65% Drop in Libya’s Oil Income This Year Seen

Libya will suffer a 65% drop in oil revenues this year because of the global price collapse and the U.S. economic boycott against that nation, a State Department official said Monday.

“We are aiming at cutting right at the jugular,” said the official, who spoke on condition that he not be identified.

He also said all American employees of U.S. firms left Libya well before the June 30 deadline imposed by the State Department, but he was unable to say how many U.S. citizens not affiliated with oil companies might have remained.

Virtually all payments from U.S. oil companies have ceased since the imposition of the economic sanctions against Libya last January, the official said, and Libya will receive at most $4 billion in oil revenue in 1986, compared to $11 billion last year.

Although no U.S. allies joined in imposing sanctions, the official said, Western European nations have reduced their purchases of Libyan oil. France has cut oil imports from Libya by 90% and West Germany by 30%.

Drop in World Oil Prices

However, economists and oil industry experts said the U.S. pullout will play a minimal role in any drop in Libya’s oil income. They said Libya’s revenues, like that of other Middle Eastern oil producers, is being ravaged by plummeting world oil prices.

“Libya’s oil production is not estimated to change much, and prices have fallen by over 50%,” said economist Punam Chuhan, who follows North African nations for Bank of America in San Francisco. “It’s basically the price decline that’s going to cause the decline in oil revenues. . . . Other countries will take up the slack.”

Except for Saudi Arabia, whose oil production increase precipitated the decline in world oil prices beginning last November, Chuhan said, declines in oil revenue in the major producing nations will closely track the decline in world oil prices, which have fallen 58% to $13 a barrel from $31.

The State Department official conceded that foreign subsidiaries of U.S. corporations might still be buying from Libya because the Reagan Administration preferred to “jawbone” these businesses rather than seek to apply U.S. law to them--which could have led to charges of extra-territoriality.

The gradual, six-month phase-out of U.S. business activity in Libya has resulted in keeping the losses of American firms to less than $500 million a year, the official said. These losses had been estimated to be as high as $1 billion annually.

Tightening the Noose

The next stage in tightening the economic noose on the regime of Libyan leader Moammar Kadafi, the official said, would be the consolidation of the ban on importing any refined petroleum products containing Libyan crude oil. About 10 Western and Eastern European nations would be affected by this move, he said.

“We would hope to make Libyan crude become something of a nuisance factor for foreign refiners,” the official said.

Earlier, Michael H. Armacost, under secretary of state for economic affairs, said the economic developments represent a “sea change” for Kadafi.

Armacost said “greater restraint” was already evident in Kadafi’s declared campaign of terror against the United States, but he added that it is too early to say whether the Libyan leader has abandoned his worldwide drive.

The State Department official attributed the drop in terrorist attacks to the raid in April by U.S. fighter-bombers on Libya and the expulsion of more than 100 Libyan diplomats from Western Europe.

However, despite pressures against Kadafi, the State Department sees no evidence that his “power position” is in danger, the official said.

Times staff writer Donald Woutat, in Los Angeles, contributed to this article.