After several months of fighting, it became clear to outside observers that Habré’s forces had gained the upper hand. Goukouni then asked Gaddafi to formalize and escalate the support he had received over the past several months. This culminated in a friendship treaty and a meticulously organized Libyan ground invasion of Chad in December 1980. This forced Habré to disengage from N’Djamena, and flee the country. Most of his forces managed to regroup and withdrawal into neighboring Sudan, from which Habré soon began conducting guerilla operations. In early 1981, Gaddafi and Goukouni announced the “merger” of Chad and Libya. This chapter narrates these events, and questions how French policy failed to prevent the kind of nightmare scenario which had haunted French officials over the previous three years. It also discusses the origins of a growing American role in support of Habré. The chapter further introduces the early approach of Mitterrand's presidency towards Chad and assesses the gradual shift in French policy which helped to encourage Goukouni to expel Libyan forces from Chad.