Reagan Lets Oil Firms Resume Work in Libya

President Reagan, tacitly admitting that U.S. economic sanctions against Libya gave Col. Moammar Kadafi’s regime a huge financial windfall, Thursday authorized five U.S. oil companies to resume operations in the desert nation’s rich petroleum fields.

State Department spokesman Charles Redman announced Reagan’s decision to permit Occidental, Conoco, Marathon, Amerada Hess and W. R. Grace to operate their concessions provided they employ no American citizens. The companies would also be allowed to transfer their businesses to foreign subsidiaries or sell their assets to a foreign buyer.

The action, on Reagan’s last full day in the White House, relieves President-elect Bush, a former oilman, of making a potentially awkward decision that is worth billions of dollars to the oil industry.

The oil companies have been barred from doing business in Libya since Jan. 7, 1986, when Reagan imposed economic sanctions intended to punish Kadafi for the Christmas-season terrorist attacks on the Rome and Vienna airports carried out by Libyan-backed Palestinian terrorist Abu Nidal.

But the sanctions seem to have misfired badly.

Redman said that as a result of the sanctions, Libya has been able to pump and sell oil from the fields leased to the U.S. companies, permitting Kadafi to pocket both his usual royalty and the profits that normally would go to the American firms.

“The President’s decision has been taken to protect U.S. interests,” Redman said. “It will eliminate the significant financial windfall which Libya has been receiving by marketing the U.S. oil companies’ equity share of oil liftings.”

He said that the situation provided “profits to the Kadafi regime, profits estimated to go into the hundreds of millions of dollars.”

The U.S. oil companies, eager to recapture those profits, have been urging the Reagan Administration to lift the sanctions. State Department officials say that they do not know the exact value of the Libyan assets of the five oil companies, but that the total is at least several billion dollars.

Redman said that other elements of the three-year-old sanctions will remain in effect. That means that U.S. passports are not valid for travel to Libya and that a total trade embargo will remain in effect.

“As a result of those continuing restrictions, U.S. oil companies will not be allowed to export goods from the U.S. to Libya, import goods from Libya to the U.S. or have U.S. nationals work in Libya,” he said.

“This decision does not represent a change in the attitude of the U.S. government toward Libya,” Redman added. “Libya still supports terrorism and subversion and continues to act against the interests of the United States and the West. The chemical weapons factory it has built constitutes a regional menace.

“No improvement in U.S. relations can be possible without concrete and durable change in Libya’s behavior,” he said.

Reagan renewed the sanctions for another year earlier this month.

At the time the restrictions were implemented, the U.S. oil companies were authorized to negotiate “standstill” agreements with Libya to protect them from charges of default on contracts requiring them to work the concessions in Libya. Those agreements run until June 30, although the decision to permit the firms to resume operations seems to render them moot.

The 1986 sanctions required all U.S. citizens in Libya--estimated at between 1,000 and 1,500, most of them employed in the oil industry--to leave the country. Most of the Americans complied with the orders, but some either remained in Libya in defiance of the order or returned after a few weeks. The U.S. government has no reliable estimate of how many Americans are now in Libya because Washington has no diplomatic representation in the country and those Americans who returned did so without using U.S. passports.

Some oil workers who wanted to remain were flown to London and, after a brief vacation, were flown back to Tripoli on Libyan airliners, entering the country without the usual border formalities, officials have said.

Oil industry sources say that the companies have been lobbying the Reagan Administration in an effort to gain permission to return.

President Reagan’s decision to let U.S. oil companies return to Libya opens the way for Occidental Petroleum to sell its interests there. Business.