Is Libya the next Iraq?

A picture shows the Zawiya oil refinery west of Tripoli after Libyan rebels pushing to cut off Tripoli took complete control of the key oil refinery that is the only source of fuel to the capital, its manager said.

Stacey Vanek-Smith: Yesterday it seemed victory was at hand for Libyan rebels. Today, the situation looks a lot hazier. One of Colonel Muammar Gaddafi's sons has reappeared and rebels have retreated from parts of Tripoli.

Robert Powell joins me now to talk about what this might mean for Libya's economy. He specializes in the Middle East and North Africa for the Economist Intelligence Unit. Good morning, Robert.

Robert Powell: Good morning.

Vanek-Smith: Robert, yesterday it seemed like the Gaddafi regime was going to topple. Now, it seems like there's a litte bit more uncertainty. What does that mean for Libya's governmet and for Libya's economy?

Powell: There's a considerable level of doubt -- we are in the midst of a fog of war. And of course in terms of investment, in terms of business, in terms of that country's economy, we really cannot move forward until we have some certainty on the way ahead.

Vanek-Smith: Oil is obviously one of the big topics. Libya's very oil rich. In your opinion, is that going to make it easier for Libya to move forward or potentially more difficult?

Powell: It should make it a lot easier. It's also, if you keep in mind, they have about $100 billion plus of relatively easy-to-access foreign assets as well, which they can draw down while they get the old sector back on its feet. But it does at least give them an easy source of foreign exchange. It will bring in considerable sums into the fiscal coffers -- which means the government can spend money to rebuild the country and pay the civil servants.

Vanek-Smith: Are there any countries with toppled dictators that provide any lessons for Libya right now?

Powell: I guess a lot of eyes are on Iraq. It was seen as the next frontier, an it was making many oil executives salivate. Libya's not quite to that extent, but if you look at least in terms of time lines in terms of how long it took for production to return to its earlier levels. Iraq could potentially reveal some lessons. So if you look in the Iraqi case, the regime fell in 2003; it was not until 2008 that Iraqi oil production returned to its previous levels. And in the case of Libya, it will probably take a few years before oil is back up again to its pre-war levels.

Vanek-Smith: Robert Powell is senior economist with the Economist Intelligence Unit. Robert, thank you.

Powell: Thank you very much.

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