Watching Libya May 7/8, 2011

The way to a Temporary Financial Mechanism to unfreeze Libyan assets for humanitarian purposes will not be an easy and straightforward one.

Italian foreign minister Franco Frattini – who co-chaired the second meeting of the Libya Contact Group in Rome last Thursday, May 5, together with Qatar’s prime minister and minister of foreign affairs Sheikh Hamad bin Jassim bin Jaber Al Thani – called upon other members of the Group to establish bilateral relations with the Benghazi-based Transitional National Council (TNC) and to participate actively in the military campaign in Libya.

Frattini emphasised that the UN should have “a clear leading role” in the organisation of humanitarian assistance. He also urged members of the Group to assist the TNC with technical expertise in various fields to help them run their administration. He also argued in favour of stronger economic support for the TNC, welcoming the establishment of the Temporary Financial Mechanism, a means to “permit funds to be channelled effectively and transparently” to the TNC.

Extract from the official written text of Frattini’s address: “One very serious problem needs to be tackled as a matter of priority: the possibility for the INC (TNC) to request the unfreezing of Libyan assets for humanitarian purposes. That money belongs to the Libyan people. Italy and France have already urged the pertinent EU bodies to seek a solution. We ask our partners, seated (as members of the Security Council) on the Sanctions Committee established by Resolution 1970, to address this crucial issue immediately.” Read the whole text.

The Temporary Financial Mechanism is not, however, an off-the-shelf plug-and-play gadget. It may take some time for it to be developed, for some international consensus to be reached regarding its application, and for the individual countries concerned to actually apply it. This emerges clearly from the replies given by Mark C. Toner, Deputy Department Spokesman at the US State Department’s daily press briefing a day after the Rome meeting (Washington, May 6).

To a request for “a little bit more detail on the Secretary’s statement yesterday about disbursing – finding a way of disbursing the money that was frozen by the Treasury Department to the opposition in Libya”, Toner replied: “I don’t have a tremendous amount of detail about this. I mean, we’ve talked all along about there’s this temporary financial mechanism, and of course, we’ve talked all along about the fact that the Libyan opposition needs financial wherewithal in order to carry out its operations. And it’s vital; it’s something we – the Contact Group addressed head-on in Rome. And to that end, we are looking at ways now, exploring ways that we can take some of these frozen assets that – from the Qadhafi regime and use them for the benefit of the Libyan people.”

“Now there are, as I understand it – this is going to require a legal review, and obviously work with Congress on ways that we can do this in a legal fashion. And I don’t have – it’s obviously a complex thing, but indeed, there are – they’ve begun work on how to address some of these legal issues.”
When pressed regarding what are these “legal issues” might be, Deputy Department Spokesman Toner said: “Well, again, these are – this is – again, I’m by no means a lawyer or an expert on this, but there are certain legal considerations here because of these frozen assets and how they – how they’re affected by the current sanctions regime and whether they can be then given to another section of Libyan society. I mean, I don't know much beyond that. We’ll try to get you more details as they emerge.”

When asked if there is “any precedent for taking funds that belong to a government, when that government is still in power, and giving it to somebody else”, Toner indicated that this was the sort of issue that was being looked into. The sum involved is in the region of $ 30 billion in Libyan assets held in the US.

Regarding US recognition of the TNC, Toner said: “every time we interact with the TNC, we get a better sense of who they are and what they need. We’ve said all along that recognition is not a means in – or not an end in and of itself, that there’s many ways we can help the Transitional National Council and the Libyan people in finding – in addressing, again, their immediate needs, financial needs, but also in their longer-term aspirations. And again, we’ve provided the 25 million in nonlethal assistance. We’re looking at ways to unfreeze some of these assets. But we’re very much proactive in looking for ways that we can assist them. We’re getting a better sense of who they are as an entity. And again, none of this is totally contingent on recognition.”

Toner confirmed that TNC’s Mahmoud Jibril would be going to Washington this week. Although he did not rule out a meeting with Secretary Clinton, he confirmed that he would meet with various members of Congress, officials at the Department of Defence, and Deputy Secretary Steinberg. Read the original transcript.

The issues involved in unfreezing Libyan assets abroad to finance the needs of those Libyan territories no longer under Gheddafi’s control, concerns all countries where substantial Libyan assets exist and have been frozen in accordance with UN resolutions and other legally binding decisions (national and, where this applies, European Union).

The government of Malta, for example, has yet to decide whether it intends to use millions of euro in frozen Libyan assets in Malta for the benefit of the TNC. Maltese foreign affairs minister Tonio Borg, speaking after the Libya Contact Group meeting, observed that the EU had taken no final decision on the subject and Malta – a member of the EU and of the Contact Group, as well as being a hub for humanitarian operations in Libya – also had no formal position on the issue. Borg told the Times of Malta: “The conclusions of the Contact Group meeting in Rome do not speak of any agreement on a rebel fund and we have not taken any position on whether we agree with this or whether we will participate in it.”

Malta’s position substantially reflects that taken by EU foreign policy commissioner Catherine Ashton who has said that although she is in favour of this fund, no formal decision had been taken on how it should be administered and who should contribute towards it. Malta’s is, if anything, more cautious than that of the EU of which it is the smallest member and the one physically closer to Tripoli, reflecting its concern for the implications for Libyan investments in Maltese companies and Maltese business interests in Libya – mainly in and around Tripoli.

At the Rome meeting, the Maltese foreign minister – whose most urgent concern is the deteriorating situation in Misratah – confirmed his country’s proposal of a humanitarian corridor between Malta and Libya. (Read more about the strategic significance of Misratah in the conflict in Watching Libya April 27, 2011 and Watching Libya March 19, 2011 below.)

Meanwhile other countries are seeking their own, and possibly less cumbersome, ways and means of releasing Gheddafi-controlled assets in their own countries to the TNC. Switzerland is a case in point. See Watching Libya May 4, 2011 below about the concept of ‘potentate funds’, Gheddafi’s frozen assets and the Swiss Act on the Restitution of Illicit Asset (LRAI).