http://www.nytimes.com/2011/08/26/world/africa/26assets.html

August 25, 2011

U.N. Releases $1.5 Billion in Frozen Qaddafi Assets to Aid Rebuilding of Libya

By STEVEN LEE MYERS and DAN BILEFSKY

WASHINGTON -- Even with Col. Muammar el-Qaddafi still on the run, the nations that aided Libya's rebellion moved swiftly Thursday to release billions of dollars of cash needed for the difficult -- and, for some foreign companies, potentially lucrative -- task of rebuilding the country after six months of fighting.

The United Nations Security Council approved an immediate infusion of $1.5 billion that the United States seized last spring. Officials said the money was urgently needed to provide basic services, especially electricity, and, perhaps as important, to build political support for Libya's rebel leaders, known as the Transitional National Council, as they try to consolidate control of the country after 41 years of Colonel Qaddafi's government.

"Qaddafi hasn't paid salaries in months," Jeffrey D. Feltman, an assistant secretary of state, said in a telephone interview from Istanbul, where diplomats from 28 nations and 7 international organizations met on Thursday to discuss preparations for a post-Qaddafi Libya. "It would be a real boost for the T.N.C. to be able to do that."

The Security Council's action came after leading countries made new pledges of financial and diplomatic support, laying the foundation for new relations with a nation presumably more amenable to interaction and alliance with the West than it was under Colonel Qaddafi. With so much uncertainty over the governance of Libya, though, none of the money will be given directly to the rebels, but instead will be dispersed on their behalf by the United States or international agencies to ensure it goes directly to humanitarian needs.

Prime Minister Silvio Berlusconi of Italy, meeting with one of the Libyan rebel officials, joined other leaders in offering to aid the nascent government, promising to unfreeze roughly $500 million. The Security Council's action on Thursday so far affects only the $1.5 billion in American jurisdiction.

Eni S.p.A., Italy's largest oil company and the biggest oil producer in Libya, also pledged to supply gasoline and diesel fuel on an emergency basis and on credit, to be paid later in crude oil when production resumes.

The head of the Transitional National Council, Mustafa Abdel-Jalil, explicitly promised to reward those nations that backed Libya's revolt with contracts in the state's postwar reconstruction. "We promise to favor the countries which helped us, especially in the development of Libya," he said in the rebels' eastern stronghold, Benghazi. "We will deal with them according to the support which they gave us."

The Libyan council has asked the United Nations to release as much as $5 billion of an estimated $160 billion in Libyan assets frozen abroad after the Security Council imposed sanctions on Colonel Qaddafi's government shortly after the popular uprising began in February.

Much of those assets are property, investments or other fixed assets that cannot easily be cashed in without the authority of a recognized Libyan government, which legally remains very much up in the air. Of the nearly $38 billion in assets frozen by the United States, for example, only about $3 billion is in cash, according to the State Department.

The United States had asked the committee that oversees United Nations sanctions -- made up of the same 15 members of the Security Council itself -- for a special exception to return $1.5 billion. But it encountered strong opposition, particularly from South Africa, whose leaders long had close relations with Colonel Qaddafi. The sanctions committee requires unanimous consent, which South Africa blocked, even as events in Libya rapidly unfolded.

American and British officials took the usual diplomatic step of publicly identifying South Africa's opposition and vowed to force a vote on a new resolution on Thursday afternoon, which South Africa alone would have been unable to block.

South Africa objected to releasing the frozen money in part "because it implied recognition" of the rebels, one American official said, but ultimately relented after the sanction committee's decision deleted explicit reference to the rebel council.

The $1.5 billion in assets is divided into three roughly equal parts of $500 million -- none of which will go directly into the coffers of the rebels. One-third will pay international organizations like the United Nations High Commissioner for Refugees for past and future humanitarian assistance, while another will go from American accounts directly to companies that have been providing fuel for electricity in civilian areas under rebel control.

The third $500 million will go to a special fund in Qatar, controlled by a committee of nations, that disperses money for basic services like health care, education and food. Many countries, including Turkey most recently, have pledged money through the fund.

The transitional council, already recognized by the United States and many other countries as the recognized authority in Libya, is scrambling on the diplomatic and political front to catch up to its surprisingly rapid military advances this week. And it appeared to be succeeding, with the Arab League inviting the council to represent Libya at its next meeting later this month.

The diplomats meeting in Istanbul -- including representatives of the United Nations and the Arab League -- promised in a statement to provide the council with "the legal, political and financial means necessary to form an interim government of Libya."

They also called on the Security Council to free all the assets "in an expedited manner" and said that the United Nations would oversee "international efforts" to rebuild Libya, a demand that Russia and China emphasized on Thursday.

The nations in Istanbul, meantime, pledged $2.5 billion in aid in all, according to Fathi Baja, a member of the rebel council. "We need more," he said, "but this will be a very useful chunk to take care of the immediate needs."

Mr. Abdel-Jalil said that "the biggest destabilizing element" would be a failure of the rebel administration to deliver services and pay the salaries of officials who had not been paid for months.

With fighting still under way, it is too early to estimate the scope of the reconstruction needed in Libya, though officials acknowledged that the effort would be immense. At the same time, officials said, much of it can be paid for by Libya itself from the Qaddafi-era assets and a resumption of the country's oil industry, the infrastructure of which is not believed to have been badly damaged in the fighting.

"The overwhelming bulk of Libya's needs," Mr. Feltman said, "are going to be paid for by the Libyans themselves."

Steven Erlanger contributed reporting from Paris, and Sebnem Arsu from Istanbul.