Europe caught in a bind after years of cosying up to Libya

Having strengthened relations with Libya over the last few years, European countries now find themselves having to condemn Col Qaddafi's regime without totally abandoning it.

While revolts in Tunisia and Egypt have captivated the West's attention, the crisis in Libya has an entirely new set of consequences for European countries.

On an economic level, there is more at stake for Europe than almost anywhere else in Africa. Because of the deepening trade ties cultivated especially over the past few years, European governments have to walk a balance between their condemnation of human rights abuses and their longstanding relationships with the regime of Colonel Muammar Qaddafi.

Indeed, since Libya reintegrated into the concert of nations in 2004, and even more since 2006 when economic sanctions were lifted by the Bush administration, the country has become the European Union's golden goose.

Contracts have been granted disproportionately to European firms, based on Libya's huge oil revenues, which are valued at about $35 billion (Dh128.6 billion) a year, its financial reserves (more than $200 billion) and its drive towards modernisation.

The economic relationship with western European nations has flourished in the past few years to the extent that 75 per cent of Libyan exports and 85 per cent of its oil exports go to the European Union. European oil companies have been among the first to rush into this new El Dorado, from Britain's BP, to Italy's ENI and France's Total. Following them, weapons manufacturers have poured in from the same countries, inking numerous contracts with Tripoli.

In recent years, France has become a major business partner; after receiving a grand welcome in Paris in 2007, Col Qaddafi placed orders for multi-billion euro contracts with French multinational corporations such as Dassault, Airbus and Areva.

But the country that has really been expanding economic partnerships with Libya is none other than its former colonial ruler, Italy. The image of the Italian premier Silvio Berlusconi kissing Col Qaddafi's hand at the Arab League summit in 2010 sums up the relationship.

Indeed, Italy is the top European trading partner with Libya, receiving 20 per cent of its exports and accounting for 18 per cent of its imports. Libya has invested about €3.6 billion (Dh18.2 billion) in Italian companies, taking a 7.6 per cent stake in Italy's second largest bank Unicredit, 2 per cent in Finmeccanica and 7.5 per cent of the football club Juventus.

One sign of this close relationship was all too clear on Monday. The Milan Stock Exchange took the worst hit from the Libyan crisis, plunging 3.6 per cent.

The Italian-Libyan rapprochement, which is now causing some embarrassment, really took off in 2008 when Mr Berlusconi apologised for the colonial period and offered a $5 billion payment over 25 years as reparations. But it was more than just mending fences: Libya agreed to invest heavily in Italian companies and grant contracts to Italian firms; it inked an iron-clad military agreement; and agreed to help to stop the flow of illegal immigration from Africa to Italy. The latter clause had immediate effect since the number of arrivals plunged from 36,000 in 2008 to 4,300 in 2010.

Next to the economic ties, it is the immigration issue that now concerns Europe most - a fact that Col Qaddafi is well aware of. That is why he has threatened to stop cooperating with the EU if it gets involved in Libya's domestic affairs. European interior ministers met on Wednesday to discuss the issue and Italy's foreign minister, Franco Frattini, warned that up to 300,000 Libyans could flee in an exodus on a "biblical scale".

The third fear for Europe is terrorism and Islamist fundamentalism that might arise in a power vacuum. Mr Frattini was quick to point out that the rise of an Islamic emirate in Eastern Libya is possible: "This radical Islamism worries us because it is only a few hundred kilometres from the European Union."

In fact, al Qa'eda's central leadership is composed of many Libyans and al Qa'eda-linked Libyan Islamic Fighting Group (LIFG) has a presence in eastern Libya and the troubled Sahel region.

Col Qaddafi has been helpful in counterterrorism operations - even the United States would agree with that at least in part - but he has also released prisoners with some connections to al Qa'eda in recent years. It is very possible that a non-aggression pact has been signed with some LIFG members who have given up the goal of an Islamic regime in Libya and are focusing on western targets. European security services have already considered the possibility of Libyan operatives pulling off an attack in Europe, in particular against Switzerland.

All of these considerations mean that European capitals will be watching events in Libya through the prism of realpolitik. Because, so far, Libya's tribes and organised opposition have not been visible, this has been an easier position to live with.

But after being new best friends with Col Qaddafi in recent years, now some in Europe, including France and Germany, are calling for sanctions because of the ongoing violence. They will, however, hedge their bets and not go too far in case Col Qaddafi manages to hang on to power.

Olivier Guitta is a security consultant based in Europe who writes at www.thecroissant.com