Cash-strapped rebels will be counting on a quick resumption of foreign investment and oil exports if they manage to consolidate this week’s military gains, including large parts of the capital Tripoli, and take full control of Libya.
Staff from some companies, such as Italy’s ENI , may already be returning, which is essential to a rapid resumption of crude shipments — most likely first from Libya’s rebel-held east.
But many others will hold back, worried over ongoing fighting in the capital and the fact that ousted leader Muammar Gaddafi, his sons and regime loyalists are still very much alive and active.
"The situation is still very dangerous and unpredictable," said John Drake, senior risk consultant at London-based consultancy AKE — a firm with many clients in the oil industry as well as media firms operating in the war zone.
"Tripoli in particular is very difficult to operate in, but you also have uncertainty and the threat of violence across much of the rest of the country."
Security analysts say foreign companies will probably be unable to operate in the capital for days or even weeks or longer. Other parts of the country may be safer, but many areas remain highly unpredictable.
With Gaddafi’s rule collapsing, opposition forces have made rapid advances through the key oil facilities of Brega and Ras Lanuf. Most observers expect them to hold onto these gains, but with Gaddafi forces still fighting around his home town of Sirte just along the coast, the risk of a swift battlefield reversal remains.
Remnants of the former regime also may retain the ability to strike at pipelines and shipping. Concerns about that possibility will make it harder for foreign shippers to get insurance and vessels to enter the ports.
The rapid rebel advance on Tripoli took many by surprise, but analysts says the rebels may struggle to impose their grip, particularly in western areas. Internal divisions within the rebel movement could also make it difficult for firms to know whom exactly are they are dealing with.
"There’s a great deal of rivalry within the rebel camp and a lot of people trying now to stake their claim in this conflict," said political risk consultancy Stratfor in a note.
"Until you have a single coalition or faction that controls the country, you cannot have a government. Until you have a government, you cannot have a foreign policy … (or) and energy policy. Until you have an energy policy, you cannot have a contractual model for foreign energy firms to work with."
GADDAFI ON THE RUN
The rebel National Transitional Council has been keen to stress that any new government will respect Gaddafi-era contracts with foreign firms. But for now, even some export deals may be illegal.
Foreign powers have moved quickly to unlock some Gaddafi-era funds for the council, but international sanctions remain in place.
Designed to starve Gaddafi of resources and revenue, the sanctions may make it all but impossible even for the rebels to ship oil.
Western powers are keen to get the reconstruction started and will be keen to drop the sanctions, but that may be difficult while the Libyan leader remains at large.
The sanctions are designed to target specific individuals and companies through blacklists, but the strong presence of the Gaddafi government throughout the economy has made it nearly impossible to ensure money won’t end up in the wrong hands.
Lawyers said this has been blocking or slowing investment in the country, including the vital oil industry.
"There are entities owned or part-owned by sanctioned entities, so sanctions potentially cover a vast proliferation of companies," said Susannah Cogman, London-based partner at law firm Herbert Smith.
U.S. authorities are seen as most likely to maintain and enforce economic sanctions on firms and individuals that may be linked to the Gaddafi government.
The European Union looks set to take a more lenient approach, prioritising instead the resumption of normal economic activity to reduce dependence on foreign aid.
France is already working with Britain and other allies to draft a new U.N. resolution intended to ease sanctions and asset freezes imposed on Libya when Gaddafi was in charge.
"If Gaddafi were to die, it would be easier as sanctions authorities would not have to fear companies are aiding him," said Harry Clark, a partner at New York-based law firm Dewey & LeBoeuf, specialising in trade and investment rules.
"If they escape (Gaddafi and associates) or simply leave power, application of sanctions might be messy and unclear."
