WESTERN EUROPE: POLICIES TOWARD LIBYA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01058R000202270001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 22, 2016
• Document Release Date: January 28, 2010
• Sequence Number: 1
• Publication Date: January 17, 1985
• Content Type: REPORT

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Central Intelligence Agency
Washington. D.C 20505
DIREC.`IORATE OF INTELLIGENCE
17 January 1985
Western Europe: Policies Toward Libya
Summary
Most West European governments remain indulgent of the
Qadhafi regime even though their economic dependence has
diminished. We believe their tolerance stems.fran three
factors:
- A desire to maintain and expand oatunercial ties.
-- A belief that a soft line has the best chance of
modifying Qadhafi's behavior.
-- A fear that toughness would not have any effect on
Qadhafi and might jeopardize their nationals in
Libya.
Sane combination of a particularly outrageous act by
Qadhafi, a perceived decline in the prospects for a fruitful
oatunercial relationship with Libya, and a more effective
Libyan apposition movement might change this attitude.
Otherwise we expect the indulgent attitude to continue.
Division,
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This memorandum was prepared by of the Office of European
Analysis. it was requested by Richard N. Haass, Deputy for Policy Planning,
Bureau of European and Canadian Affairs, Department of State. Questions and
catments may be addressed Chief of the European Issues
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could work.
Introduction
West European tolerance persists in the face of a significant decline in
West European economic dependence on Libya, particularly in terms of oil.
Western Europe's vulnerability to Libyan oil sanctions, for instance,
certainly has fallen. Although overall import levels remain similar to what
they were a few years ago-about 8 percent of West European consumption on
average-the emergence of the "oil glut" makes it highly unlikely now that
Tripoli would even attempt to impose oil sanctions or that such sanctions
private warnings they can keep his troublemaking within reasonable bounds.
unbalanced, leader, and that by humoring his pretensions while issuing vague
Qadhafi is not totally reckless but is rather a pragmatic, if somewhat
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Apart fran economic motives, we think most West European governments
remain convinced that the best strategy for moderating Qadhafi's behavior is
to avoid confrontation. Senior West European officials continue to argue that 25X1
Nevertheless, econanic considerations continue to push the West Europeans
into taking a soft line. They are first of all reluctant to jeopardize any
significant source of trade in view of their serious unemployment problem.
Moreover, they almost certainly believe that the Libyan market will increase
again due to the country's immense oil wealth, and they do not want to
jeopardize their future access. They may also realize that Libya-which
possesses one-quarter of the world's oil reserves outside the Persian Gulf-
would be a primary alternative oil supplier for Western Europe in the event of
for 7 percent or less of sales by the major countries.
Moreover, because falling oil revenues have curtailed Libyan purchasing
power, West European exports to Libya have fallen by about 50 percent over the
past three years. In 1983, the Libyan market accounted for only about 0.7
percent of West European export sales, identical to that of Egypt and about a
quarter of the proportion taken by Saudi Arabia. Libyan financial investments
in Western Europe have also fallen precipitously, from about $13 billion in
1981 to about $4 billion today, according to publicly available data. West
European arms sales to Libya have been very limited in recent years accounting
West European officials contend that any firmer actions against Qadhafi
would be ineffective and probably counterproductive. Italian and British
officials have told US diplanats, for instance, they believe that the Qadhafi
regime is too solidly entrenched to be jeopardized by Western pressure, and
according to US Embassy reporting, British and West German officials have
argued that concerted Western actions against Qadhafi will pranpt him to
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Individual Country Perspectives
Italy
Italy has the most important econanic relationship with Libya of any of
the major countries. In 1983, Libyan purchases accounted for over 3 percent
of Italian exports, while Libya supplied about 13 percent of Italian oil
consumption requirements. In addition, Italian firms are heavily involved in
developing Libya's large offshore oil resources. Tripoli owns at least a one-
eighth share of Fiat along with other substantial investments, mainly in
southern Italy.
In recent years Rane has followed a policy of limiting arms sales to
weapons that could not be used against Italy. Rcme's decision this summer to
approve delivery of missiles and artillery pieces previously held up indicates
that this policy is being relaxed. Libya has taken only about 7 percent of
Italy's arms exports in recent years, but Rane is now looking to expand such
sales, according to diplanatic reports.
Italy's econanic relations with Libya have been marred in recent years by
Tripoli's unwillingness to repay approximately $600 million in debt to Italian
firms. During a visit to Tripoli this past summer, Foreign Minister Andreotti
reached a major econcanic agreement under which Rane accepted-at a probable
financial loss--oil shipments in partial payment of this debt. The agreement
also paved the way for future accords on consular conventions and recruitment
of Italian workers, among other technical issues, and it could open the door
to Italian participation in public works projects totaling over $1 billion
dollars.
France
French econanic relations with Libya have been very limited in recent
years. Exports to Libya have accounted for only 0.4 percent of worldwide
French sales, and Libyan oil imports have comprised only about 4 percent of
French consumption requirements. Since Libya's foray into Chad in 1983 the
French have refused to make arms sales or deliveries to Libya, although they
have honored agreements to repair previously purchased weapons. Overall,
French arms sales to Libya have been fairly small since the late 1970s-
accounting for only about 2 percent of the total and Paris has rejected
Libyan efforts to purchase advanced aircraft or to obtain technical support
for Libya's nuclear program.
In its effort to limit Tripoli's efforts to extend its influence over
Francophone Africa, especially Chad, France has pursued a dual strategy:
dispatching troops to southern Chad while offering Libya various "carrots"-
including a resumption of arms sales and a Qadhafi visit to Paris-in return
for Libyan moderation. Now that this strategy has failed to dislodge the
Libyans, we believe that the Mitterrand government is resigned to an
indefinite Libyan presence in the northern part of that country.
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French canmercial interests are now pressing for improved relations with
Libya to pave the way for increased exports. We believe, however, that the
Mitterrand government will find it politically difficult to move ahead with
any highly visible improvement in relations with Libya in the near future--say
for'the next six months to a year. In our view, this precludes sales of
sophisticated weaponry and high technology as well as a visit by Qadhafi to
Paris. The US Embassy has reported that France's first priority for the time
being is to attempt to save face by exerting diplomatic pressure on Libya to
abide by the agreement. Both-President Mitterrand and Foreign Minister Dumas
have publicly insisted that the Libyans must withdraw fran Chad before
relations can be normalized. 25X1
United Kingdan
The US Embassy reports that sane Foreign Office officials would like to
normalize relations with Tripoli, severed after the shooting incident at the
Libyan Embassy last April, but that Prime Minister Thatcher remains adamant
against any warming of political relations. The British have cooperated with
US efforts to deny Libya nuclear technology and have enhanced counterterrorist
cooperation, but British officials remain skeptical about economic
sanctions.
While diplomatic relations are frozen, economic ties remain largely as
they were prior to the April shooting. Foreign Office officials say that the
3,000 British subjects still living in Libya largely oil technicians and
dependents-have not been advised to leave the country. British officials
plan to prevent any new economic deals with Libya for the present but to
maintain the level of economic relations existing before April.
Exports to Libya accounted in 1983 for about 0.4 percent of total British
trade; oil imports accounted for only about 2 percent of consumption
requirements. Arms sales in recent years have been. negligible. Direct
investment ended in Libya when British Petroleum and other British oil
companies left the country in 1969.
West Germany
Libya supplied about 10 percent of West German oil requirements last
year, second only to the United Kingdom. Most of the Libyan oil is purchased
by West German companies on the Rotterdam spot market rather than directly
from Libya, however. West German exports to Libya were only'0.5 percent of
total West German exports, and military sales to Libya have accounted for
about 5 percent of total arms sales.
Payments to West German suppliers have slowed because of Libyan financial
difficulties. Indeed, official export insurance coverage is no longer
generally available for West German firms selling to Libya because of problems
obtaining Tripoli's assurance that contracts will be honored. Nonetheless,
outstanding export insurance exposure to Libya totaled about $5 billion as of
December 1983-about 7 percent of total West German export credit exposure.
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In recent years, West German firms have been involved in constructing a
steel foundry and a steel mill, urea and methanol plants, a desalination
plant, a floating dock, an airfield and other facilities at defense
installations, and air traffic systems at various airports and bases. Several
West German firms have been involved in projects at the nuclear research
facility at Tajura, including Siemens which installed computer equipment and
provided computer training for Libyans in West Germany as well as in Libya.
Approximately 3,000 West Germans are employed in Libya, mostly working for oil
firms of various nationalities.
An FRG-Libyan joint economic c emission, established in 1976, has met
once. The Libyans insist on ministerial-level representation, while the West
Germans will go no higher than the deputy minister level because of the
precedent it would set for similar joint ca missions with other countries.
At the political level, the major irritant in West German-Libyan
relations has been past Libyan attempts to assassinate exile politicians on
West German soil. West German authorities have arrested various Libyan "hit
men," only to release them in exchange for West German nationals seized by
Tripoli.
Bonn is reluctant to take any steps to counter Libyan terrorism that would
endanger West Germans in Libya.
Bonn hopes to use its contacts with Tripoli to moderate Libyan
behavior. Foreign Minister Genscher had planned to visit Tripoli last year,
but he postponed his trip after the incident in London. As far as we know the
trip is still on, but the West Germans are likely to use the Libyan desire for
the visit to insist on more moderate behavior, at least toward dissidents
residing in West Germany.
Canada
Ottawa maintains bilateral political and eoonanic ties with Libya but
seeks to keep the relationship at arm's length. Ottawa has no diplanatic
presence in Libya--Canada's Ambassador to Tunisia also is accredited to Libya
-and it refused to permit the opening of a Student Liaison Office in Ottawa
to serve the approximately 850 Libyan students attending school in Canada.
Ottawa has limited its criticism of Libyan terrorist acts because of concern
over the safety of the approximately 1,200 Canadians residing in Libya. F_
Canada-Libya trade is extremely small. Ottawa appears to be interested
in cultivating Libya primarily as a custaner for agricultural products-
particularly wheat and dairy products--and, to a lesser extent, for machinery
used in connection with the energy industry. In addition, Ottawa has sold
aircraft to Libya in the past and is now engaged in a dispute with the United
States over plans to sell another civilian aircraft to Libya's national oil
company.
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to the Libyans through Morocco.
Ottawa is, however, sensitive to the possibility of OOCOM-controlled
technology falling into Libyan hands. After the recent Moroccan-Libyan union,
for example, Ottawa suspended plans for nuclear energy research cooperation
with Morocco because it feared that sensitive data and technology would flow
Spain-Portugal
Libya is a fairly important economic partner for Spain, taking about 1.5
rcent of its exhorts and providing 8 percent of its oil requirements.
Spain has no nuclear cooperation
diplomatic relations with Israel.
agreements with Libya, and arms sales are limited to modest mounts of
munitions, bombs, and grenade launchers which together account for less than 1
percent of total sales. We believe Libya has served as a transshipment point
for Spanish arms sales to Iran, and sane Spanish arms ma also have reached
the Polisario, which Libya also supplies.
In the political area, Spain's overriding concern is to keep Libyan-
Moroccan ties from jeopardizing Ceuta and Melilla-the Spanish-controlled
enclaves on the Moroccan coast. Prime Minister Gonzalez's meeting with
Qadhafi on 19 December was largely motivated by Spain's concerns over the
possible implications of the Libyan-Moroccan merger agreement signed in
August. Spain also hopes that good relations will discourage Tripoli from
supporting EPA terrorists and lessen Libya's ire when Spain establishes
Portugal's economic and political ties with Libya are minimal.
with Tripoli.
The Belgians also appear convinced that other Western governments will
provide assistance to Tripoli in the nuclear area if Belgium does not. For
these reasons, Belgian officials reportedly will continue to explore areas for
nuclear cooperation and other economic arrangements which would be acceptable
to the United States. We believe that Belgonucleaire and some government
officials will continue to look for ways to get around US objections to deals
from using nuclear cooperation for a weapons program.
Belgium
Trade with Libya is currently small, but Brussels is anxious to develop
better ties, especially in a period of high unemployment. Tripoli has
attempted to tie a broader trade agreement to greater Belgian cooperation in
providing nuclear expertise. The firm Belgoncleaire is currently providing
technical-advice to Libya, and officials in both the nuclear industry and the
government would like more extensive cooperation, including Belgian technical
advice in construction of a Soviet-financed reactor. The Belgian Government
has refused to sanction the proposed arrangement due to US objections,
although many officials have expressed dissatisfaction with Washington's stand
and are apparently confident that adequate safeguards exist to prevent Qadhafi
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I I
Luxembourg
remains a relatively easy entrepot for trade and financial dealings, however,
Tripoli probably will continue to look for ways to use it to get around US
sanctions.
The Netherlands
The Dutch Government has no major economic or military agreements with
Libya, and Dutch officials have often expressed distaste for the Qadhafi
regime. At the same time, The Dutch oppose sanctions against Libya and
continue to look for business opportunities. The Dutch have cooperated with
US efforts to prevent the sale of Western nuclear technology to Libya, and
have assured US officials that the Netherlands will make no such sales.
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It is
likely that Dutch companies--with the acquiescence of the government--will
continue to look for ways to do business with Tripoli, regardless of US
Dermar k
Denmark's ties with Libya are limited to sales of agricultural goods and
machinery which in total accounted for only 0.3 percent of total exports.
The Sweden-Libya Mixed Commission has met irregularly since 1974 to
discuss bilateral economic and trade matters. At its most recent meeting in
March 1983, discussion focused on various joint industrial projects as well as
cooperation in the areas of agriculture and housing and roads construction.
Libya has pressed at these meetings to be allowed to pay its debts to Swedish
Under a 1974 deal believed to be worth about $10 million, Telub-a quasi-
goverrmental subsidiary of the Swedish national industries group involved in
highly classified electronics research and development for the Swedish
military-undertook to sell equipment and know-how to Libya and to train 100
Libyan technicians at its Swedish plant. Although US inquiries produced
repeated assurances from the Swedish Government that nothing of a military
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the deal and limit its terms exclusively to the non-military sphere.
nature was involved, it was later reported in the Swedish press that Telub had
secretly contracted with Libya to train the Libyans in missile technology and
other military skills. In 1981 the government ordered Telub to renegotiate
Finland
Libya is second to the Soviet Union in importance as an export market for
the Finnish construction industry. In 1983 Finnish companies were involved in
$250 million in projects. Libya's relative importance to the Finns is likely
to increase because construction projects in the Soviet Union are due to
decline fran over $500 million a year now to about $300 million per year
during the 1986-90 trade agreement.
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Economic ties are minimal. Political relations have been cool since the
seizure of a Norwegian ship and the torture and death of one of its crew last
Libya.
Ireland
In recent months, both Dublin and Tripoli have attempted to expand their
economic relationship. Irish experts have been hired to manage Libyan farms,
and a meat export deal is under negotiation. Libya has also attempted to use
Ireland for illicit reexport of US-origin aircraft; in 1982 US protests caused
cancellation of the sale of a Boeing 747 to Libya by Aer Lingus, the Irish
national airline. Aer Lingus, however, then attempted to lease aircraft to
Libya. Last year, Aer Lingus requested a US license to sell spare parts to
Dublin is concerned about potential Libyan terrorist connections, in
terms of both Libyan use of Ireland for terrorist activities against the
United Kingdan and resumed Libyan ties to the Provisional Irish Republican
Army (PIRA). Following the Libyan Embassy siege in London last April,. Qadhafi
threatened to resume aid to the PIRA-halted in 1977-and permitted-the
organization to open an office in Tripoli.
According to the
Embassy in Dublin, British Irish security o icia s have at present no
specific reason to fear attacks against the United Kingdom fran Ireland, but
they are watching the situation very closely.
West European Willingness to Confront Qadhafi
We doubt that most West European governments would favor-any US proposal
for joint Western action to isolate Libya. At most they might be willing to
restrict the sale of nuclear and sophisticated military technologies that
Qadhafi might ultimately try to use against them. Even this restraint could
vanish if Qadhafi were to make a tactical retreat to a more moderate path and
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if..other markets for West European defense and high technology products were
to remain depressed. It would probably take an extremely reprehensible act by
Qadhaf i such as a terrorist attack on West European territory resulting in
the loss of many innocent lives--to move West European goverrinents in the
short term to contemplate firm joint action against Libya. 25X1
France is likely to be the only individual West European country that
could be drawn into direct confrontation with Libya in the near future.
France's recent behavior, however, suggests that it will seek to avoid a
military showdown in Chad while using diplomatic approaches to dissuade Libya
fran moving directly into southern Chad. Because Libya's ambitions to extend
its influence over northern and central Africa clash with Paris's obligation
to protect its allies in those regions, however, Franco-Libyan relations are
likely-to remain es cially difficult, whatever the immediate outcane in
Chad. F 7- 25X1
Over the next few years we believe West European attitudes toward Libya
might become harsher even in the absence of a spectacular Libyan provocation
if the following three conditions were met:
-- Libya escalates its terrorist attacks against exiles in Western
Europe.
Continued slackness in the world oil market prevents Libya from
meeting West European expectations of increased commerce, or a
Libyan default on loans devalues the importance of the Libyan
market.
- Growing effectiveness of the Libyan dissident movement or signs of
growing divisions within the Libyan elite lead the West Europeans to
conclude that increased pressure on the Qadhafi regime might lead to
the emergence of a more acceptable leader.
France and the other major West European countries would probably not
look with great disfavor on an Egyptian effort to strike a blow at Qadhafi.
Since it recovered the Sinai oil fields, Egypt has become a substantial energy
supplier and trading partner for Western Europe. All of the major countries,
moreover, have developed close political relations with the Mubarak regime.
They would be reluctant to criticize publicly an Egyptian move against Libya
and thereby jeopardize ties with Cairo, expecially now that the Egyptians
appear to be resuming an important role within the Arab world. Sane less
squeamish West European leaders, such as Prime Minister Thatcher and President
Mitterrand, might privately welcome such a move, because it would have the
potential of cutting Qadhafi down to size without resenting too great a
threat to West European interests in Libya.
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Distribution: Western Europe: Policies Toward Libya
Orig - Richard.Haass, Deputy for Policy Planning, Bureau of
European and Canadian
DDI
DDI Registry
NIO/WE
IMC/CB
EURA
EURA Production
Affairs, Department of State
1 - EURA/WE/GN
1 - EURA/WE/CM
1 - EURA/WE/IA
1 - EURA/WE/BBC
1 - EURA/EI
5 - EURA/EI/PS
1 - Author
DDI/EURA/EI/PS/
(23Jan85)
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