Libya: Background and U.S. Relations

Christopher M. Blanchard
Analyst in Middle Eastern Affairs

Libyan-U.S. rapprochement has unfolded gradually since 2003, when the Libyan government accepted responsibility for the actions of its personnel in regard to the 1988 bombing of Pan Am Flight 103 and announced its decision to eliminate its weapons of mass destruction and longrange missile programs. In response, U.S. sanctions were gradually removed, and, on May 15, 2006, the Bush Administration announced its intention to restore full diplomatic relations with Libya and to rescind Libya's listing as a state sponsor of terrorism. Full diplomatic relations were restored on May 31, 2006, when the United States upgraded its Liaison Office in Tripoli to an Embassy. Libya was removed from the lists of state sponsors of terrorism and states not fully cooperating with U.S. counterterrorism efforts in June 2006.

Until late 2008, U.S.-Libyan re-engagement was hindered by lingering disagreements over outstanding legal claims related to U.S. citizens killed or injured in past Libyan-sponsored or - supported terrorist attacks. From 2004 onward, Bush Administration officials argued that broader normalization of U.S.-Libyan relations would provide opportunities for the United States to address specific issues of concern to Congress, including the outstanding legal claims, political and economic reform, the development of Libyan energy resources, and human rights. However, some Members of Congress took steps to limit U.S.-Libyan re-engagement as a means of encouraging the Libyan government to settle outstanding terrorism cases in good faith prior to further normalization.

Under the terms of a Claims Settlement Agreement reached between the Libyan and U.S. governments in August 2008, funds are now available to settle specific outstanding legal claims. Congress supported the final stages of U.S.-Libyan negotiation on the agreement by passing S. 3370, the Libyan Claims Resolution Act (P.L. 110-301), which authorized the creation of an entity with legal immunity to receive settlement funds from Libya or other sources and to distribute them to U.S. plaintiffs. On October 31, 2008, the Bush Administration certified the receipt of $1.5 billion in settlement funds, and President Bush signed Executive Order 13477 stating that claims covered by the agreement were settled. The State Department has referred claims to the Department of Justice Foreign Claims Settlement Commission for adjudication.

When Scottish authorities returned convicted Pan Am 103 bomber Abd al Baset Ali al Megrahi to Libya on humanitarian grounds in late 2009, the ensuing outcry in the United States and United Kingdom highlighted the continuing influence of past U.S.-Libyan differences. In July 2010, new scrutiny of Libyan-UK negotiations over Megrahi and energy contracts involving BP plc underscored this dynamic. Nevertheless, the 111th Congress and the Obama Administration inherited a U.S.-Libya relationship largely free of the formal constraints that once precluded cooperation. The relationship remains relatively undefined after decades of tension. Libya has experienced a period of significant economic growth but remains defined politically by Muammar al Qadhafi's controlling influence over a decentralized, opaque, and authoritarian political system. Economic and political reform efforts are emerging in Libya, with some limitations.

Current U.S. policy concerns include ensuring Libya's positive contribution to the security and economic prosperity of North Africa and the Sahel, securing commercial opportunities in Libya for U.S. firms, and addressing persistent human rights issues. The Obama Administration is requesting $875,000 in FY2011 foreign assistance funding for Libya programs. This report provides background information on Libya and U.S.-Libyan relations; discusses Libya's political and economic reform efforts; and reviews current issues of potential congressional interest.


Date of Report: July 16, 2010
Number of Pages: 43
Order Number: RL33140
Price: $29.95

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