LONDON: British firms that had been hoping to do business in Iraq after the fall of Saddam Hussein are switching their attention to Libya as a more promising market.

With UN sanctions likely to be lifted on Thursday, Muammar Gadhafi’s oil-rich North African state is coming in from the cold at a time when trade prospects for Iraq are rapidly deteriorating.

“There is a lot of enthusiasm for Libya,” said James Lawday, director-general of the London-based Middle East Association, which promotes trade and investment in the region.

“This is particularly because the Iraqi market is not proving as accessible as we had hoped.”

The MEA, which has already sent several trade delegations to Libya, will be sending another at the end of the month.

Britain drafted a Security Council resolution to end UN sanctions after Libya agreed last month to pay $2.7 billion to the families of people who died in the bombing of a Pan Am airliner over Lockerbie in 1988.

France then threatened to block the move unless Libya increased its compensation for the bombing of a French UTA airliner which killed 170 people in 1989.

France and Libya apparently reached a new compensation agreement over the weekend, paving the way for a return to the security council, although by yesterday no deal had yet been signed.

Libya, which is still reluctant to admit direct responsibility, insists the extra money will not come from government funds but from the “Gadhafi International Association for Charitable Organizations”, which is run by the colonel’s son, Saif al-Islam.

UN sanctions were suspended in 1999 when Libya handed over the Lockerbie suspects for trial by a Scottish court specially convened to sit in the Netherlands.

The permanent lifting of sanctions is seen as partly symbolic — signalling Libya’s rehabilitation — but also as a lever towards ending sanctions that were imposed separately by the US.

In 1996 a law popularly known as the D’Amato act targeted Libya and Iran because of their alleged support for terrorism and efforts to acquire weapons of mass destruction.

There are also presidential sanctions unrelated to Lockerbie, which were imposed by Ronald Reagan in 1986 and bombed Tripoli.

Once UN sanctions have formally ended — Washington is not expected to use its veto but will probably abstain in a Security Council vote — the US will have to decide what to do about its own sanctions.

Not lifting US sanctions will help foreign companies by allowing them to develop business in Libya without American competition.

The terms of Libya’s compensation offer for Lockerbie are also designed to put pressure on the Bush administration. An initial $4 million would be paid for each victim once UN sanctions are ended.

That would be followed by another $4 million if the US lifts its sanctions and by a further $2 million if it drops Libya from its list of states that sponsor terrorism.

But if Washington does not take these steps within eight months, the families would receive only dollar $1 million more, bringing the total to $5 million per victim — half what they would otherwise get.—Dawn/The Guardian News Service.