U.S.-Libya mistrust lingers despite new ties

By Tom Pfeiffer - Analysis

RABAT (Reuters) - Washington's first ambassador to Libya in 36 years takes up his post this month, but neither side seems ready for true friendship.

The United States is loath to fully embrace a country it accuses of severe human rights abuses and whose leader Muammar Gaddafi strove for decades to thwart U.S. interests.

Gaddafi has made it clear relations with Libya's former foe will be business-like at best. Since U.S. sanctions were lifted four years ago, Tripoli has favored mostly European and Asian firms for multi-billion-dollar nuclear, rail and road deals.

"The Americans would like to attach conditions to what they want to do in Libya and keep talking of human rights, democracy and the rule of law," said Libyan political analyst and university professor Mustafa Fetouri. "We consider this to be interference in our internal domestic affairs."

Libya has emerged from isolation after it abandoned weapons of mass destruction programs and paid compensation for bombings for which it was blamed by the West.

U.S. Assistant Secretary of State David Welch told Reuters last week the compensation deal "opens the horizon to a normal relationship of the kind we might have with any country."

Analysts said the improved ties with Libya instigated by U.S. President George W. Bush were unlikely to unravel under his successor Barack Obama, who has set out a vision for foreign policy based on diplomacy, internationalism and alliances.

"I don't see a real change under Obama, but the U.S. will be watching that there is no backsliding on what Libya has agreed to," said Dirk Vandewalle, a Libya specialist and professor at Dartmouth College in New Hampshire.

American firms won a clutch of oil exploration licenses since sanctions ended in 2003, but lingering suspicion still holds Washington back from full engagement.

"In the U.S. there is a certain skepticism and reluctance to be drawn into Gaddafi's economic development schemes," said Vandewalle. "Beyond the oil and gas industry it will be a lot tougher for American companies."

U.S. officials say the breakthrough with Libya opens potential for cooperation in diplomacy. One senior Washington official, who asked not to be named, cited concerns about Iran's nuclear program as one area where the two countries had collaborated.

Libya backed the U.S. push for tougher sanctions against Iran at the United Nations, while other nations with closer ties to Washington, such as South Africa and Indonesia, did not.

The official said he could see the United States selling "non-lethal" arms to Libya like helicopters, transport aircraft and communications equipment within the next few years.

SIDELINED

But Fetouri said U.S. firms had been deliberately sidelined from Libyan government investments worth billions of dollars since the end of sanctions.