In a series of bold decisions last December, the Libyan government openly acknowledged its pursuit of weapons of mass destruction (WMD). Within days of the announcement Mohamed Al Baradei, director of the International Atomic Energy Agency (IAEA), visited the country and soon afterward the government in Tripoli turned over its store of acquired literature and hardware to the United States. Libya's moves promise to lead the country back into the fold of diplomacy and to lift European and U.S. sanctions, paving the way for unimpeded international commerce. After decades of antagonism between Libya and the West, what prompted these seemingly sudden moves? Are they a harbinger of economic and political opening in Libya after thirty years of closure, as the country's prime minister has suggested?

Some have described Libya's recent shift as a reaction to Washington's muscle flexing during the Iraq war. In reality there is no direct link between the war and Libya's decisions. The back channel diplomacy that led to the denouement started almost two years before the Iraq war. It was initiated by British policy makers and only later did U.S. officials join. In a carefully orchestrated carrot-and-stick campaign that took place in several venues across the globe, Libya, Great Britain and the United States reached a consensus on a number of outstanding issues—including the 1988 Lockerbie bombing—that led to the breakthrough agreement on WMD.

Several factors facilitated the carrot-and-stick diplomacy. These include Libya's disenchantment with its diplomatic isolation, its pressing need for economic investment and expertise, and its internal political malaise. These factors had already spurred changes inside Libya prior to the December denouement. One such change is the increasing professionalization of Libya's bureaucracy as a younger, more technocratic and less ideological set of policy makers emerges. The western-educated Prime Minister, Shukri Ghanem, is the most visible such figure. Several others have risen to positions of responsibility within various ministries and the National Oil Company, which has always been relatively protected from the revolutionary edicts of the last three decades. Among this new generation, Libyan leader Colonel Muamar Qadhafi's son Saif Al Islam has played an important role, though his present and future position within Libyan politics remains opaque. In another development, Ghanem has promised greater decision-making transparency and has vowed to move the country's economy away from what until now has essentially amounted to state socialism. In this regard he announced, several months before the declaration on WMD, economic reforms that promise a dramatic reduction of the state's role in the economy.

The pragmatism that the new technocrats have urged upon Qadhafi, concern over the economic and political toll of sanctions, and the need for international investment in the country's deteriorating oil infrastructure and in developing new oilfields slowly moved Libya to act upon western demands. But just how far reforms will go remains unclear.

Some obstacles to reform stem from the nature of the Libyan state as it emerged, hand in hand, with the commercialization of oil. The country still lacks many essential institutions—individual taxation systems and property rights to name only two—on which market economies depend to provide predictability and accountability. Although Libya's parliament, the General People's Congress, is now considering legislation that would allow private businesses to reestablish themselves, Libya's thirty-year legacy of forbidding private economic initiatives carries a heavy legacy of distrust and hesitation. This reluctance stems from Libya's deep-rooted patronage system, typical of oil exporters in the Middle East and beyond, that has enabled the regime to use economic favoritism to ensure its survival. Indeed, on two previous occasions in the late 1980s and early 1990s, Libya adopted economic liberalization policies that in effect left the economy and its management virtually unchanged.

The current circumstances are noticeably different, and past efforts never had the aura of transparency that is now being promoted by Ghanem and Qadhafi alike. But Libya faces immense internal economic and political structural impediments. If implemented, the announced economic reforms are likely to trigger calls for greater accountability. Oil exporters, however, because of their ability to distribute economic largesse, are extremely adept at ignoring such calls and at keeping political change in abeyance. It is highly unlikely that the Qadhafi government will backtrack on any of its recent international commitments and promises. Internal political reforms, however, are unlikely to take place soon because they could fundamentally alter the dynamics of state-society relations inside Libya—something the regime has successfully avoided doing for thirty-five years. The international investment that looks set to flow into Libya seems likely to strengthen the regime's ability in this regard.

Diederik Vandewalle is associate professor of government and chairman of the Asian and Middle Eastern Studies program at Dartmouth College, and an expert on Libya.