WASHINGTON — The Obama administration is working to find ways to provide financial assistance to the rebels in Libya, officials said Monday, but the administration intends to maintain a freeze on $37 billion in Libyan assets until it is clear that Col. Muammar el-Qaddafi and his supporters no longer have access to the country’s financial system.
President Obama, speaking in Vineyard Haven, Mass., said that the efforts to unfreeze and return the assets are part of the administration’s work with allies to prepare for a post-Qaddafi Libya. Last month, the United States joined more than 30 other countries in recognizing the Transitional National Council, the main opposition group, as Libya’s legitimate government.
As the transition proceeds, Mr. Obama said, “our diplomats will work with the T.N.C. as they ensure that the institutions of the Libyan state are protected, and we will support them with the assets of the Qaddafi regime that were frozen earlier this year.”
Several legal issues remain to be solved before the United States can release the assets it froze in February, money and property of the Libyan government and the Qaddafi family. Among the concerns is who will have access to the returned money and property, administration officials said, speaking on the condition of anonymity to protect diplomatic discussions.
The administration must also consider United Nations sanctions, imposed a day after the American sanctions, the officials said. Officials at the United Nations were meeting Monday to discuss whether member countries could provide financial assistance to the transitional council without violating the asset freeze, as well as when to lift its sanctions.
Much of the frozen funds are investments made for the Libyan sovereign wealth fund, which was believed early this year to hold more than $70 billion in assets, but the value may have been lessened by recent turmoil in world markets.
According to an American diplomatic cable obtained by WikiLeaks, a senior Libyan official told American diplomats in January 2010 that the Libyan Investment Authority, which manages the country’s oil revenues, had $32 billion in cash. Foreign assets totaled more than $70 billion at the time, but reports from the investment authority later in 2010 said the total had fallen to about $65 billion.
A large portion of the investment fund’s assets, including those in the United States, are tied up in property and in publicly traded or privately held companies. Those holdings are more difficult to turn into cash in a short time and therefore are to be less likely to be an immediate help to a new Libyan government.
In the last two months, Kuwait and Qatar, among other countries, have been donating money to the rebel government’s financial fund. That fund has said it distributed millions of Libyan dinars to families in the Nafusah Mountain area in western Libya.
Stuart Levey, a senior fellow for national security and financial integrity at the Council on Foreign Relations, said he believed that a lifting of the sanctions imposed by the Obama administration “won’t happen instantaneously.”
“I expect they will use the lifting of sanctions as a point of leverage to make sure they get the kind of government they want to see,” said Mr. Levey, who served as under secretary for terrorism and financial intelligence at the Treasury Department under Presidents George W. Bush and Obama. “It is clear that the sanctions policy was a very effective tool. It yielded exactly the thing it was designed to yield.”
Colonel Qaddafi is believed to have hidden away tens of billions of dollars in Libyan, United States and other currencies. He was able to build cash reserves beginning in 2004, when the West began to lift longstanding sanctions on the government, opening the way for more countries to invest heavily in the Libyan oil and gas industry.