Probably nothing will happen. Nameservers for .ly are
dns.lttnet.NET, dns1.lttnet.NET, ns-ly.ripe.NET, auth02.ns.uu.NET, phloem.uoregon.edu. Of these only dns.lttnet.net and dns1.lttnet.net are hosted in Libya. If the dictator will have the local internet shutdown, he probably will not go to the lengths of also clearing all foreign DNS caches listed above.<p>Nonetheless I would be more careful in selecting a ccTLD to base my business on. Read, for example, about Gaddafi's dealings with Switzerland and you know which laws Libya follows at the moment.