Libya Discovers It Can’t Afford Both Guns and Butter

Mohsen, a shopkeeper, stood on the edge of Tripoli’s ceremonial Green Square and shook his head at the words from his ruler, Col. Moammar Kadafi, blaring from a loudspeaker.

“He is telling us we must abandon everything foreign and be self-sufficient,” Mohsen explained in broken Italian to a foreigner who struck up a conversation. “But if we rely on what we have here, we will only be able to eat oil.”

The occasion was a speech by Kadafi marking the 16th anniversary of the U.S. turnover to Libya of Wheelus Air Base outside the capital. The televised speech was full of defiance of the United States and its European allies and orders to the Libyan people to give up European clothes, food, drinks and other products.

“It is an opportunity to get rid of Europe,” Kadafi said. “It is we who back their crippled budgets.”

Economic Crisis

But as Mohsen and others in this arid North African nation of 3.5 million know, it is Libya’s budget that is crippled.

Libya today is undergoing the most severe economic crisis of Kadafi’s 17-year rule. It is a crisis that foreign analysts here say may do more to shake his government than did the U.S. bombing raids on Libya’s major cities last April.

Once awash in cash from its abundant oil reserves, Libya has had the rug pulled out from under it by the plummeting price of oil. In 1980 Libya earned $22 billion from its oil sales. But this year, oil industry sources predict, the nation will be lucky to earn $4 billion.

That income will not cover its projected budget of $5 billion for 1986. And it will not come close to paying off the $6 billion in international debts that Libya owes the Soviet Union, Italy, Turkey, South Korea and West Germany.

Production Increased

According to oil industry sources, Libya increased its oil production this month to 1.4 million barrels a day, up from about 900,000 barrels a day six months ago.

But oil prices continue to drop because of overproduction by members of the Organization of Petroleum Exporting Countries.

The departure at the end of June of the five U.S. oil companies and six service companies that still extract oil in Libya may temporarily cause a drop in production. The oil companies were operating under special licenses exempting them until June 30 from the trade embargo imposed by President Reagan in January.

But U.S. oil industry sources say that Libya will be able to replace the American companies with other foreign experts and soon will be back to its current rate of production.

Chronic Shortages

Not even Libya’s secret police or revolutionary committee cadres have been able to keep down the widespread grumbling--and occasional riots--over chronic shortages of everything from toilet paper to soap to basic foods.

Libyans must line up to buy bread, vegetables, fruit and, when it’s available, meat. By Western estimates, almost half of the shops in Tripoli are closed because they can no longer get the goods they need to sell.

Even the shelves in the new government-owned supermarkets are barren except for cans of Cypriot tomatoes, sacks of Cuban sugar and boxes of Chinese tea.

The shortages are the result of Kadafi’s efforts to cut his government’s once lavish expenditures to cope with the fact that Libya no longer has the money to pay for both guns and butter.

Small Economic Cushion

The government has decided that the people need guns more than they need butter. But it is uncertain whether the government can even pay the Soviet Union the $5 billion its still owes for past arms purchases.

Western diplomats estimate that Libya still has a small economic cushion--its foreign currency reserves, estimated at about $3 billion. But even these have been drawn down dangerously close to the $2.5-billion level that Libya considers the minimum it can tolerate.

The decreasing foreign currency reserves are going to make it harder in the near future for Kadafi to relieve the growing disaffection of his subjects, as he has in the past, by importing food and other goods.

A major factor in his long rule has been that he has provided for his people. If he can no longer provide, common wisdom says, he will be in deep trouble.

‘Forbidden’ Foods

So for all his rhetoric about not wanting his citizens to eat “forbidden” European food, or wear European clothes or drink European drinks, Kadafi recently bought a $75-million shipment of meat from Ireland and ordered a shipload of butter and cheese from Denmark.

“Just about the only food one can find, when one can find it here, is still imported,” the wife of one Western diplomat said. “There just isn’t enough local food to keep the markets and shops open.”

Thus the speculation here remains that as money gets tighter and imports of basic commodities continue to decrease, dissatisfaction with the government will continue to grow, and Kadafi’s government will become less credible.