As attempts to end the Libyan crisis took shape this week, questions were being asked about the cosy state of European-Libyan relations, writes David Tresilian in Paris As the crisis in Libya continued this week, with reports of the east of the country being in rebel hands and the regime of Libyan leader Muammar Gaddafi battling it out in the capital Tripoli, sanctions were imposed against the country amid questions about the cosy state of European- Libyan relations and fears of a large-scale refugee crisis. US president Barack Obama announced that the US would be imposing sanctions against the Libyan regime on 25 February, with the UN Security Council voting at the weekend to put further pressure on the Libyan government by imposing an arms embargo and asset freeze and referring Gaddafi to the International Criminal Court for possible prosecution. The leaders of European and other countries called for the Libyan leader to step down and for an end to the violence in the country, with efforts being stepped up to evacuate foreign nationals. French President Nicolas Sarkozy told reporters while on a visit to Turkey that Gaddafi should step down, while British officials reiterated warnings that members of the Libyan regime could face prosecution should the violence continue. Nevertheless, the Libyan government, believed to be restricted to Tripoli and certain other urban centres following popular uprisings in the rest of the country, showed few immediate signs of yielding. At meetings held in Tripoli at the weekend, Gaddafi continued to call on his supporters to "defend Libya", while his son, Seif Al-Islam Gaddafi, believed to be in charge of what remains of the Libyan government, issued threats of escalating the violence. While the international sanctions against Libya were welcomed by observers, appalled by violence that has left hundreds dead and that may be on the way towards causing a full-scale refugee crisis, questions are being asked about European relations with the Gaddafi regime, until a few weeks ago held up as a partner in policies on immigration and the fight against terrorism. The US and Europe restored diplomatic relations with Libya following Gaddafi's cooperation in resolving long- standing disagreements, including over the country's programme to develop weapons of mass destruction and the Libyan agents accused of carrying out the 1988 bombing of Pan Am flight 103 over the Scottish town of Lockerbie. In the wake of Libya's payment of compensation to the families of those killed in the Pan Am bombing and its undertaking to abandon the development of weapons of mass destruction, Gaddafi found himself transformed from international pariah to favoured interlocutor. European companies began queuing up to sign contracts in Tripoli, many of them relating to Libya's large oil and gas reserves, but also covering infrastructure and development projects. Gaddafi himself has made a series of visits to European countries in recent years, notably to France in 2007, where he arrived amid rumours that Libya would be signing contracts worth some 10 billion euros, including for weapons purchases. Following a visit by former British prime minister Tony Blair to Libya in 2004, during which he hailed a "new relationship" with Gaddafi, the Anglo-Dutch oil company Shell signed a deal for gas-exploration rights in the country. In 2007, Blair went again to Libya, this time helping to seal a deal for the British oil giant BP and various defense contracts. Two years later, the Libyan agent Abdel-Baset Al-Megrahi, found guilty for the Lockerbie bombing, was released from a Scottish prison. It was suspected at the time that this was the price for contracts being awarded to British companies, reinforced by confidential US diplomatic cables published on the WikiLeaks Website late last year. According to reports in Europe's financial press this week, funds controlled by the Libyan Investment Authority, the country's sovereign wealth fund, and the Libyan central bank could amount to some $150 billion, much of it invested abroad. Libya is believed to have built up a significant foreign investment portfolio in Italy, the former colonial power, where Libyan funds control 7.5 per cent of the Italian bank Unicredit and have significant holdings in the arms manufacturer Finmeccanica, the oil company ENI, the telecommunications company Retelit and the football club Juventus. Relations between the Libyan regime and Italian business and political circles have been particularly close in recent years, with Italy now receiving one third of Libya's petroleum exports. However, relations with British political and business circles have also been close, with Saif Al-Islam Gaddafi being quoted in the British press last week to the effect that Blair was a "close, personal friend" of the Gaddafi family, offering the regime "invaluable advice". A further potentially embarrassing story was the revelation that the London School of Economics had received funding from the Libyan government, Seif Al-Islam Gaddafi, responsible for directing much of the recent violence, being awarded a doctorate by the institution in 2009. While such details have provided evidence of the readiness of European countries to do business with Libya despite questions surrounding the dictatorial character of the regime and its poor human rights record, they have also called into question European strategies on immigration and energy security. Libya is an important crossing point for illegal immigrants into Europe and continuing instability in the country could significantly increase illegal immigration. According to the Italian interior minister Roberto Maroni, speaking in Brussels at the weekend, Italy fears a "catastrophic" flood of hundreds of thousands of refugees into Europe should the crisis continue. Tens of thousands of people, most of them foreign workers, have already been fleeing the country over the Tunisian and Egyptian borders. Meanwhile, while Libya is not as important an oil producer as the Arab Gulf countries or Iran, the present instability in the country has also affected oil prices, with Brent crude reaching as high as $114 a barrel earlier this week in London. However, analysts have thus far played down the importance of the Libyan crisis on international oil prices, the London Financial Times quoting Saudi Petroleum Minister Ali Naimi last week to the effect that Saudi Arabia would immediately make up any shortages of supply.
