The Reagan administration has drafted a list of additional economic and financial sanctions for use by the United States and its European allies in an effort to further isolate and undermine Libyan leader Muammar Qaddafi, officials said yesterday.
Among the new proposals is a crackdown on Libyan Airlines by either closing European offices or reducing the number of flights allowed, according to one source. The administration intends to cite Turkish allegations that Libya used the airline's office in Ankara to smuggle terrorist arms.
Another sanction under discussion, officials said, would ask European governments to withdraw funds they now hold in banks and other financial institutions owned partly by the Libyan government. A third proposal is to have European governments pressure companies to withdraw from Libya, as the administration has done with U.S. firms.
These proposals, coupled with U.S. success this week in getting a public denunciation of Libyan-supported terrorism from six allies in Tokyo, mean that Washington's campaign against Qaddafi is shaping up as the broadest diplomatic campaign to isolate a Third World nation since the 1960 U.S. embargo against Cuba, administration officials said.
"But this is markedly different [from Cuba] because of the disposition of other countries to follow our lead," one official added. "Virtually every European country is prepared to cross a new policy line in taking action against Libya if there is another major terrorist activity on their own soil."
But it is unclear how vigorously U.S. allies will translate rhetoric into antiterrorist action, and whether the proposed sanctions against Libya will generate more enthusiasm abroad than previous American proposals.
Testifying before the Senate Foreign Relations Committee yesterday, Robert B. Oakley, head of the State Department's counterterrorism office, said the phrase "national measures" used in the Tokyo summit declaration on terrorism was understood by all to imply the possible use of economic sanctions and military force against Libya by the seven allied governments.
"They are willing and they do see the need to apply economic pressure as well as diplomatic and political pressure in order to isolate Qaddafi and to bring an end to his support for terrorism," Oakley said of the allies. "They also see that this whole effort to stop state-supported terrorism must be applied to other countries."
Oakley said that Italy, which has the largest economic stake in Libya among the Europeans, had cut back "drastically" its economic and commercial relations with Tripoli and that the number of Italians residing there had dropped from 17,000 in January to 3,000. He also noted that Prime Minister Bettino Craxi had threatened the use of military force against Libya if another terrorist incident occurs in Italy.
Qaddafi is feeling "bitter disappointment" with the diplomatic measures undertaken by European countries and with the failure of Arab leaders to agree to a special summit on his behalf, according to officials who have seen reports from Tripoli. The reports also say Qaddafi is "upset" with the Soviets for their lukewarm support regarding the April 15 U.S. bombing of Tripoli and Bengazi; as a result, his relations with the Soviets are believed to be worse than before the attack, the officials added.
Oakley said the United States will take further measures "before long," including the banning of all oil refined in Europe but known to originate in Libya.
The United States has periodically imposed economic or political sanctions on Third World countries and tried to persuade the world community to follow suit. The most publicized recent cases were Cuba in the early 1960s; white-ruled Rhodesia (now Zimbabwe) in the mid-1960s; and Iran and the Soviet Union in 1980. But these efforts failed, wholly or partly, for lack of support, even among Washington's closest allies.
Lack of cooperation was particularly evident during the crisis over the American hostages in Tehran, when European nations refused to follow a call by the Carter administration for economic sanctions or pressure against Iran.
This time, West European governments, apparently anxious to avoid an escalation of U.S. military force against Qaddafi, are "telling us to do more" and "doing more themselves" in economic and diplomatic measures, according to one administration official.
The official said the "dimensions" of U.S. policy toward Libya are changing "pretty fast," as one proposal after another for additional economic and financial sanctions were put forth and adopted within the special interagency group set up within the National Security Council to deal with Libya.
The official described overall administration policy toward Libya now as "do everything you can across the board" in the hope that "the cumulative effect of a lot of countries doing a little will be a lot."