Libya Defence and Security Report Q2 2008

The Tripoli government said in January 2008 that it had started deporting illegal immigrants. There are thought to be up to 2mn immigrants in the country, mainly men from various parts of Africa trying to make their way to Europe. Of that total, only around 60,000 are thought to have work permits and legal visas. The government has been under pressure to deport immigrants, who have been blamed in the local media for a rise in crime and for taking jobs away from Libyans. The climate has changed since foreign workers were first welcomed in the 1990s, when they were needed to help boost the economy which had been hit by international sanctions. Reuters quoted Mohamed El-Lamoushi from the Prime Minister's office saying 'all the procedures of expulsion must be finished in one month and there will be no exceptions. Foreigners who want to enter Libya must have legal papers and documents.' Responding to criticism from human rights groups who said the deportations were at odds with international law, El- Lamoushi said they were being carried out 'in a civilised way'. The matter was 'an internal issue' he said.

The normalisation of relations with the US in 2006 opened the door to many opportunities for Libya.

Whilst the republic has been edging towards normal relations with the international community for a few years, the US was Tripoli's ultimate goal. The announcement has paved the way for US investment in Libya's oil sector and if Tripoli plays its cards right, the sale of arms to the North African state. The move may prove to be beneficial for both parties, with Washington deepening its involvement in another country's oil sector and befriending another ally, this time on the African continent, in the fight against terrorism. Relations with Europe are also strengthening.

However, as many states have experienced, closer relations with the US can have adverse affects amongst the population. The conservative old guard is already stirring over Qadhafi's economic reforms. Whilst BMI does not anticipate a revolt, there will be issues regarding Qadhafi's succession to think of in the not too distant future - Qadhafi may be able to contain a conservative backlash but his more reformist son, Seif, may struggle to do so.

The potential for US military assistance will be of great interest to Qadhafi. At present the Libyan defence industry is practically non-existent, and what does survive is almost entirely state owned. Multinational involvement has been legalised only relatively recently, with the lifting of the UN arms embargo in September 2003 and of the EU arms embargo on September 22 2004, and foreign companies are beginning to penetrate the market. It has been reported that authorities in Tripoli have been in low-level talks with several European defence companies, eager to establish themselves in what should become a significant market now that the EU arms sales restrictions have been lifted. The resumption of full political and commercial relations with the US on May 15 2006 should also ease the pressure on Libya's economy by removing some of the restrictions on investment in the sector. As larger foreign companies move into Libya, its domestic defence sector is likely to experience a large expansion. Libya's extensive military equipment is in desperate need of modernisation. Precise details of the modernisation path to be taken are not yet known.

Providing Qadhafi continues along his current path then the prospects for Libya's defence industry look good. Defence expenditure is estimated to remain at about US$670mn in 2007, rising to some US$730mn by 2010, as the defence industry opens for foreign investors and new technology and hardware become available to Libya. The signing of new defence contracts and the trading of Libya's valuable oil reserves will provide further funds for military expenditure. This will see import figures rise substantially over the coming years, as Libya updates and replaces its ageing Soviet equipment.