6 Min Read
* Eni calls for end to Europe sanctions
* Analysts doubtful of early return by big firms
* Libya to become playground for smugglers, small traders
By Alberto Sisto and Dmitry Zhdannikov
ROME/LONDON, March 16 (Reuters) - Italy's Eni (ENI.MI) called on Europe to abandon sanctions against Libya, becoming the first Western firm to try to rebuild bridges as Muammar Gaddafi is regaining control and may reopen the oil taps.
While other firms declined to comment on their return to Libya, analysts said they believed sanctions would remain in place to isolate Libya from big companies for months to come, making it a playground for smuggling by little-known traders.
"The installations are in perfect shape but first we have to make sure that the operation isn't targeted by sanctions," said Eni's chief Paolo Scaroni, whose company produces both oil and gas in Libya, much of which is exported to Southern Europe.
"Whatever happens, imposing sanctions is shooting ourselves in the foot because by not taking this gas, we are not ensuring our energy security," he said.
Gaddafi's forces have reclaimed several ports and oil installations along the coast from rebel forces, who had won considerable Western support when the uprising began weeks ago and appeared to have prospects of success.
Asked if relations with Libya had been hurt, he said: "Absolutely not, I don't consider that they have been compromised at all. We have maintained relationships with the National Oil Corporation (NOC), which is our main interlocutor".
The stakes are high for Italy as Eni is the biggest foreign player with billions of dollars invested in Libya and Italy was buying 500,000 barrels per day, or 22 percent of its oil, from Libya before sanctions and fighting stopped exports.
Italy's Prime Minister Silvio Berlusconi had long been seen as Gaddafi's closest European ally but called on him to step down. Gaddafi has said he felt betrayed by former European allies. [ID:nLDE72E0DK]
"It tells me that people were too quick to jump on the wrong horse and it will be difficult to row back now," said an adviser to a risk consultancy firm dealing with Libya.
"But from the practical point of view I don't see how big companies like Eni can come back amid sanctions, even if Gaddafi calls to bless Berlusconi," he said, asking not to be named.
Wrapup story on fighting in Libya [ID:nLDE72F00F]
More on Middle East unrest [nTOPMEAST] [nLDE71O2CH]
Libyan oil map r.reuters.com/jem28r
Production and export graphics:
LIBYA TO HONOUR CONTRACTS
Libya's government will honour existing contracts with Western oil companies, NOC head Shokri Ghanem told Reuters on Wednesday.
Foreign powers were initially united in condemning Libya's leader for the bloody crackdown against the uprising.
Britain and France, growing trading partners and arms suppliers to Tripoli until recently, called for a strong response and French President Nicolas Sarkozy has recognised the opposition as the legitimate representative of Libya's people.
France's Total (TOTF.PA), one of the most active players in Libya, declined to comment on its return to Libya while Norway's Statoil (STL.OL) said it will respect all sanctions. U.S. firms have repeatedly said they would fully comply with sanctions.
For a FACTBOX on the Libyan oil industry and sanctions [ID:nLDE72E23I]
"Even if Gaddafi wins he won't be able to stabilise the area. There's a new element - now there's an organised rebellion force which will be backed by Libyans abroad," said Stefano Casertano, senior fellow at German thinktank BIGS-Potsdam.org.
Analysts say China may benefit most in the early days of Gaddafi re-establishing control and resuming oil sales [ID:nLDE72E0BE]. Beijing, keen to secure supplies of resources, has offered billions to other isolated states in the past.
Gaddafi has seen envoys from India, China and Russia in recent days and urged them to invest. Russian President Dmitry Medvedev on Monday, however, banned Gaddafi from Russia [ID:nLDE72D0T0]
Military experts say Gaddafi could still struggle to seize the opposition stronghold of Benghazi, which would leave the whole country prone to controversial trading plays.
"It might become similar to Ivory Coast, where no cocoa is traded by big firms but stuff keeps smuggling to Ghana and other places, gets legalised and then resold on global markets," the adviser at a risk consultancy said. (Reporting by ALberto Sisto, Stephen Jewkes, Nia Williams and Dmitry Zhdannikov, writing by Dmitry Zhdannikov)