*This article was first published in January 2011 by the Foreign Service Journal.

Relations between Libya and the U.S. have a turbulent history: War at the beginning of the 19th century; U.S. government support for Libyan independence after World War II; official and private-sector American engagement in the development of Libya’s oil wealth and human resources in the mid-20th century; Libyan terrorism and U.S. military retaliation in the 1980s; U.S.-engineered economic sanctions and isolation in the late 20th century; and restoration of diplomatic relations in 2006.

Hopefully, the 21st century will continue to feature positive interaction between Libya and the United States. But for that to happen, both sides must employ serious diplomacy and show mutual respect in order to build on shared interests.

Early History of Bilateral Relations

Our first policy toward Libya was appeasement. The young United States established relations with the Bey of Tripoli in 1796 and signed a treaty of peace and friendship. Behind the fancy diplomatic language, the reality was that in return for an annual U.S. government payment, the Tripoli-based corsairs, who had preyed on U.S. shipping, guaranteed its free passage. Along with being a military hero, President George Washington was a foreign policy realist. He correctly assessed that it was hard enough to maintain land forces and a modest navy to deal with the British, French, Spanish and other threats, and he warned against entangling alliances even with states that could have defended our commerce in the distant Mediterranean.

The second U.S. policy emerged in 1801. Thomas Jefferson’s administration decided to establish a naval presence in the Mediterranean, it halted payments to the bey and spent the money on beefing up the U.S. Navy. That led to our first foreign war, which started badly with the Libyan capture of the U.S. frigate Philadelphia and incarceration of its crew in 1803. Two years later, William Eaton, the U.S. naval agent for the Barbary States, led a detachment of eight U.S. marines and a much larger foreign mercenary force overland from Alexandria to seize Derna, a port in eastern Libya. Eventually, the Ottoman Empire reasserted direct rule in Tripoli and agreed with the United States and European nations that state-licensed piracy should no longer be an acceptable tool of national security.

For the next century or so, the U.S. had minimal dealings with Libya. We were of little significance in the Mediterranean, compared to the Ottoman Empire, Britain, France and Italy. In 1911, Italy invaded Libya and established a colony. Completely shut out of business, we closed the U.S. consulate in Tripoli in 1916. Especially after the advent of fascism, Italian colonial rule proved brutal and racist. The Arab population in Libya actually decreased between 1922 and 1943, and very few Libyans benefited in terms of modern agriculture, education or health care.

U.S. forces landed in French North Africa in 1942, and U.S. diplomats gained a place at the table for postwar planning. In 1943, President Franklin D. Roosevelt began a new policy toward Libya when he opposed plans for further European agricultural settlement. At the 1945 Potsdam Conference, President Harry Truman declined to take a trusteeship for Libya, and in 1949 we supported a U.N. resolution for Libyan independence.

The Importance of Oil

The new U.S. policy was cradled in the rhetoric of morality dear to Americans – self-determination and independence of colonial peoples. It also reflected the power politics of the Cold War. With its vast spaces and year-round flying weather, Libya was the perfect place for an air base. Read moreover, Libyans were among the poorest inhabitants of the world, with an annual per capita income of less than $50. Their postwar economy was based on subsistence agriculture, the export of esparto grass for fine paper and scrap metal from the battlefields. So rental paid by the U.S. and British governments for air bases looked like a good deal to a Libyan government with few options.

Even before Libya achieved independence in 1951, Washington started an aid program emphasizing badly needed secondary education, English-language and vocational training. While foreign government aid was desperately needed during this period, by the 1960s it was dwarfed in economic importance by the investments and training programs of foreign oil companies, especially the American companies. Libya’s first oil shipment was in 1961, and the country’s oil income expanded rapidly during the decade.

By 1969, the U.S. and British air bases in Libya were of declining strategic importance, but Tripoli had become a producer of energy vital to the economies of our West European allies and profitable for American companies. While the U.S. still enjoyed a cozy relationship with an aging monarch and his sclerotic political system, Libyan popular attitudes were not isolated from the rest of the Arab world. The war of June 1967 had left Arabs everywhere with a feeling of humiliation and a conviction that Washington had aided Israel’s victory, achieved in large part by its devastating surprise attack on the Egyptian Air Force. This set the stage for the Libyan Revolution of Sept. 1, 1969.

Eventually, U.S. policy adapted to these new realities. Henry Kissinger, who was President Richard Nixon’s national security adviser, claims in his memoirs that he favored a covert action program to overthrow the new Libyan leaders and keep the airbase, but yielded to the State Department view of the primacy of the oil interests and declining value of our military base. Much later, during the Reagan administration, the U.S. supported and provided some military training to Libyan émigré opponents of the Qadhafi regime. They proved unreliable.

Ambassador Joseph Palmer left Tripoli in 1972, as U.S.-Libyan diplomatic relations were becoming more troubled. Not until 2009 did a U.S. ambassador return to Tripoli. Nonetheless, the volume of U.S.-Libyan trade grew until 1979, and large numbers of Libyan students received higher education in the United States. But after a Libyan mob sacked the U.S. embassy in 1979, we withdrew our remaining official personnel from Tripoli. A short time later, we gave Libyan diplomats in Washington their walking papers. Libya was placed on the terrorism list, and the travel of business people and students between the two countries ground to a near halt

Between 1980 and 1992, several acts of terrorism dominated the U.S. image of Libya. U.S. policy toward Libya featured military pressure, diplomatic isolation and unilateral sanctions. By 1992, we were able to make our punitive policy more effective with the passage of U.N. sanctions. Libyans began to feel the cumulative economic and political weight of being a pariah state.

Movement Toward Reconciliation

Starting in 1992, Libya took initiatives for secret talks to improve relations. After years of U.S. rebuffs, the Clinton administration joined Great Britain in secret talks with Tripoli in 1998. The George W. Bush administration continued the dialogue. The combination of this diplomatic framework with well-crafted and nearly universally applied U.N. sanctions led to the Libyan decision to change course.

The Libyan government took steps to end support for terrorism and cooperate with the Scottish court established to prosecute the 1988 bombing of Pan Am 103 over Lockerbie, Scotland. Nearly all of the families of the victims of Libyan-linked terrorism eventually accepted its offer of compensation. By December 2003, Washington, London and Tripoli were ready to formalize changes in Libyan foreign policy that were already evident. Libya’s full implementation of the agreement to rid itself of chemical and nuclear weapons programs accelerated the positive trends.

Since then, the U.S. government has followed a gradual process of normalizing our relations. For some, the process has been too fast. This is true of many families of American victims of terrorist acts connected to the Libyan government, for instance. Coverage of Libya in the U.S. mass media is sporadic and tends to focus on the personality of its leader, Muammar al-Qadhafi. Human rights groups and some Libyan émigré personalities emphasize Libya’s lack of internal political reforms.

Others believe normalization has been too slow. Libyan government officials, business people and educators all make this complaint. It is also the view of most American companies, who have been at a competitive disadvantage in Libya due to the years of sanctions. They point to the speed with which European governments normalized relations with Tripoli starting as early as 1999 with the suspension of U.N. sanctions.

Within a short period, most of our close allies had opened full embassies in Libya, and many established direct airline links. The process of normalization accelerated after December 2003, with visits to Tripoli by top leaders of countries like Britain, France, Italy and Germany, just to name a few, often with delegations of businessmen on their coattails. There have also been return visits to West European capitals by Qadhafi, illustrating the reality that Libya was no longer isolated. It was Washington that was out of step with the rest of the world, and we no longer had international leverage to influence Libyan behavior.

In contrast to our allies and competitors, the highest-level U.S. official to visit Libya was Secretary of State Condoleezza Rice, and that did not happen until the very end of the Bush administration, in December 2008. (Her Libyan counterpart had visited Washington in January 2008.) U.S. Ambassador Gene Cretz, whose nomination was held up by the Senate for more than a year, did not arrive in Tripoli until 2009. After some months, full consular services returned to Libya’s capital, following pressure by impatient U.S. companies and U.S. universities.

In September 2010, Secretary of State Hillary Rodham Clinton met with her Libyan counterpart, Foreign Minister Musa Kusa, in New York on the margins of the United Nations General Assembly session. A State Department spokesperson indicated the conversation focused on regional issues such as the Palestinian-Israeli talks and the situation in Sudan, matters where the U.S. government seeks Libyan support.

Cautious Re-engagement with Tripoli

The Obama administration is in the process of broadening bilateral relations, especially in the areas of economic and scientific cooperation and expanded person-to- person s. Despite the recent signature of a Trade and Investment Framework Agreement, the priorities of U.S. policy remain strategic, not commercial. In this respect, the U.S. differs from nearly every country of the capitalist world, whose governments tend to make winning business contracts the principal measure of their relations. However, growing numbers of Libyans and Americans are eager for expanded business and tourism and a resumption of the educational exchange that characterized U.S.-Libyan relations in the 1950s and 1960s. Recent steps by both governments to normalize visa issuance and travel are overdue and popular.

The strategic benefits to the United States of Tripoli’s current posture are immense. Libya is no longer an adversary state located on the Mediterranean Basin. Instead, it can be a positive example to the North Koreas and Irans of the world of how to come in from the cold and become a respectable member of the global community. To be blunt, there are too many bad governments seeking bad weapons for the United States to bomb them all into submission.

The Bush administration needed an alternative paradigm for international cooperation, and diplomatic engagement with Tripoli also fits well with the overall foreign policy of the Obama administration. Normalization on a basis of mutual respect, including intelligence exchanges on terrorist threats, serves the security needs of both states. Economically, Libyan oil and gas reserves offer diversification of supply in a world of tight energy resources.

A major incentive for the Libyans has been full international acceptance. Restoration of diplomatic relations with the U.S. made it possible for Libya to be elected to the U.N. Security Council. Its record over the course of two years was generally responsible. Despite its own bad memories of U.N. sanctions, Libya voted for enhanced measures against Iran, and hosted the recent Arab League summit meeting that supported a resumption of Palestinian-Israeli negotiations.

Qadhafi, who recently concluded a year as chairman of the African Union, has cooperated with other African states and with the United States to ameliorate the Darfur problem and to prevent the growth of ungoverned spaces in the Sahara and Sahel regions, which could harbor terrorist organizations. Tripoli has also made useful contributions to the development of African economies.

Internally, Libya is introducing cautious economic reforms, but thus far it has not initiated a process of political or constitutional change. The country has an elaborate formal structure of direct democracy, but non-Libyan observers view the current political system as authoritarian. The most meaningful civil society institution in Libya is the weak but ambitious private sector. Over the long term, interaction between Libyan and U.S. companies, and the reopening of American universities to Libyan students, can do far more to encourage reforms than lectures by human rights organizations.

Libya’s leaders sometimes make unpredictable, even disturbing, statements. (For their part, Libyans often regard Washington’s public statements as arbitrary and unfair.) Tripoli’s actions, however, have followed a generally prudent road in recent years, so three successive U.S. administrations have tried to maintain a steady course in pursuing closer ties, recognizing that it was a good idea to bring Libya in from the cold. Without false optimism or illusions, we should try to maintain the relationship and expand it where we can.

After all, the principal rationale for U.S. diplomatic relations is not to celebrate friendships with ideal democracies blessed with free-market economies. The real diplomatic challenge, and the one that offers the most benefit, is moving countries from the status of adversaries to former adversaries to partners, to deal with a world of global threats and cultivate common interests. Washington and Tripoli can take pride in having moved this process forward.

The history of Libyan-American relations invites attention to a larger foreign policy lesson, as well. Neither government advanced its interests greatly by the use of military power in isolation from other forms of persuasion. Indeed, overt or covert violence was often the prelude to setbacks for both sides. This was true from the early 19th century through the 1980s.

Beginning in the 1990s, both governments employed a wider range of the tools of statecraft. Latent military force for purposes of deterrence played a role, as did international sanctions. But it was essential to construct a diplomatic framework to make such measures effective. Diplomacy allowed policymakers in both Washington and Tripoli to reconsider their respective interests and seek to advance them in a coolheaded way. Such an approach has applications in the resolution of other international conflicts.

Assertions and opinions in this Policy Insight are solely those of the above-mentioned author(s) and do not necessarily reflect the views of the Middle East Institute, which expressly does not take positions on Middle East policy.