A young Libyan in Benghazi celebrates Tuesday over news that Moammar Gadhafi's rule appears to be at an end. The U.S. says it is prepared to unfreeze Libyan assets quickly and make them available to a new government.
The United States wants to give Libya its money back.
The U.S. froze some $30 billion worth of the country's assets after leader Moammar Gadhafi launched a harsh crackdown on his opponents earlier this year. With Gadhafi's rule now near or at its end, U.S. officials and their European counterparts are prepared to quickly unfreeze those funds for a new Libyan leadership.
Susan Rice, the U.S. ambassador to the United Nations, told CNN on Tuesday that she hoped at least some of the money could be freed "within days" for use by the Transitional National Council, the rebel group that the U.S. recognized as Libya's legitimate government last month. Many European countries have also recognized the council, known as the TNC.
"We have put forward an initial tranche of assets that we anticipate unfreezing as a first stage," Rice said. "Some of which will go directly to humanitarian organizations, some of which would go to the TNC, some of which would help meet the needs of fuel for humanitarian and civilian purposes."
Who's In Charge?
Libyan rebels overran Gadhafi's compound in Tripoli on Tuesday, though sporadic shooting continued in the capital afterward. Gadhafi's whereabouts were unknown, but he had effectively lost his ability to run the country.
Here's a partial list of countries in which the government or individuals are currently under economic sanction by the U.S.:
Source: Treasury Department
Meanwhile, the fact that the U.S. has already recognized the TNC should expedite the process of freeing frozen assets. Federal law requires that a formally recognized government be in place before foreign assets that have been frozen can be released.
"The Security Council had already made its determination that those frozen assets should be made available as soon as possible," says Jeffrey Laurenti, foreign policy director at the Century Foundation, a progressive think tank. "There's a mandate to unfreeze them as soon as practicable when you are not dealing with the [Gadhafi regime]" in Libya.
A new government will want to use those assets as part of its campaign to establish legitimacy, Laurenti suggests. The better equipped it is to provide basics such as food and gasoline, the easier its transition will be.
"The Western countries now are desperate to get money to them, and they want no responsibility for paying for Libya's reconstruction," he says. "That's the bottom line. Libya is a country that should be able to pay for itself."
Complications To Come
Although Secretary of State Hillary Clinton talked at times during the course of the Libyan conflict about confiscating assets and turning them over to the TNC, in reality the U.S. merely kept those assets frozen.
The money is still sitting in the bank, under the original account holders' names. In the case of assets clearly belonging to the Libyan government itself — accounts held by the nation's sovereign wealth fund, for example — returning the money will be a simple matter. All the U.S. government must do is let the bank know it's OK to release the money.
But a relatively small proportion of Libya's assets, at least in this country, are in cash. Most is in property. Turning real estate into liquid assets that the new government can put to use is going to take some time.
Seif's London Mansion
And it's not always clear that the government will be able to take title easily. Consider the London mansion that Gadhafi's son Seif al-Islam Gadhafi bought when he was a student at the London School of Economics.
The title is still in his name, but the British government has blocked him from using it as part of any financial transaction, whether as collateral or putting it up for sale or lease.
Property belonging to the Gadhafi family and other individuals loyal to the old regime won't automatically be transferred to a new government.
Those assets may simply stay frozen unless there is a finding that they represent money stolen from the Libyan government.
"The money stays in the bank account under the name of the person or the entity that opened the account," says Kern Alexander, a senior research fellow in financial services law at the University of London.
Cutting Through The Red Tape
Determining who controls a given company with holdings overseas has become more complicated as the civil war has progressed, Alexander points out. "As the rebels take control of more of the country, they take control of more enterprises with bank accounts," he says.
And simply getting the paperwork taken care of can be complicated, as Ambassador Rice said on CNN. The State Department is likely to take the lead, but Treasury and the Department of Justice also have roles to play. The National Security Council is expected to keep the process moving among the different departments.
It appears the European Union also wants to keep the process moving expeditiously. Lifting sanctions is sometimes merely a matter of dealing with technical details, once larger issues such as determining who is in charge of a country have been sorted through.
If the U.S. and other governments are confident that there's a trustworthy government in charge in Libya, that's a good sign that the country is back on a path toward stability, says Michael Malloy, a sanctions expert at the University of the Pacific law school.
"It will give you a very good reading on how complicated the transition and aftermath are going to be," Malloy says. "If the U.K. and the U.S. and other governments just sign off on a termination of sanctions, then we're probably much further along in transitioning Libya back to normal status."