Wednesday’s defection of Libyan Foreign Minister Moussa Koussa is a major embarrassment for Libyan leader Muammar Qadhafi and a sign of lagging morale in the top echelons of his regime.

Koussa was not just the foreign minister, which is often just a mouthpiece position in Arab dictatorships; more importantly, he was the head of Libya’s main intelligence agency between 1994 and 2009. He was also a longtime confidante of the Libyan dictator, who had previously lost his minister of interior and minister of justice to defections and is increasingly dependent on members of his own family and tribe to maintain his grip on power.

Koussa may have valuable intelligence about Qadhafi’s future plans, insights on the regime’s vulnerabilities, and suggestions for secret facilities that could be targeted for bombing. Given his key role within the regime, he undoubtedly has important information about the regime’s past terrorist activities, including the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, that resulted in the deaths of 270 people, most of them Americans.

Koussa’s defection may open the door for other wavering members of Qadhafi’s inner circle to follow. Koussa had been in touch with U.S. officials in the days since the Libyan uprising began, and others may have also established contact to prepare for defecting. His departure will likely have a demoralizing effect on the regime’s foot soldiers, who may now have an additional reason to worry about the regime’s long-term survivability in the face of rising international pressure.

But it is increasingly clear that, even in its weakened state, the Libyan regime has little to fear from the bumbling military efforts of the disorganized opposition. Regime loyalists continued to push back the ineffective rebel forces for a third straight day. Meanwhile, the Pentagon today transferred responsibility for the military operation in Libya to NATO.

Secretary of Defense Robert Gates, testifying before Congress, stated that the operation has cost the Pentagon approximately $550 million so far and would probably require the Administration to seek funding through a supplemental budget request. This is not likely to be well-received in Congress, where members of both political parties have increasingly criticized the Administration for its confusing Libya policy zigzags and minimal consultation of congressional leaders.