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Libyan TNC Has Recognition, But Still Lacks Funds

Despite U.S. recognition of the Transitional National Council as Libya’s government, frozen Libyan state assets will not be easily transferred to TNC control. The Washington Post reported over the weekend: One obstacle to releasing the money is that much of it was seized under legally binding sanctions imposed against the Gaddafi government by the U.N. […]

Despite U.S. recognition of the Transitional National Council as Libya’s government, frozen Libyan state assets will not be easily transferred to TNC control. The Washington Post reported over the weekend:

One obstacle to releasing the money is that much of it was seized under legally binding sanctions imposed against the Gaddafi government by the U.N. Security Council. Unfreezing such accounts would require a consensus vote of the U.N. sanctions committee, according to one senior European diplomat, who spoke on the condition of anonymity [bold mine-DL].

That presents two risks for the Obama administration: The committee includes countries that are skeptical of NATO’s military campaign in Libya, such as Russia and China.

In addition, said the senior official, “You don’t want to set a precedent that compromises other sanctions regimes,” such as those against Iran.

It seems unlikely that Russia is going to cooperate in unfreezing these assets when it regards American recognition of the TNC as a serious mistake. If recognition was intended to free up these assets for the rebels, it doesn’t do them or anyone else much good if there was no consensus among the governments that would be responsible for making these funds available.

To make things harder, the funds are scattered among many different institutions:

U.S. and Libyan officials say there are a host of other complications in turning over the frozen assets to the rebels. Libya’s financial holdings are widely dispersed among financial institutions, some of which are subject to the laws of foreign governments.

And bankers will probably move cautiously because of the fear of lawsuits.

“All these institutions want assurances that they’ll be protected,” said a second U.S. government official, who also insisted on anonymity to describe internal discussions. “This is something that is going to take some time.”

The U.S. has taken the unusual step of recognizing a government that doesn’t control most of its own country in order to unfreeze state assets that the U.S. and its allies were instrumental in freezing in the first place. Libyan war supporters can argue that this was a necessary step in pursuing the war’s real goal of regime change, and more hawkish supporters will certainly complain that all of this could have been done months ago, but all of that will be moot if recognition does not even translate into unfreezing the assets.

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