The colonel who came in from the cold: Libya opens its doors to the West

The Great Leader did not disappoint. We might have asked for more, of course. He might have received us in his legendary tent, the one he brought to Brussels and Belgrade, his flock of camels cropping the grass outside. He would have done us all a favour if he had ridden into the conference hall on a white stallion, his troop of cruelly beautiful, Uzi-toting female commandos sprinting alongside. But presiding over the 30th anniversary of his little Green Book, he was the man we had come to see, imperious behind his big sunglasses, this modern Ozymandias in a gleaming white dinner jacket with a cape around his shoulders, his jet-black hair teased into the familiar modified Afro, like a member of Mott the Hoople.

He published the Green Book on 2 March 1977, seven years after he seized power, aged 29, in a coup against King Idris, the West's stooge. Since then, millions of copies have been distributed. It is Gaddafi's answer to the Little Red Book of Mao, encapsulating what the colonel modestly calls the "Third Universal Theory" - following (and hopefully supplanting) those of capitalism and Marxism. Its subtitle is "The solution to the problem of Democracy", and the crux of Gaddafi's insight into that problem is summed up in posters in the desert town of Sebha during the celebration: "No representation without participation."

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Parliamentary representative democracy, according to Gaddafi, is a fraud; what he proposed instead was (as he put it in his speech on Friday) "direct democracy as it was once practised in Athens" through "committees everywhere". Whether the Green Book revolution has lived up to its billing is a good question. But in one sense it has been a blistering success: it has made it impossible, ideologically and practically, for Gaddafi's opponents inside Libya to organise themselves into political parties. "Political parties introduce evil in society and society goes corrupt," Gaddafi declared on Friday. "Any attempt at this needs to be got rid of." And so it came to pass. Given the clarity of the word from on high, and saturation levels of plainclothes cops at street level, dissidents of the Islamist or any other variety do not appear to have obtained a toehold in the country. When they have tried to in the past they have been vigorously dealt with.

But that does not mean Gaddafi is unopposed. As Libya shyly opens itself to outside inspection - normally it is impossible for foreign journalists to obtain a visa, but dozens of us were let in to attend the anniversary celebrations - it has become clear that a struggle is under way for the heart and the soul of the country. The colonel is on one side of the argument, and his brightest and most ambitious son, Saif al-Islam, on the other.

"There is a big fight going on between the old guard and the new," says a foreign resident of Tripoli whose position gives him a ringside seat on the action. A Western diplomatic source prefers to talk about "tension, more or less creative, between those who want to hold on to the status quo - which has kept the regime in place, with a quiescent population - and those who want to open Libya up, now that sanctions have gone, to the wide world".

The chasm separating these two views of the world, and of Libya's future, was apparent in the conference hall in Sebha. Inside, a succession of speakers hollered their undying admiration for the boss to an audience carefully segmented into soldiers, women, farmers and so on. "We are overwhelmed by joy," one screeched. "This is the dawning of a new age of glory."

"Glory be to him, father of the glory," cried another. "The dream that inspired the downtrodden has come true... The sun rose on 2 March 1977 and now it is high in the sky... we see the enemies of the masses falling down one by one."

Gaddafi acknowledged all this verbal prostration with a thin smile, then launched into his own speech without bothering to stand. He went straight onto the offensive, attacking the unspecified enemies of Libya - "those shortsighted people tempted to collaborate with our enemies" - comparing them to "the Libyans who enabled the Italians to colonise Libya, and the Spaniards who helped the Arabs to cross the Strait of Gibraltar and conquer Spain." He warned that Libya's natural wealth was finite: "Oil will deplete, water will run out ... Sometimes I sense the presence of spiders and cobwebs, houses in ruin in Sebha ... Once the oil is gone, five, 10, 15 million Libyans could not live here..."

The answer? Gaddafi's great hobbyhorse these past 10 years, the unification of Africa, with "strategic highways" linking every country, making the United States of Africa (which Gaddafi and African leaders proclaimed in 1999) and the interdependency it would bring a reality. Because the alternative, he stressed, was grim. "When all the shops are flooded with goods manufactured abroad," he said, "that's dangerous for us."

"Gaddafi is a man of vision, in the good sense and the bad," said one who has been observing Libyan politics closely. But his opponents, led by his son Saif-al-Islam, are also visionaries of a kind - and their vision is more closely aligned with the sort you find in the pages of The Economist. That figures because Saif, 35, besides being chairman of the Gaddafi Foundation for Development, is also midway through a part-time PhD at the London School of Economics.

Five minutes after Gaddafi walked offstage in a huddle of well-wishers, his prime minister Dr al-Baghdadi al-Mahmoudi, Saif's ally, who had been sitting in the front row, gave a hurriedly organised press conference in the foyer.

No grand visions of African unity here, no peering into a future beyond oil. This was simple stuff. "We want to invite foreign companies to come to Libya to invest," he said. "Libya has an open-door policy towards foreign investment. Libya has peace and stability and we invite all states in the world to invest in our country ... We are open to hotels and services, too. Any investment in the tourism sector will be acceptable..."

After decades of almost Soviet-style isolation, padded and protected by the oil revenue that leaves Libya today with no debt and some $60bn to dispose of as it chooses, Saif al-Islam and his friends are trying to tug the door open. In January a Harvard business guru, Michael Porter, helped Saif and the prime minister set up the Libya Economic Development Board, to encourage entrepreneurship by Libyans. Other Western think-tanks are advising on liberalisation.

There are good reasons for trying to force a change, and the simplest comes down to the fact, as a diplomat put it, that "you want to know when you go to bed that the regime will still be in power when you wake up in the morning: the regime's first intention is its own preservation. Things may look very settled, but those in power may not think they are."

Now that Gaddafi has given up his nukes, paid for Lockerbie and come in from the cold, the good he has done to his country is easier to see. He was a driving force in the successful bid by Opec, back in 1973, to force Western oil companies to pay real money for oil, at a stroke multiplying the state's revenue many fold. This was an initiative that is still the great exemplar for all poor countries endowed with mineral wealth, and the great dread of those who plunder them. He oversaw the Great Man-Made River project, bringing millions of litres of "fossil water" a day from aquifers deep under the Sahara via four metre-wide pipes to the coastal belt where 90 per cent of Libya's nearly six million people live. He created an NHS-type health service, and raised the literacy rate from 17 per cent to 80. He threw open his nation's borders to Africa, to prove that his pan-Africa rhetoric was not just moonshine. As one man shouted as Gaddafi was speaking, "You are the one who struck the rock like Moses and made the rivers run!" But Gaddafi's heirs, Saif al-Islam in particular, look about them now and see the metaphorical water that Gaddafi made run pouring into the sand.

Take the success of his education reforms: about half of Libya's population is under 16, but because the country still has a stagnant command economy, the thousands pouring out of high school and its eight universities risk ending on the scrap heap. More than 60 per cent of jobs are with the government, and many of those involve looking out of the window. There is every reason to fear that a fraction of Libya's highly educated youth, lacking jobs and prospects, will follow the lead of their brainy Muslim brethren elsewhere into the ranks of the fanatics. More headaches for the Gaddafis.

Jobs need to be created for them. One obvious industry to develop is tourism. There is a 2,000km coastline with white sandy beaches and beautiful, warm, turquoise water similar to Malta or Turkey; thousands of Libyan graduates could readily find work managing new hotels and resorts. But tourism remains becalmed, just as it was in the Eastern bloc at the height of the Cold War, with extra Islamic wrinkles such as the impossibility of getting a drink.

Why don't things change? "People don't invest," says Laurence Hart of the International Organisation for Migration, "because there is still a fear that things might change from one day to the next." And what about open borders? Gaddafi has spent much of his career arguing for unity, first with his Arab neighbours, latterly with the rest of the continent. The result of his open borders policy is convenient for this rich but oddly undeveloped society, because Libyans (like Saudis or, indeed, white Europeans) don't need to do the dirty jobs when there are Moroccans or Chadians to do it for them.

But it has also resulted in multiple headaches. Gaddafi's wide welcome has yet to make a dent in the vicious racism Africans suffer when they come to Libya. Meanwhile, the town of Zoara, west of Tripoli, has become a major jumping-off point for illegal emigrants, some 20,000 of whom turn up in Italy every year. Despite loud EU complaints, that issue doesn't bother Libya much, according to Laurence Hart. But with up to one-third of Libya's population consisting of foreigners - Arabs from Libya's crowded neighbours as well as sub-Saharan Africans - the regime is growing increasingly nervous about the terrorist threat. The messy result: a new crackdown on foreigners, who are now supposed to find work with a regular contract or go home. Many are in a panic about the future.

At the celebration in Sebha, the only foreign dignitary of importance was President Museveni of Uganda. He also gave the best speech. "In Uganda we have a proverb," he said. "When a dog cannot smell, it is dead: because it cannot smell danger, and it cannot smell food. One of the problems of Africa is that people lost their sense of smell, they could not smell where danger was, or where advantage was. That's why we suffered all these centuries."

Muammar Gaddafi and his son are sniffing for all they are worth. Libya's problem is that they smell danger and advantage in totally different directions. The arguments are only just beginning.