As his troops advance on opposition forces, Muammar Gaddafi's survival looks more likely -- leaving foreign powers facing awkward decisions over whether to isolate him or work again for a rapprochement. Foreign powers were initially united in condemning Libya's leader for a bloody crackdown against an uprising that followed the ouster of Egypt and Tunisia's presidents, but have shown little appetite or consensus for action. Britain and France, growing trading partners and arms suppliers to Tripoli until recently, want a strong response and a no-fly zone. President Nicolas Sarkozy has recognised the embattled opposition as the legitimate representative of Libya's people, although other European states held back on that point. But a G8 meeting in Paris showed little sign of agreement. The United States remains cautious about the need for military action despite Arab League support for a no-fly zone, Russia and China even more so. Beijing's billions have offered a lifeline to isolated states before, from Zimbabwe to Myanmar. Stuck in the middle -- along with Libya's population -- are foreign oil companies whose assets could be seized by Libya in retaliation for any punitive action including sanctions and blocks on Gaddafi family and state sovereign wealth fund assets. For now, Libyan oil output has completely dried up with fighting on the outskirts of several key terminals and banks refusing to clear payment in dollars because of sanctions. But security experts say Libya's government is already pressuring some foreign oil firms to resume operations. "In the short term, Gaddafi has massive foreign exchange reserves," said senior risk consultant John Drake at London-based consultancy AKE, which advises the oil industry. "But in the longer term, he will want to find buyers for the oil. Will he find them? It's good quality. Maybe some countries have burned their bridges -- Britain, France, some of the Western powers -- but it's always hard to tell. Perhaps buyers will come from outside the West." Military experts say Gaddafi could still struggle to seize the opposition stronghold of Benghazi, potentially leaving the country split and oil firms with facilities in both opposition and government territory. Ivory Coast offers a possible indicator of what that could mean. Cocoa stocks are rotting in warehouses under an EU embargo as incumbent president Laurent Gbagbo remains in power in a divided country despite rival Alassane Ouattara being generally acclaimed the winner of last year's disputed elections. Violence is worsening and -- with regional and global powers unwilling to intervene -- analysts increasingly fear the country stands on the edge of another protracted civil war. But oil is more valuable than cocoa and some believe countries are quietly preparing to again deal with Libya. Libya is Italy's main oil supplier, with Prime Minister Silvio Berlusconi long Gaddafi's closest European ally and oil giant ENI the largest foreign player in the country. Berlusconi did call for Gaddafi to step down earlier in the crisis, but has since kept largely kept quiet. "We're already seeing a lot of caution and discretion in response to the violence," said Ian Bremmer, president of political risk consultancy Eurasia Group. "Southern European countries in particular won't be happy with a prolonged period of no oil supplies. International oil companies will hold the same view. Italy... has been stalling all EU efforts to put wide economic sanctions on the country." Chinese and Russian companies would likely step in if Western companies pulled out, he said, and earthquake-hit Japan would also likely have few qualms about buying Libyan oil. On Sunday, Gaddafi saw envoys from India, China and Russia and urged all three to invest, state television said, an apparent attempt to undermine any remaining international unity. Both Russia and China endorsed a Security Council resolution referring Libya to the International Criminal Court, while Russian President Dmitri Medvedev on Monday banned Gaddafi and family from financial transactions in Russia. Gaddafi has shed pariah status before. But some say this time he has gone too far. "It's too late for Gaddafi to just come back into the fold," said Michael Levy, senior fellow at the U.S.-based Council on Foreign Relations, suggesting he could find himself isolated like Saddam Hussein between the 1991 and 2003 Iraq wars. "I don't see Western countries cosying back up to him any time soon. Italy might be an exception. Chinese energy firms might also be a different matter -- their tolerance for risk is much higher -- but again it will be difficult. If they wish to take over operations from Western oil firms, that could cause diplomatic problems." The most vulnerable Western firms to expropriation are seen as those from the most outspoken countries: Britain and France. French oil group Total is one of the largest operators in Libya, while BP and Shell have a limited presence, primarily exploratory. Any expropriation would see Gaddafi sacrificing potentially for good any chance of getting back access to seized family wealth or sovereign wealth fund assets, a key "carrot" in any Western attempt to influence him. "The West are likely the losers here, particularly the countries that have taken the toughest line," said Anthony Skinner, associate director of political risk consultancy Maplecroft. "There is the risk they will end up looking ridiculous. Outside military intervention could still change things -- but that might only make things worse particularly if it was not enough to oust Gaddafi.
