NEED TO KNOW
national Security
Show Them the Money
Libya’s rebels want access to billions in frozen Libyan financial assets.
Should Washington give it to them? By Yochi J. Dreazen
O
n February 25, nearly a month
before U.S. warplanes began
bombing targets across Lib-
ya, the Obama administra-
tion launched a different kind
of assault on the regime of Col. Muammar
el-Qaddafi. In Executive Order 13566, Presi-
dent Obama cited a “serious risk” that the
Libyan strongman would use the money he
had squirreled away in American banks over
the years to fund a crackdown on the coun-
try’s pro-democracy protesters. To prevent
possible atrocities in Libya, Obama said, the
U.S. government would stop Qaddafi’s mon-
ey from being “transferred, paid, exported,
or withdrawn.” Treasury Department of-
ficials have frozen more than $34 billion of
Libyan assets, the largest such sanction in
American history.
The rebels working to oust Qaddafi are
now hoping to use the dictator’s money
against him. NATO’s no-fly zone over Libya is
allowing the ragtag insurgent army to solidify
its control of the eastern half of the country,
but loyalists have prevented the rebels from
advancing into the western half or launch-
ing a planned assault on Tripoli. Facing a pro-
longed war against Qaddafi’s heavily armed
troops, rebel leaders are desperate to tap the
frozen Libyan cash to rearm and finally over-
come the government. The money, in other
words, may hold the key to Libya’s future.
Britain has frozen $50 billion of Qaddafi-
linked assets, while France and Italy have
confiscated smaller amounts. All told, rebel
leaders estimate that Western nations have
impounded nearly $90 billion of Libyan mon-
ey. “Libya is not a poor country,” Ali Sulei-
man Aujali told reporters on Tuesday. He quit
his job as Qaddafi’s ambassador to Washing-
ton last month to represent the rebels. “If we
don’t have the access to this money,” Aujali
said, “then I think this is a serious problem.”
The Libyan funds in U.S. banks were fro-
photo: get t y images /chip somode vill a
zen under the 1976 International Emergen-
cy Economic Powers Act, a little-known law
that gives the executive branch broad pow-
ers to block financial transactions and take
control of foreign assets in American banks
if there has been an “unusual and extraordi-
nary threat … to the national security, foreign
policy, or economy” of the United States. The
act has been used to freeze assets held by the
governments of Burma, Iran, Iraq, North Ko-
rea, and Syria.
The White House has indicated that it’s
nationa l jou r na l a pr il 9, 2 011
Instigator: Rebel supporter Ali Suleiman Aujali
wants to use Qaddafi’s money against him.
open to freeing some of the money to pur-
chase humanitarian goods for the rebels,
which could be a politically palatable way to
give them additional assistance without put-
ting new strains on the federal budget or in-
creasing the U.S. military role in Libya. Wash-
ington sent small teams of CIA paramilitary
operatives to work with insurgent leaders and
help them plan air strikes, but the administra-
tion has steadfastly refused to consider de-
ploying ground troops.
David Cohen, the Treasury Department’s
acting undersecretary for terrorism and finan-
cial intelligence, said that officials are consid-
ering “what can and should be done with the
frozen assets.” The options include using some
of the money to buy food or medicine, but not
purchasing armaments or simply transferring
large sums to the rebels. “There isn’t any seri-
ous consideration being given to turning over
the $34 billion to the INTC,” Cohen said, using
the acronym for the rebel leadership. France,
which has an embassy in the rebel capital, is
looking for ways to transfer money to the in-
surgents and is open to providing weapons. By
contrast, says a senior Treasury official, “we’re
not talking about dropping pallets full of cash
into Benghazi.”
That is precisely what the Bush admin-
istration did in Iraq, with little effect. After
the 2003 invasion, the United States moved
more than $20 billion that had belonged to
Saddam Hussein into a program called the
Development Fund for Iraq. Tons of shrink-
wrapped bundles of $100 bills were airlifted
to Iraq, where the money was supposed to
pay for reconstruction projects and govern-
ment salaries. U.S. audits subsequently found
that billions of dollars had been lost, stolen,
or misspent. “There is evidence of substantial
waste, fraud, and abuse,” a scathing 2005 re-
port by the House Government Reform Com-
mittee concluded.
Libya’s $34 billion now frozen in U.S.
banks could be transferred to rebel control in
two ways. First, Congress could pass legisla-
tion liberating the funds. Alternately, Obama
could issue an executive order declaring that
armed hostilities existed between the Unit-
ed States and Libya and that he was seizing
the money to boost the national-security in-
terests of the United States. If the president
took that step, he could send the rebels as
much of the money as he wanted. Neither op-
tion would require the administration to rec-
ognize the rebel-led Transitional National
Council in Benghazi as Libya’s official govern-
ment, a step that Washington has so far been
reluctant to take. “The president has really
broad powers to seize and disburse foreign as-
sets pretty much as he sees fit,” said Jennifer
Elsea, an expert on overseas funds at the Con-
gressional Research Service.
The Obama administration has walked a
cautious line when it comes to Libya, arguing
that Qaddafi had lost all legitimacy and needs
to step down but that the United States will
not force him to do so. Freeing up some of Lib-
ya’s frozen money could make it easier for Lib-
ya’s rebels to oust Qaddafi on their own, which
is why they are hoping Obama eventually de-
cides to put his money where his mouth is. n
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