Defiant Kadafi Back to Hard Line Against West : Libya: Stung by sanctions, he won’t turn over Lockerbie suspects. Also, he invites Mideast peace foes for talks.

A German merchant ship made its way into the harbor of Tripoli not long ago and was boarded by a troop of police who wanted to know if the ship was carrying weapons. Hoping for a laugh, the sea captain responded with a dirty joke.

But the Libyans weren’t smiling, and the captain spent a week in jail, released only after the intervention of the German Embassy.

A short time earlier, several Europeans living at an expatriate workers camp near the Libyan capital were sentenced to several weeks in prison when their wives placed a large mail order for poppy seeds. The women said the poppy seeds were for baking. The Libyans said they were for merrymaking, perhaps suspecting the seeds would be used as an opiate.

Fun isn’t a marketable commodity in Libya these days. Last month leader Moammar Kadafi imposed Islamic law throughout the country; one of its dictates makes it a crime, punishable by imprisonment, to “make rumors or harmful jokes about society or the Koran.”

And, in an interview last week here in the homeland of his desert tribe, Kadafi spoke in defiant tones.

Reeling under tightened international sanctions that have halted air travel to and from Libya, slowed delivery of key commodities, forced the country into arrears on its bill payments and sparked a slow exodus of foreign companies, Libya is no longer striking a pose of conciliation with the world.

Kadafi, the mercurial Libyan leader who last year was trying to court the West, this year is alarming his Arab neighbors by threatening to set up a “peaceful Islamic state” in his North African desert country, inviting opponents of the Middle East peace process for consultations in Tripoli and announcing that he has no intention of handing over two suspects accused in the 1988 downing of an American jetliner over Lockerbie, Scotland, that killed 270 people.

“There are no circumstances whatsoever under which we can turn them over,” Kadafi said in the interview. “Even if there is a war.”

Kadafi, who as a young colonel rode the crest of Arab nationalism in 1969 to topple the pro-Western monarchy and establish Libya as one of the West’s most enduring headaches, hasn’t mellowed with age.

Late last year, Libya hosted a meeting of radical Arab organizations dubbed the “Democratic Arab Revolution,” and Kadafi, who is in his early 50s, said he was considering inviting terrorist leaders Ahmed Jibril and Abu Nidal to Libya.

Western intelligence analysts say at least five terrorist training camps remain operative in Libya, and several years after an international uproar over a purported chemical weapons plant forced Libya to halt production, the German press last month showed photographs of tunnels dug deep into a mountainside at Tarkhounah, south of Tripoli.

The reports said German companies were aiding in the construction of a new manufacturing plant for chemical, and possibly biological, weapons. Libyan officials said the tunnels were being dug for the Great Man-Made River, a huge project for transportation of water from desert aquifers to the coast.

Just as worrying, Libyan opposition sources say, they now have eyewitness reports that Libya was behind the disappearance of Mansour Kikhiya, a Libyan opposition leader and human rights leader who disappeared in Cairo in December while on his way to a meeting with a Kadafi contact. Kikhiya has since been seen alive in Libya, former Libyan Prime Minister Abdel Hamid Bakoush, now a key figure in the Libyan opposition, said in an interview in Cairo last week. He suggested that Kadafi has returned to the days of terror of the mid-1980s, when the Libyan regime hunted down its opponents all over the world.

“Kadafi has been calm for the last few years not because he gave up but because he had other problems to take care of, and because the international market of terrorism was in recession,” Bakoush said. “He has gone on television again calling for the enemies of the revolution to be killed, because imprisoning them is doing them a favor. . . . We see that with these sanctions he has gotten into a mess, and now he is making the mess worse.”

“For several months, he was trying to be nice about (President) Clinton and (British Prime Minister John) Major,” said a European diplomat in the Libyan capital, referring to Kadafi’s charm offensive launched against the leaders last year. “All that has stopped. Now he’s started shouting again about the Jewish and Christian crusading conspiracy. He’s become very violent in his speeches. He’s furious at not being taken seriously, not by the West or even his Arab brothers.”

Kadafi, weakened by the international air embargo, a freeze on his assets abroad and a halt on spare parts supplies for some oil equipment, at the moment does not appear to have the wherewithal to return to the freewheeling days when Libya offered financial and logistic support for a wide array of international terrorist groups and national liberation movements, from the Irish Republican Army to the Abu Nidal organization.

And in an interview at the modern hotel complex in Sirte, constructed for international conferences, Kadafi repeatedly called for an end to violence in the Middle East, although he refused to rule out further support for violent opponents of the Middle East peace process. George Habash, head of the militant Popular Front for the Liberation of Palestine, which has mounted a series of attacks in the Israeli-occupied territories aimed at derailing the peace talks, arrived in the Libyan capital last week for consultations.

“If there is a real peace process, we will support it fully,” Kadafi said, sitting quietly in a modern office dressed in the traditional robe of North Africa. “We will wait for the result. If the result brings about peace, then it is good.”

As he spoke, Kadafi sat slumped over slightly in an elegant chair, talking in a low monotone interrupted by occasional sighs. Frequently, his eyes would scan the ceiling as if seeking a way to make the world see the dreamscape on the backside of his eyes.

“But you can’t just talk about recognizing Israel. Things cannot be put in that way. Because if you ask one party to recognize Israel, then you have to ask Israel to recognize the other party. When are they going to recognize Palestine? Are we seeking peace, or just the recognition of Israel? If it is just the recognition of Israel you’re after, then we have to sacrifice peace. This is what has delayed the peace process, and we may never achieve peace in the long term.”

The peace process has failed so far, he said, because Israel has focused its efforts on coming to terms with Palestine Liberation Organization Chairman Yasser Arafat.

“Abu Ammar does not represent all the Palestinians,” he said, using Arafat’s nickname. “The armed groups and organizations are not part of this process, and so peace is in danger. Abu Ammar’s organization is not a fighting one. Any agreement with that organization will not end the struggle.”

Kadafi defended his ongoing contacts with purported terrorist leaders. “When the British government agreed to meet with the IRA, does that mean they encouraged them to continue violence?” he asked, clucking his tongue with irritation. “And when the leaders of the United States received Salman Rushdie, were they encouraging him to attack Islam? If we do a meeting with these people, it’s considered evil. Even if I was trying to convince them not to continue fighting, you condemned us in advance.”

Kadafi said he has challenged the West to provide evidence that he is still engaging in terrorism, and he raised questions about why the West continues to talk about Libya and terrorism. “Is it because I posed a threat to you in the past?” he asked. “What is the basis of these accusations? If you go to interview the president of Italy, would you ask him if he is dangerous? These are wrong accusations.

“Is there any terrorist operation that was carried out by Libya? I challenge them to provide evidence for even one terrorist act which Libya has committed. . . . These are just colonialist designs on our countries. They would like to subject all the peoples of the world to surrender and become beggars. This is the difference between me and them, and terrorism is only a cover for that difference between them and us.”

The Libyan leader defended an invitation to Egyptian cleric Sheik Omar Abdul Rahman, spiritual leader of an organization that is trying to bring down the Egyptian government and whose followers were convicted in the bombing of the World Trade Center in New York. He said he has asked the radical preacher to set up a peaceful Islamic state in Libya.

“I still insist on my request that the United States government should release Omar Abdul Rahman and he should come to Libya,” he said, “in order for us to convince him to put an end to the violence in Egypt. . . .

“We are against all kinds of violence: that used by the Islamists and the fundamentalists, by the Americans against the Indians. We demand from the Israelis, the fundamentalists and the Americans to put an end to violence. They should be convinced that dialogue is the only way. They should put away their arms and recognize the existence of each other.”

All of this talk may sound as though Kadafi has become a reasonable man. But the pacific overtures have a tinny ring when they come to the case of Kikhiya, a former foreign minister and one of the most outspoken critics of the Kadafi regime as well as founder of the Libyan Organization for Human Rights. Kadafi insists that Kikhiya was kidnaped by the CIA to damage relations between Libya and neighboring Egypt.

“We officially accuse you of it as Americans,” he said, grinning cheerfully as he calculated the effect of his words. “American intelligence is responsible for what happened to Kikhiya. He is a Libyan citizen and the Libyan authorities will follow up the matter to the end.”

Clinton was deceived and manipulated by the CIA when he said in a recent report to Congress that Libya still poses an enormous threat to the United States, Kadafi contended.

The Libyan leader and the entourage around him seem to have almost dreamlike hopes about Clinton, the successor to two Republican administrations thoroughly loathed in Tripoli. One Kadafi aide said the Libyans particularly admire Clinton for his avoidance of the draft during the Vietnam War. At one point, Kadafi, noting his belief that Clinton is the victim of a CIA conspiracy, offered to send an armored car to Washington to protect the President.

“Everything that came in this Clinton report (about Libya), Clinton cannot be responsible for it,” he said. “It was imposed on Clinton. Clinton is a victim, just like us. He is a victim of the CIA and imperialism, and we’re concerned about him, that he might face the same destiny as JFK”--a reference to President John F. Kennedy, who was assassinated in 1963.

With his country increasingly squeezed by international sanctions, Kadafi has reason to be worried about himself. According to diplomats in Tripoli, Kadafi uncovered an assassination plot from within the military last October, only a day before his motorcade was to have been attacked in the steel-producing town of Misratah.

Although the details are not clear, an uprising began about the same time in the town of Bani Walid, reportedly spurred by a tiff between Kadafi and the powerful tribal leaders in the area and military cadets who, like many other public employees, have gone unpaid for six or seven months.

Rumors that Kadafi’s closest lieutenant, Staff Maj. Abdelsalem Ahmed Jalloud, was behind the coup plot have been fed by reports that Jalloud is under virtual house arrest.

“There was some unrest in the army camps, and at the same time a group of high professional officers, really well-educated people, planned to ambush him,” one diplomat said. “One of the group betrayed them, so they were all picked up in one day. Most of them were shot.”

Four officers have been shown on Libyan television in the last two weeks confessing to being spies for the United States.

“There are always rumors. One version has it that 2,000 people were rounded up, and 300 were executed, 80 by Kadafi himself,” said one Western envoy in the Libyan capital.

Kadafi himself said the four men on television “admitted they were recruited by the CIA” to spy on the Libyan regime.

“Now look what America is doing to destroy the world,” he added. “If we did something like that, what would they say about us? When they do it, it is legitimate. How can the problems of the world be solved by such a mentality? They consider the people of the West are human beings and the people in the East are donkeys.”

Although Kadafi said he is adamant about not handing over the Lockerbie suspects, he repeated past statements that the two men are free to turn themselves in. Most analysts in the Libyan capital believe there are no conditions under which the two men will be released for trial in the United States or Scotland.

“I’m much more pessimistic now than a year ago. Because there is no sign whatsoever that Kadafi is prepared to deliver these two persons,” one European envoy said.

Instead, Kadafi appears to be preparing for a long showdown. With his assets frozen abroad, he worked quickly to transfer overseas funds into accessible accounts before the latest sanctions and has since brought large quantities of cash into the country, in $100 bills and treasury bonds, according to diplomatic sources. Reserves now are said to total a full year’s oil revenue, or about $7 billion.

The failure to pay public salaries over a period of several months is driving out an increasing number of foreign workers but is getting the Libyan populace prepared for hard times, with the prospect of a full oil embargo, depriving Libya of virtually all outside revenue, under probable consideration by the United Nations over the summer, these analysts said.

“Their policy for the future seems to be to spend as little as possible from their reserves,” said a foreign envoy. “I think they’re preparing for a long siege.”

Kadafi seems to be taking the long view too. “The struggle of my nation is continuing,” he said with a quiet sigh, staring into space. “It’s carried over from one generation to another. And that’s what we’re doing. It’s not a matter of win or lose. The question is, what is the correct thing to do? To continue to struggle for our right to life.”