20111219
Reuters
(Reuters) - The U.N. Security Council lifted sanctions on Libya's central bank and a subsidiary on Friday, clearing the way for tens of billions of dollars they hold overseas to be unfrozen to ease an acute cash crisis.

The Central Bank of Libya and the Libyan Foreign Bank (LFB), an offshore institution wholly owned by the central bank, were taken off the council's sanctions list drawn up earlier this year amid civil war in the Arab state.

After a rebellion broke out in February against leader Muammar Gaddafi, the Security Council froze Libyan assets abroad, estimated at $150 billion. Most of that sum has remained beyond the reach of the oil-rich country's new rulers.

Gaddafi's 42-year rule collapsed when his forces fled Tripoli in August, and the last of the fighting in Libya ended in October when he was captured and killed by rebels.

Yet by late November only about $18 billion in seized assets had been released by special provisions of the Security Council's Libya sanctions committee, and diplomats said only about $3 billion of that had been made available to Tripoli.

A U.N. resolution in September eased sanctions on Libya, removing them from the national oil company but leaving them largely in place on the central bank and LFB, partly due to legal problems over unfreezing their foreign assets.

Last week, senior figures in Libya's new leadership wrote to the committee asking it to delist the two banks, which had been sanctioned along with two Libyan investment authorities.

The move was "essential for the economic stability of Libya; for confidence in the banking sector; for the smooth execution and settlement of both domestic and international banking transactions; and to underpin the social and microeconomic stability of the new Libya," the letter said.

Frustration at the delay in releasing the assets has been growing inside Libya, where the interim government says it urgently needs the cash to pay the wages of public sector workers and to start re-building state institutions.

NO OBJECTIONS

The freezing of Libyan assets was part of a package of sanctions by the 15-nation council intended to put pressure on Gaddafi's government to stop attacking civilian protesters.

Shortly after the Security Council's move on Friday, the White House said the United States was unfreezing most Libyan government and central bank funds within its jurisdiction.

"These measures ... will help the new government oversee the country's transition and reconstruction in a responsible manner," a statement said. But it said assets held by Gaddafi's family and members of his former government remained frozen.

The U.S. Treasury Department then said it had unblocked more than $30 billion in Libyan government assets.

The U.N. sanctions were lifted automatically under a procedure invoked by committee chairman Ambassador Jose Filipe Moraes Cabral of Portugal, who told council members a week ago the measures would end unless there were objections by 5 p.m. New York time (10 p.m. British time) on December 16. Diplomats said no objections were received.

Libya can generate substantial revenues from oil exports, but these were halted by the conflict and are taking time to restore, leaving a hole in government finances.

The reason most assets were not unfrozen earlier was uncertainty over who legally owned them and concerns that in some cases it could be Gaddafi's family or aides, diplomats said.

They said the delisting of the two banks did not necessarily mean all frozen assets would be instantly available to Tripoli as foreign institutions holding them might seek formal authorization from governments.

British Foreign Secretary William Hague said Libya's government "will now have full access to the significant funds needed to help rebuild the country, to underpin stability and to ensure that Libyans can make the transactions that are essential to everyday life."

But he said in a statement the European Union would need to pass a regulation required to release about 6.5 billion pounds ($10 billion) frozen in Britain.