Did Economic Sanctions Incite Political Change?

According to reports, in the case of Iraq economic sanctions have cost the lives of thousands. But if the words of Libya's Secretary General Ghanem can be given any credence, they have lead to Tripoli opening up to the West and free market reforms. Erik Campano has the report

According to reports, in the case of Iraq economic sanctions have cost the lives of thousands. But if the words of Libya's Secretary General Shukri Ghanem can be given any credence, they have lead to Tripoli opening up to the West and free market reforms. Erik Campano has the report

photo: AP — A portrait of Libyan leader Moammar Gadhafi tops a group of signs for European and Asian companies at the entrance of a US$5 billion natural gas project.

A portrait of Libyan leader Moammar Gadhafi tops a group of signs for European and Asian companies at the entrance of a US$5 billion natural gas project.

Libya's socialist regime has begun instituting major economic privatisation. It's the latest project in leader Moamar Ghadafi's opening of the country to the Western world – in the last few months, Libya has paid out millions of euros in compensations to Western victims of Libyan state-sponsored terrorism.

And until now Libya's economic institutions were controlled one hundred percent by the state. But new Secretary General Shukri Ghanem, himself a trained economist, has announced that huge sectors of the economy will be privatised in the next four years.

No choice but to initiate reforms

Shukri Ghanem has said that Libya had no choice but to improve its relations with Europe and the West. That's why it compensated the victims of its terrorism.

And that's also why it's privatising much of its economy.

"After the problems we had been facing because of the sanctions, the loss of money, we thought that it was easier for us to buy peace," Ghanem admits bluntly.

"And this is why we agreed on compensation. Therefore, we said, let us buy peace, let us put the whole case behind us, and let us look forward."

Creating a stock market and a central bank

So Ghanem is looking forward to a liberalised economy. First, Libya will create a stock market. Then, the central bank will sell shares in heavy industry, like steel and chemical factories and transport companies.

Later, textiles and state farms will go private. All this should be finished by two thousand eight - and what may then follow is an oil pipeline from Libya to Sicily. This would make Libya one of the most important oil-suppliers to Europe.

British Prime Minister Tony Blair, who visited Libya recently, is optimistic about European-Libyan relations.

"In the region it will mean a new relationship certainly between the United States and ourselves and Libya but also between the European Union and Libya as well," Blair said "And I think it will enable Libya to play a strong part in the affairs of the region."

Not just Britain but also Germany is hopeful about this liberalisation. German companies want to invest in Libya: not just in oil but also in infrastructure, telecommunications, and medicine.

Tourism is also a promising sector – right now it is almost completely undeveloped.

Libya's leader Moamar Ghadafi himself has announced a new era in Libyan foreign relations.

He proclaimed that something has happened, a real change, a new understanding. He observed that all the countries that had fought against Libya, they're coming now and shaking its hand and are making friends.

And Libya wants to be their friend, too.

Ghadafi needs economic growth to stop discontent from sprouting in his country.

If the standard of living doesn't improve, it could mean success for one of the attempted overthrows that have periodically threatened the leader's regime.

Erik Campano