So far, State and Treasury department officials have identified only a small fraction of the vast Libyan holdings — estimated by some officials to be as little as a few hundred million dollars — that can be quickly freed, according to current and former officials familiar with the talks.
The administration is studying a variety of options to work around the obstacles. One, which could be put in place in weeks, would allow the frozen funds to be used as collateral for loans made to the rebels by other countries, such as Persian Gulf oil states, officials say.
“Our goal is to get more funds flowing to the TNC as quickly as possible,” said a senior administration official, speaking Saturday on the condition of anonymity to discuss internal deliberations. “We always understood there were going to have to be additional steps beyond recognition. But recognition was a necessary first step.”
The difficulties over releasing the money are the latest in a series of frustrations for the rebel group, which had hoped diplomatic recognition would free up billions of dollars in assets that had belonged to Moammar Gaddafi’s government. TNC officials say they need the money to keep the transitional government afloat and press their five-month-long fight.
Secretary of State Hillary Rodham Clinton announced July 15 that the United States would recognize the TNC as Libya’s government, following months of legal wrangling over whether Washington could grant recognition to a group that does not control large swaths of the country.
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.
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.
Although the rebels hailed Clinton’s announcement, the opposition group is still waiting to see many of the benefits. On Friday, the TNC’s representative in Washington was waiting for word on when he could move into the empty Libyan Embassy.
The representative, Ali Aujali, met with State Department officials this past week to implore them to unfreeze some of the assets. “The money is really needed in Libya, badly needed,” he said. “I think the Americans recognize this is very important.” He said the U.S. diplomatic recognition “will help many other countries to change their position” on providing money to the TNC.
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