REED from international sanctions, Libya is entering a new era at home as well as abroad. After years of being regarded as a rogue state by the West, the oil-rich North African nation is opening up to foreign investment and becoming a more market-based economy.

Attracting foreign capital, technology and know-how is a priority for a country that hopes to develop and diversify the economy, create jobs, and improve living standards for its 5.6 million people.

Change is likely to be gradual, but the need for it is recognized at the highest levels of government. The basic principles of Colonel Muammar Gaddafi’s revolution remain unchallenged in the Great Socialist People’s Libyan Arab Jamahiriya. However, the leader himself has acknowledged that the public sector has failed the people, and has endorsed a transition to what he refers to as a form of “popular capitalism.”

Most of the population lives and works in and around the big cities in the northern coastal belt bordering the Mediterranean. Libya is largely desert, but beneath the dunes lies one of the world’s most sought after commodities—oil.

Exactly how much oil there is no one knows, as only a quarter of the country has been fully explored, but Libya is believed to be sitting on Africa’s largest crude reserves. It is hardly surprising, then, that U.S. oil companies have been eager to take up where they left off when U.S. sanctions forced them to leave Libya back in the mid 1980s.

Libya is equally eager to see them return. Oil has dominated the economy since production started more than 40 years ago, and the high oil prices of recent years have delivered big returns. Libya wants to more than double production over the next five years, and for that it needs massive foreign investment.

Much of it will come from U.S. oil giants like ExxonMobil and Occidental Petroleum, who have already signed up to undertake major exploration projects.

On the diplomatic front, relations between the United States and Libya have improved dramatically since Tripoli accepted responsibility for the 1988 bombing of a Pan Am passenger plane over Lockerbie, Scotland, and agreed to dismantle its weapons of mass destruction.

U.S. economic sanctions were lifted in 2004, opening the way for American companies to resume doing business in Libya. United Nations sanctions, imposed in 1992, had already been lifted in 2003.

A U.S. diplomatic liaison office has been opened in the Libyan capital, Tripoli, as a first step towards ending a suspension of direct diplomatic relations between the two countries that has lasted for a quarter of a century.

Delegations from the U.S. Congress have visited Tripoli, and dialogue has been taking place on trade, investment, economic reform, and cooperation on counter terrorism. American businessmen have been flocking to Tripoli in search of business opportunities.

Secretary of State Condoleezza Rice has reaffirmed the U.S. commitment to “broaden and deepen” ties between the two countries. The constantly improving relationship, which was inconceivable a few years ago, is seen as advantageous for both nations.