Order Code RL33142 Libya: Background and U.S. Relations Updated August 6, 2008 Christopher M. Blanchard Analyst in Middle Eastern Affairs Foreign Affairs, Defense, and Trade Division Libya: Background and U.S. Relations Summary Libyan-U.S. rapprochement has unfolded gradually since 2003, when the Libyan government accepted responsibility for the actions of its personnel in regard to the 1988 bombing of Pan Am Flight 103 and announced its decision to eliminate its weapons of mass destruction and long-range missile programs. In response, U.S. sanctions were gradually removed, and, on May 15, 2006, the Bush Administration announced its intention to restore full diplomatic relations with Libya and to rescind Libya’s listing as a state sponsor of terrorism. Full diplomatic relations were restored on May 31, 2006 when the United States upgraded its Liaison Office in Tripoli to an Embassy. Libya was removed from the list of state sponsors of terrorism and states not fully cooperating with U.S. counterterrorism efforts in June 2006. From June 2006 through July 2008, U.S.-Libyan re-engagement was hindered by disagreements over outstanding legal claims related to U.S. citizens killed or injured in past Libyan-sponsored or supported terrorist attacks. Administration officials argued that broader normalization of U.S.-Libyan relations would provide opportunities for the United States to address specific issues of potential concern to Congress, including the outstanding legal claims, political and economic reform, the development of Libyan energy resources, and human rights. However, Congress took several steps to limit U.S.-Libyan re-engagement as a means of encouraging the Libyan government to settle outstanding terrorism cases in good faith prior to further normalization. For example, Congress enacted Section 654 of the Consolidated Appropriations Act FY2008 (P.L. 110-161, H.R. 2764), which prohibits the obligation or expenditure of appropriated funds “to finance directly any assistance for Libya” unless the Administration certifies that settlements have been completed. On May 29, 2008, the U.S. Department of State and the Libyan government announced that they had begun negotiating the terms of a “claims settlement agreement” for outstanding legal cases. Many observers linked the announcement to the enactment of Section 1083 of P.L. 110-181, the National Defense Authorization Act for FY2008, which altered the legal environment in which terrorism cases involving Libya are being considered by amending the Foreign Sovereign Immunities Act (FSIA) (28 U.S.C.§§ 1602-1611) to make Libyan property subject to attachment in relation to damages awarded to plaintiffs. In conjunction with apparent progress in U.S.-Libyan negotiations, on July 31, Congress passed S. 3370, the Libyan Claims Resolution Act, which authorizes the creation of an entity with legal immunity to receive settlement funds from Libya and distribute them to U.S. plaintiffs. The Administration’s certification of the receipt of sufficient funds would result in the rescission of the applicability of the provisions of Section 1083 to Libya. Once completed, the arrangements could clear the way for a series of long-anticipated diplomatic steps, including the confirmation of the U.S. Ambassador-designate to Libya or a visit to Tripoli by U.S. Secretary of State Condoleezza Rice. This report provides background information on Libya and U.S.-Libyan relations; profiles Libyan leader Muammar al Qadhafi; discusses Libya’s political and economic reform efforts; and reviews current issues of potential congressional interest. It will be updated to reflect major developments. Contents Recent Developments ..............................................1 Background and Recent History ......................................2 The Qadhafi Era...............................................3 The Green Book and Qadhafi’s Ideology .......................3 Terrorism and Confrontation with the United States...............4 Qadhafi’s Arab-Israeli Intransigence...........................4 International Isolation and Signs of Change .....................5 Current Issues in U.S.-Libyan Relations ................................5 Reestablishing Normal Bilateral Relations ..........................6 Congressional Efforts on Behalf of U.S. Terrorism Victims .............8 Background: Pan Am Flight 103 ..............................8 Background: La Belle and UTA Flight 772 ......................9 FY2008 Foreign Operations Request and Assistance Prohibition ....10 New Embassy Construction Delayed..........................11 Ambassador Nomination Held...............................11 Section 1083 of P.L. 110-181 ...............................12 Analysis and Potential Impact...............................14 FY2009 Foreign Operations Request ..............................15 Post-9/11 Counterterrorism Cooperation ...........................16 Libyan Foreign Fighters in Iraq..............................17 Lockerbie Appeal.........................................17 The Return of U.S. Oil Companies ...............................18 Political and Economic Profile ......................................19 Muammar al Qadhafi: A Profile .................................19 Political Dynamics ............................................19 Government Structure .........................................20 The “Authority of the People”...............................21 Opposition Groups ............................................21 Exiles..................................................22 The Muslim Brotherhood ...................................22 Libyan Islamic Fighting Group (LIFG) ........................23 Political Reform and Human Rights ..............................24 Legal and Institutional Reform ..............................25 Human Rights Monitoring..................................26 Fathi al Jahmi............................................26 Libyan Foreign Policy .........................................27 Energy and the Libyan Economy .................................28 Economic Reform and Infrastructure Development ..............29 Oil Reserves and Production Capacity .........................29 New Exploration and Production-Sharing Agreements ............30 Natural Gas .............................................31 Military Profile and WMD Disarmament ..............................31 The Libyan Military ...........................................31 Structure, Training, and Equipment...........................31 Arms Sales..............................................32 WMD Programs and Disarmament...............................33 Nuclear, Chemical, and Ballistic Missile Programs ..............33 Termination of WMD and Missile Programs ...................35 Motives for Disarmament ..................................36 International Controls and Inspections ........................36 Further Reading and Historical Resources..............................37 Appendix A: Libya’s Pre-Qadhafi History .............................39 Libya’s Colonial Experience....................................39 The Ottoman Empire and Qaramanli Dynasty...................39 “The Shores of Tripoli”....................................39 Italian Annexation and Post War Uncertainty...................40 Independence and Monarchy, 1951-1969 ..........................40 List of Figures Figure 1. Map of Libya .............................................2 List of Tables Table 1. Libyan Military Personnel ...................................32 Libya: Background and U.S. Relations Recent Developments On July 31, 2008, Congress adopted S. 3370, the Libyan Claims Resolution Act, which states the support of Congress for “the President in his efforts to provide fair compensation to all nationals of the United States who have terrorism-related claims against Libya through a comprehensive settlement of claims by such nationals against Libya pursuant to an international agreement between the United States and Libya as a part of the process of restoring normal relations between Libya and the United States.” The bill authorizes the Secretary of State to create an entity with legal immunity to receive settlement funds from Libya and distribute them to U.S. plaintiffs. U.S. State Department officials continue to negotiate with Libyan government representatives over the final terms of a comprehensive settlement agreement. Libya reportedly is seeking compensation for civilian victims of 1986 U.S. air strikes on Libya. Under the terms of S. 3370, once the Administration certifies the receipt by the claims entity of sufficient funds from Libya, several terrorism liability provisions will no longer be applicable to Libya, including Section 1083 of P.L. 110-181, the National Defense Authorization Act for FY2008. Section 1083 altered the legal environment in which terrorism cases involving Libya are being considered by amending the Foreign Sovereign Immunities Act (FSIA) (28 U.S.C.§§ 1602-1611) to make Libyan property subject to attachment in relation to potential damage awards. The passage of S. 3370 is being viewed by some supporters of U.S.-Libyan engagement as an important step in facilitating the resolution of outstanding legal claims, which have delayed a full reestablishment of U.S. Libyan relations since Libya was removed from the U.S. list of state sponsors of terrorism in 2006. Section 654 of the Consolidated Appropriations Act FY2008 (P.L. 110-161, H.R. 2764, signed December 26, 2007), prohibits the obligation or expenditure of appropriated funds