As Libya lives in the rubble, the sanctions game goes on

THE taxi driver spoke no English but could sing every word fromLionel Ritchie's Greatest Hits album, blaring from the front of the vehicle. "Do it to me one more time," he sang, as the taxi collapsed into downtown Tripoli, past Green Square and the old medina.

We pulled over and I handed him 25 dinars. Five for the taxi ride and 20 for his singing. "Shukran," he said, his mouth opening wide, "shukran."

Libya is a country of glaring contradictions. It is largely unknown to the outside world, principally the result of Colonel Muammar Gaddafi discouraging contact between foreign visitors and local residents. Instead, the leader has imposed his own brand of revolutionary theory on the Great Socialist People's Libyan Arab Jamahiriya. Throughout the 1970s and 1980s, as foreign companies pulled out and embassies closed, an ever decreasing number of people entered Libya from the Western world. Gaddafi, it seemed, preferred it that way.

In a cafe on Green Square, Hussein, who works for the Ministry of Information, talks about the sanctions that have been crippling his country. Over the past decade Libya has been haemorrhaging on the back of the international blockade. Surprisingly, Hussein feels much more relaxed about Libya's future.

He talks at length pointing out that while American sanctions still forbid US firms to operate in Libya, American corporations have simply shifted their dealings with Libya to their European subsidiaries, thereby carrying on as before. "They did not go away," he said, "they just changed they way they work."

A day earlier I watched European businessmen disembarking at Tripoli airport, a regular occurrence now that it is no longer closed to international flights. Western sanctions were only suspended after Gaddafi handed over the two Libyan suspects in the Lockerbie case and, even before the trial began, Britain and Libya restored full diplomatic relations. For the Libyan leader, the deal that established the Scottish outpost in Holland has borne fruit, and the guilty verdict for Megrahi does not change that.

In the lobby of the Grand Hotel, where I am staying, an English businessman, based in Malta, told me he works for an oil exploration company which is contracted to one of the largest US oil companies. For the past 12 years he has been going in and out of Libya in search of its greatest currency: oil. "Even when I was not able to fly here, I would fly to Tunis, in Tunisia, and drive to Tripoli. All the big firms were doing this."

Yet despite the volume of money that has been flowing into Gaddafi's greatly diminished coffers, the streets of Tripoli are littered with dust and broken buildings. Almost every piece of architecture looks like it has been dumped there instead of erected, as if Gaddafi had ordered millions of tonnes of cement to be dropped over the city, the builders arriving only when rain fell.

Even in the relatively thriving parts of the town, it is easy to see that Libya has fallen years behind the rest of the oil-yielding countries. It is exposed and vulnerable, a home to people who care little for their working life because they are given very little in return. It was not always this way, continued Hussein. Twenty and 30 years ago almost the entire population worked for the government and oil revenues ensured that nearly everyone had a decent standard of life. "We were comfortable," he said. "it was OK." Numerous apartment blocks were built and no-one was without a home. Electricity and water came free of charge. Sanctions brought a tightening of Libya's money belt.

When I caught up with Gaddafi, following the release of Al Amin Khalifa Fhimah, the Libyan found not guilty of bombing PanAm flight 103, he was in a defiant mood. At his compound on the outskirts of Tripoli where, in 1986, the Americans bombed a building, killing 37 people, he refused to discuss the conditions that the people of Libya currently live under, preferring to stick to his rhetoric of revealing the real killers behind the Lockerbie tragedy. Perhaps fittingly, he prefers to dwell on his future failures and not his past ones.

Diplomatic talks between Britain, the United States and Libya are now being planned, but what will be said and what will be their aim is far from clear.

Tomorrow Gaddafi, if his boast last Thursday is to be believed, will disclose new evidence that will exonerate Megrahi. That claim and the clear comments made by British Foreign Secretary Robin Cook that "Libya must acceptresponsibility for the act of their official", show how far the diplomatic gulf between Britain, the US and Libya appears to have widened, rather than narrowed, after the trial.

Then there is the warning from lawyers in New York representing the American families of the Lockerbie victims that they are preparing to sue the Libyan government for up to $10bn in damages.

The Middle East experts inside the Foreign Office know there is only a limited expectation that Gaddafi will accept such a responsibility. Cook and the new US president, George W Bush, have little political room for manoeuvre, and can only demand of Libya that it comply fully with United Nations Security Council resolutions and compensate victims. Gaddafi, too, has his hands tied by the tribal traditions of his country. The two accused were from a larger and more powerful tribe than Gaddafi himself.

But the power structures inside Libya are often fluid. Last week showed that things change quickly. At one point the assistant foreign minister, Hassoun al-Shawish, said: "Now that this case is behind us we can look forward to improving our relations with the US." Then Gaddafi said the opposite.

Equally confusing, the foreign minister, Abdel Rahman Shalqam, said there could only be disappointment if the West was waiting for an apology and compensation. A day later, the Libyan ambassador in London, Mohammed al-Zwai, said everything should wait till the outcome of the appeal process. He also briefly signalled that Libya may comply with the UN Security Council orders.

Then Gaddafi took to the streets of Tripoli and announced Libya was now seeking compensation.

This is the background against which the three-way talks will have to prevail. It is likely the talks will initially be in New York, perhaps beginning later this week, with, perhaps not surprisingly, other locations planned ahead for the inevitable first, even second- round failures.

The US-imposed sanctions against Libya in 1986. Financial assets of Libya lodged in US banks were frozen. Britain joined the international stance against Libya in 1992, following Gaddafi's refusal to hand over the two suspects named in the jointly issued US- Scottish indictments. The United Nations banned arms sales and air traffic in and out of Libya. These sanctions were hardened in 1993, which hit Libya at the core of its economy - oil.

Three years later, Washington deepened Gaffadi's internal problems even more with the Iran and Libya Sanctions Act. This threatened international action against firms who aided any projects liable to help the Libyan oil industry.

The pressure on Libya to hand over the men named in the indictment continued, with plenty of false dawns, till 1999. When they stepped off the plane in the Netherlands, the UN suspended its air, weapons, and diplomatic sanctions.

However suspension did not mean lifting the Security Council sanctions. Taken alongside the United States' unilateral action, which remained in place pending compensation for the families of the PanAm 103 victims, Gaddafi's internal economic troubles did not ease by the simple act of handing the two men over.

Britain's diplomatic strategy has been similar to that of the US, though slightly less hard-line. The UK has always insisted that any lifting of UN sanctions would require Libyan obedience to UN resolutions. Cook's comments in the Commons echoed that line when he said last week: "It is in Libya's own interests to be seen to co- operate fully with the Security Council."

The Foreign Office yesterday said: "The Foreign Secretary and US Secretary of State, Colin Powell, are in unity."

The trial's outcome however - a guilty verdict on one of the two accused who was judged to have been an officer with Libya's intelligence service, the JSO - only compounds the diplomatic logic.

Handing the men over, Gaddafi was promised sanctions would be lifted. Now it is demanded of him that he admit Libya's guilt, offer compensation in the region of #2m for each victim, and subsequently be accorded the prize of having economic normality restored to his country.

This diplomatic game-playing was acknowledged last week by Nelson Mandela. The former South African president was a crucial figure in the covert negotiations that eventually brought the two accused to the trial. He now claims that both Britain and the US have reneged on a promise to lift sanctions once the suspects were sent out of Libya.

"Sanctions must be lifted. The West must not move the goalposts," said Mandela. But they have been moved - and before there is any final resolution or even a hint of final justice, the game itself may have to be changed.

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