Beginning of 2002 serious attempts to reunite the World Championhip were made. According to the so-called "Prague Agreement" one of the unification matches was supposed to be between world's #1 rated player (Kasparov) and the reigning FIDE World Champion (Ponomariov). However after more than a year of back and forth Ponomariov eventually refused to sign the contract (he was not satisfied that Kasparov was given a free pass into the unification "semi-final", he wanted FIDE time controls instead of classical ones, he demanded a Champions advantage, etc.). Having lost it's own representative in the unification process, FIDE decided to held another KO World Championship, just to find an opponent for Kasparov.
FIDE controversially awarded the tournament to Libya that was trying to establish contact with international community after years of isolation. This decision caused great concerns because Libya had a history of not allowing entry to citizens of Israel or any person with Jewish heritage. With this in mind, FIDE originally announced that a parallel event in Malta would be held alongside the one in Libya to ensure that Israeli players could take part. This parallel event was later cancelled, following a press release from the Libyan authorities that they will pleasantly provide entry visas to all the qualified participants of this Championship. However at the same time Mohammed Gaddafi, chairman of the Libyan Olympic Committee and son of Libyan leader Maummar al-Gaddafi, made a very clear statement which contradicted everything: "We did not and will not invite the Zionist enemy to this championship."
Libyan authorities and FIDE claimed that Gaddafi's son was misquoted and that Israeli players will get their entry visas upon arrival. This assurance was never put to the test, because none of the qualified Jewish players took part in the championship. The only player in the final list of participants with an Israeli passport - Vadim Milov, representing Switzerland - never travelled to Libya: He complained that his official invitation to the event had arrived so late (on the day of the opening ceremony, one day before the first game) that it was physically impossible for him to get to Libya with it in time. Milov claims that this constituted a deliberate attempt by FIDE to exclude him. In response, FIDE said that the delay in sending Milov's invitation was due to Milov not sending them his passport details until a deadline had passed, and that even with this delay, Milov could still have arrived in Tripoli in time for his first game, which they had offered to postpone if necessary. Milov took his case to the Court of Arbitration for Sport in Lausanne, which found that FIDE "undertook extraordinary efforts to make sure that Claimant [Milov] could participate in the WCC 2004 although such efforts could and should have been made earlier" and ultimately cleared FIDE of any ill-intentioned effort to exclude Milov, concluding "there is no ground for Claimant to claim damages from Respondent [FIDE]."
As a result of this controversies many players declined to participate and the final list of participants was the weakest of all World Championships.
There were just 11 from top 25 (only 2 from top 10) players that participated in this event. This caused for another controversy; with claims that any tournament with so many top players missing should not be considered a World Championship at all.
Only rounds 5, 6 and 7 are shown. See the whole pairing tree here.
The event was won by Rustam Kasimdzhanov, at that time ranked #44 on the world. He met the same fate as all other FIDE champions before him - he got no recognition.
Impact on the future
Kasimdzhanov was supposed to play a match with Kasparov by end of 2004, but the match was delayed and venue changed several times. The whole question of how and when the Kasparov-Kasimdzhanov match would take place was made irrelevant when Kasparov announced his retirement in March 2005. Kasimdzhanov victory in Libya did however earn him a direct entry into the 2005 FIDE World Championship in San Luis, and also gained automatic entry to the Candidates for the 2007 World Championship in Mexico.