Libya is welcoming the U.S. decision to ease economic sanctions. Analysts say the development is likely to have a limited impact on global oil markets.
For the first time in 18 years, U.S. companies can now buy Libyan oil, and U.S. banks can finance foreign investment in the Libyan economy.
Analyst Jim Steel, director of commodities research at Refco Securities in New York, says the Libyan oil industries will benefit most from the decision.
"They'll have access to a more varied amount of U.S. capital and technology than they have in the past when they were rather limited in the number of foreign companies they could choose from," he said. "And, of course, U.S. industries are going to benefit, as they are able to get back to an old marketplace that they have been excluded from in recent years."
But Mr. Steel says the impact on the global oil markets will not be far-reaching. What is likely is not an increase in Libyan oil output, but a change in markets for that oil.
The U.S. move does not completely lift all sanctions against Libya. The United States continues to officially class Libya as a state that sponsors terrorism. Libya cannot receive arms exports and its assets in U.S. banks will remain frozen.
The move to ease sanctions came after Libyan leader Muammar Gadhafi pledged to abandon his weapons of mass destruction program, and accepted responsibility for the 1988 bombing of a Pan Am airliner over Lockerbie, Scotland. A U.S. spokesman said Libya has set a standard he hopes other countries will follow.
Ahmed el-Ghandour, professor of international economics at Cairo University, says the Arab world is likely to view the decision negatively. He says, while the Bush administration is calling for democracy in the Middle East, it is supporting Libya's authoritarian regime for economic reasons.
"The only reason why the United States is taking this step toward Libya, and it is a favorable one as far as Libya and the regime is concerned, is that it has an interest, and in particular, an economic interest," said Ahmed el-Ghandour.
Libya has already announced contracts will be signed in the next few days, and the first shipment of oil to the United States since 1986 will be on its way next month.