Clinton seeks to use Gaddafi’s seized funds to aid Libyan people

May 5, 2011

The Obama administration intends to use some of the billions of dollars in frozen assets belonging to Libyan leader Moammar Gaddafi and his government to provide humanitarian and other assistance to Libyans affected by the ongoing civil war, Secretary of State Hillary Rodham Clinton said Thursday.

The move, announced at a high-level meeting here on how to shore up Libya’s bedraggled rebels, appeared to be the first time a country has sought to tap some of the massive Libyan wealth blocked by U.N. sanctions in February.

Clinton, speaking with leaders from NATO and Arab countries, said the Obama administration would seek congressional approval to allocate the frozen funds — a standard legal procedure under U.S. law. She did not say how much money was involved, or whether it would go to the rebels battling Gaddafi’s forces or to international humanitarian organizations.

The rebels have begged foreign countries to transfer them the money, saying they are running out of cash as they attempt to create a government and army that can stand up to Gaddafi and his forces.

“We urge all our partners to join in increasing the pressure on Gaddafi, to sharpen the choice for him and those around him, and to provide much-needed support to the opposition,” Clinton told a closed-door meeting, according to a transcript provided by her staff.

A NATO bombing campaign of nearly seven weeks has bolstered the rebels, allowing them to hold on to eastern Libya and the western city of Misurata in the face of superior Libyan army firepower. But, with the two forces increasingly bogged down in a stalemate, the United States and its allies are trying to find new ways to squeeze Gaddafi, who has been in power for 41 years.

Rebel leaders say they need $2 billion to $3 billion to keep the economy afloat in the areas they control — to buy gasoline, to pay salaries to the large number of government workers and to purchase food. U.S. officials have privately questioned that figure.

Nonetheless, Clinton and senior European and Arab officials are eager to agree on a fund or other mechanism that will allow the rebels to borrow money abroad, receive donations and eventually accept payments for oil they sell.

“There is an effort, with urgency, to meet the request the TNC is making,” Clinton told reporters, referring to the rebels’ Transitional National Council.

But she urged patience. Although there appears to be support in Congress to unblock some of the Gaddafi regime’s assets—which total more than $30 billion in the United States alone — it is not clear how long it will take for legislation to pass.

The Rome meeting is also expected to set up a fund, jointly managed by the coalition and rebel government, to receive donations from foreign governments for the fighters.

The rebels had hoped foreign governments would simply provide them with the overseas frozen assets belonging to Gaddafi and his regime. But several European countries expressed concern that such a transfer would violate their laws. The rebels now hope to borrow money from abroad, using the blocked assets as collateral.

Jalal el Gallal, a spokesman for the rebel-led government in eastern Libya, called Clinton’s announcement “a very kind gesture .”

Gallal said establishing lines of credit secured by the frozen assets would be more expensive than transfering the funds directly to the rebels. But, he said, it also would ensure that the assets remain “the property of all Libyans, not just the Libyans in the liberated territories.”.

In Benghazi, the de facto rebel capital, citizens welcomed Clinton’s announcement and said they need funds urgently. “We need this money because we are very poor here now,” said Darine Kattab, 32, a communications engineer who earns $156 a month, “Gaddafi stole all our money for him and his family.”

In Rome, Clinton called on other countries to follow the U.S. example in providing non-lethal aid to the rebels. The Obama administration is sending about $25 million worth of equipment from U.S. military stocks — boots, tents, body armor and the like. It is expected to arrive in Benghazi “in the coming days,” Clinton said.

Diplomats say Thursday’s gathering of senior officials from NATO and Arab countries, as well as members of Libya’s rebel government, is important not only for sustaining the Libya campaign but for sending a unified message that Gaddafi must go.

“If we were to legitimize Gaddafi by letting him partition the country, what message would that send to Assad and Saleh?” a Western diplomat said, referring to the leaders of Syria and Yemen, who have tried to crush anti-government protests in their own countries. “We have to show them that brutal repression will not be tolerated.”

The Western and Arab alliance is attempting to increase pressure on Gaddafi in three ways: militarily, through strikes on command-and-control facilities in the Libyan capital; financially, through increased sanctions; and politically, by supporting the rebels’ creation of a governing structure.

British Prime Minister David Cameron said Tuesday that his government was looking at ways to further tighten sanctions on oil sales by Gaddafi’s government, “to make sure this regime comes to its senses and realizes it cannot go on terrorizing its own people.”

Oil sales in recent years have made up 95 percent of Libya’s export earnings and three-quarters of its government receipts.

The rebels have exported a small amount of petroleum, but they have been unable to pump significant amounts at oil fields they control because of war-related damage and the threat of more violence.

Special correspondent Portia Walker contributed to this report from Benghazi, Libya. Staff writer Joby Warrick contributed from Washington.

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