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Italy-Russia deal threatens U.S. business goals in Libya

Agreement aims at oil markets

By John Phillips (Contact) | Thursday, January 8, 2009

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A proposed joint venture in Libya between two energy giants, Italy's Eni and Russia's Gazprom, is posing an immediate headache for the first U.S. ambassador to take up residence in Tripoli in 36 years.

Ambassador Gene A. Cretz took his post last month in the Libyan capital, at a time when U.S. oil companies are battling to re-establish a presence in the oil-rich North African nation.

Mr. Cretz, a 58-year-old career diplomat, said before departing that serving as ambassador was "a chance to reintroduce America to Libya and a chance to reintroduce Libya to America."

His appointment as the first U.S. ambassador to Libya in 36 years marked the normalization of Libyan-U.S. relations after Libya in October paid $1.5 billion to settle claims by the families of U.S. citizens killed in the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, the 1986 attack on a West Berlin disco and other terrorist acts.

Secretary of State Condoleezza Rice met Libyan leader Col. Moammar Gadhafi in Tripoli in September, after Libya and the United States settled the outstanding lawsuits.

Mr. Cretz cited business and tourism among his priorities for expanded cooperation when he landed at Tripoli airport on Dec. 27.

Because sanctions on the country were lifted after it abandoned its weapons-of-mass-destruction program five years ago, Libya has attracted a growing number of international oil companies.

U.S. oil companies won several contracts to explore the untapped and potentially vast oil fields after sanctions were lifted, but the deals were threatened by the terror lawsuits and the possibility that the plaintiffs could seize profits as part of a judgment against Libya.

Those obstacles were removed when ties between the two countries were normalized. Now, however, U.S. officials are irked by what they see as unfriendly maneuvering in Libya by longtime U.S. ally Italy, whose Eni energy concern has given Moscow a potential advantage in the Libyan market by signing an asset-swap deal with Gazprom, diplomatic sources say.

If the agreement is finalized, Gazprom will receive part or all of Eni's stake in Libya's Elephant oil field in return for Eni being allowed to acquire Russian assets.