TALKING POINTS FOR AMBASSADOR WALTERS IMPACT OF US TRADE SANCTIONS ON LIBYA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91B00874R000100250016-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: August 8, 2011
• Sequence Number: 16
• Publication Date: August 28, 1986
• Content Type: MISC

Sanitized Copy Approved for Release 2011/08/08: CIA-RDP91 B00874R000100250016-8
CENTRAL INTELLIGENCE AGENCY
DIRECTORATE OF INTELLIGENCE
Talking Points for Ambassador Walters
28 August 1986
Impact of US Trade Sanctions on Libya F
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US trade and diplomatic sanctions are compounding the
unprecedented economic pressure on Libya resulting from the weak
oil market. Tripoli loses $33 million per month for each one
dollar decline in oil prices at current estimated export.levels
of 1.1 million barrels per day (b/d). Conversely, every 100,000
b/d drop in oil exports cost the regime $36 million per month at
the current price of $12 dollar per barrel. 25X1
--An average price of $12 per barrel would bring in
only $4.5 billion in revenues, one-quarter the level
earned in 1980. This will force Tripoli to make
difficult and risky political-choices this year to
balance import needs and foreign exchange earnings. A
reduction of this magnitude would hit imports of both
civilian goods and military equipment. 25X1
--Tripoli is aggressively discounting the price of its
high-quality crude oil and is offering net-back
arrangements to maintain oil earnings. 25X1
--Because of the sharp reduction in imports, military
imports will account for 25 percent of the total this
year, up from 14 percent five years ago. 25X1
--The decline in industrial and consumer imports
cer'tai,nly'Rieansteal GDP growth will drop for the sixth
consecutive year, the sixth consecutive drop, reducing
the overall level of economic activity in real terms to
just over half the 1981 level. 25X1
--Libyan trade arrears--primarily to Western
Europe--may exceed $5 billion. 25X1
Of the various US economic restrictions imposed last January,
financial sanctions have had the greatest direct impact on the
regime. Libya lost access to as much as $800 million of its then
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funds. The initial hearing is scheduled
$6 billion in foreign exchange reserves. Libya still has an
estimated $4.0 billion in foreign exchange reserves, about 40
percent of which were held in Japanese banks. Tripoli aslo has
sizable holdings in British, French and Dutch stitutions as
well as $1.3 billion in gold. 25X1
--Libya has brought a legal suit against a US bank in
London to regain access to $260 million in frozen
--Delays in procuring US equipment and in replacing US
personnel are partly responsible for Tripoli's
cancellation of the Zuwara aluminum smelter and the
steel mill at Misratah. Progress on Qadhafi's priority
Great Man-Made River project also has been slowed as 'a
result of the departure of US companies working on the
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Libya's development program and agricultural sector also have
felt the pinch of US economic sanctions. 25X1
--US trade restrictions have hindered Libya's ability
to obtain US seed which delayed planting of some
vegetable crops this spring. Yields of onions and
beans may be cut by up to 15 percent as a result.
and W.R. Grace--ceased their operations in Libya in accordance
US oil companies--Marathon, Conoco, Amerada Hess, Occidental,
--All. but;one have negotiated a standstill agreement
with Tripoli permitting the resumption of their
operations if relations between Tripoli and Washington
'')ZV-I
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--Several West European and Asian firms have expanded
their business activities in Libya since 7 January,
especially in the oil sector. In select cases British,
Italian, West German, French, and other firms probabl
have filled positions left by departina US workers.
--Libya is not experiencing shortages of critical spare
parts in the oil sector. Moreover, Tripoli probably
will continue to obtain sufficient select US origin
equipment and spare parts through front companies to
maintain the current level of oil production--68
percent of maximum sustainable production.
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2Al
West European support of US efforts to reduce Libyan oil
revenues has been limited so far. 25X1
--Belgium, Portugal, and France have agreed to reduce
their importation of Libyan petroleum. These states,
however, have not imported significant volumes of
Libyan oil in recent years.
--Italy, West Germany, the Netherlands, Spain, and the
United Kingdom are reluctant to reduce their reliance
on Libyan petroleum. Tripoli has a large trade debt
with several of these states--especially Italy--which
the regime is resolving with oil barter arrangements.
Tripoli continues to use overseas offices of the Libyan Arab
Airlines, Libyan Arab Foreign Investment Compan.y.(LAFICO)
affiliates, and a variety of ostensibly independent front
companies to carry out acts of subversion or to procure denied
goods. The closure of Libyan Peoples Bureaus in many countries
increases the likelihood that Tripoli will place even greater
emphasis on using semi-private channels to strike at Libyan
exiles or circumvent US trade restrictions.
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--Since 7 January, Libyan intelligence operatives
working under Libyan Arab Airline cover probably have
been involved in several terrorist related activities,
including planned attacks against a US officers club i
Ankara and the US Embassy in Nicosia.
--Individuals working in LAFICO affiliates have been
linked to several planned acts of subversion in Latin
America and Europe since 7 January.
--Libyan front companies also have been active in
helping Libya circumvent US economic sanctions. Two
such companies, Service Airlines, Ltd., and Cobra AW,
Ltd., of Hong Kong and the United Kingdom respectively,
aided Tripoli's successful efforts to obtain two
A310-200 aircraft which contain US origin components.
Other front companies may be helping Tripoli obtain US
origin aircraft spare parts and to recruit US oil
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 Sanitized Copy Approved for Release 2011/08/08: CIA-RDP91 B00874R000100250016-8
Sanitized Copy Approved for Release 2011/08/08: CIA-RDP91 B00874R000100250016-8
 Sanitized Copy Approved for Release 2011/08/08: CIA-RDP91 B00874R000100250016-8
SUBJECT: Impact of US Trade Sanctions on Libya
DISTRIBUTION:
EXTERNAL:
Copy 1 - Ambassador Waiters c/o Michael Ussery (State)
3 - DIR/DCI/DDCI/Exec Staff
4 - DDI
5 - ADDI
6 - NIO/NESA
7 - D/NESA
8 - DD/NESA
9 - NESA/AI
10 - NESA/AI/M
DDI/NESA/AI/M
28 Aug 86 25X1
i 25X1
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Sanitized Copy Approved for Release 2011/08/08: CIA-RDP91 B00874R000100250016-8