Recognizing the Transitional National Council as the Libyan government was supposed to free up the state’s frozen assets and make them available to the rebels. While this was a questionable move at odds with long-standing U.S. practice, it made sense as a way of propping up the TNC in its fight with Gaddafi. Last week, I noted that the process of unfreezing the assets was very difficult, and there were a number of obstacles to transferring the assets to the rebels. The Los Angeles Times reports today that there are additional complications:

The sanctions committee, which comprises all 15 members of the Security Council, acts only if there is unanimous agreement.

And even if the council adopts the kind of resolution the rebels want, some countries may not implement it as the rebels would like.

Each country with Libyan assets would need to take legal action to judge who is entitled to receive the money, by passing a law or setting up a commission to sort through competing claims.

If the authorities simply lifted the freeze, “there would be a free-for-all from everyone who thinks they have a claim to the money,” said Victor D. Comras, who was a top sanctions enforcement official at the State Department and the U.N. “There could be 1,000 lawsuits.”

Though authorities in the United States and Europe would probably move carefully to ensure that the money went to the rebels, other countries “may have far different procedures, and they may have different sympathies,” Comras said.

The rebels fear that if Kadafi officials see any legal loopholes, “they will do everything they can to get their hands on assets, to sell them and send the money back to Tripoli,” said Aujali, the rebel envoy.

Another fear is that members of Kadafi’s regime, sensing that his government may not be around long, may try to steal the money for themselves.

U.S. officials, though eager to help the rebels raise cash as soon as possible, are making no promises on how long unfreezing the assets may take because, as one put it, “there’s a lot of moving pieces here.”

Unfreezing Libyan assets here is clearly going to take a lot of time, but time is one thing that NATO governments don’t have. Nikolas Gvosdev explains:

Even if the conflict picks up steam again after Ramadan ends on Aug. 30, the alliance will then have to confront a new deadline: The NATO mission’s mandate will draw to a close on Sept. 27 unless it is explicitly renewed or extended, a decision that would require unanimous consent of all the alliance’s members. Enthusiasm for the operation was never that strong among key NATO states such as Germany and Turkey, and public support for the mission in Britain and France has been eroding. French President Nicolas Sarkozy will want to bring operations to a successful close well in advance of the April 2012 presidential contest, while the government of British Prime Minister David Cameron will want to be in a position to proclaim that the conflict is winding down by the time it must again submit the biannual “bill” for the Libya operation to parliamentary scrutiny.

Some European governments have unfrozen several hundred million dollars in assets, but there is reason to worry that the TNC won’t handle the money effectively once they have it. The Christian Science Monitor reports:

Some experts are cautioning that a young and divided opposition government like the TNC can hardly be expected to know how to effectively and efficiently use the hundreds of millions and potentially billions of dollars falling into its hands.

A panel of experts assembled last week by the Center for Strategic and International Studies in Washington concluded that too much money for the TNC could end up being as big a problem as too little. “The paucity of cash in eastern Libya has helped nurture a culture of volunteerism and broad public engagement,” the group said. “Too much cash at the center will likely lead to centralization and patronage.”

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