Following the decision of all members of the International Contact Group's to effectively recognize the administration in Benghazi pledges of aid have come from numerous countries of which the German loan is the first. These loans will be given by guaranteeing their repayment against the future freeing up of the billions of dollars of Gaddafi money stashed away around the globe. The political purpose of this, however, seems to have been to send Gaddafi a message to give in now or face a rebel authority with apparently unlimited funds to challenge his regime.
The Benghazi administration is desperate for money to keep the Eastern economy afloat, maintain services, pay wages and trade. Mazin Ramadan
, its financial adviser, said recently, “We're broke,” “We’re getting decimated on the financial front lines,” underpinned by the urgent appeal of NTC chief, Mustafa Abdel Jalil, who said the were vital to maintaining the governing National Transitional Council's credibility and support.
Gaddafi is estimated to have about $34 billion invested around the world and Jalil said the NTC needs $4 billion in aid immediately. However, if past promises are anything to go by, such a sum is not likely to come quickly. In fact, at the Contact Group meeting back in May, Western and Arab powers agreed to set up a “financial mechanism” to aid the rebels, but it was only Qatar, which came through with $100 million, followed by a promise of $300 million by Turkey. However, Italy joined Germany on Sunday by promising to allocate a 350-million Euro loan (about 500 million U.S. Dollars) to Benghazi.
The amounts appear huge, but a lot of it may be political posturing, in order to force Gaddafi into more serious negotiations. According to the NTC its needs are far greater than this. Back in May, Reuters
quoted another NTC official, Ali Tarhouni, who said the rebels were spending between 50 million to 100 million Libyan dinars ($43 million-86 million) per day. On average this equals 75 million dollars or the 52 million Euros . If the rebel calculations are to believed, Germany's loan of 100 million Euros would only keep Benghazi running for about 2 days.
to the defected ex-Governor of Libya's Central Bank, Gaddafi may be in a better liquidity position, as he estimates that the ruler has $500 million in cash in Tripoli and 155 tons of gold bars worth $7.5 billion.)
The decision of the US to recognize the NTC as the legitimate “governing authority” was meant to free up the billions, which could buttress the Benghazi regime. However, since the decision, there have been many warnings that this still will not be as straight-forward as it seems. The Washington Post
reported that, “US government officials cite a thicket of red tape that continues to ensnare most of the $34 billion in frozen Libyan assets. So far, State and Treasury department officials have identified only a small fraction of the vast Libyan holdings that can be quickly freed.”
magazine also explained yesterday that there are daunting practical problems to begin with. “Financial experts in Switzerland, Britain and the U.S. say tracing.. fortunes..... is just the first daunting challenge. Most countries require those trying to recover stolen assets to identify the people (personnel etc) who have hidden money, jewels or other riches and where the assets are.” "You cannot just go on a fishing expedition. You have to know what you are looking for." said Anthea Lawson of Global Witness, an anti-corruption research organization in London.
Indeed, even after Gaddafi is deposed it will be an extremely complex and lengthy task to get hold of the money. Neither Tunisia or Egypt has yet reclaimed the fortunes embezzled by their former dictators, which, in Mubarak's case, is an estimated $80 billion.
The legal issues are daunting. In effect, by granting loans to the NTC against the hidden billions, the West has issued the rebels with a visa card for Gaddafi's personal account. As the Tripoli Post
stated, the money “will likely be released slowly because of bankers’ concerns about possible legal risks in handing over money to someone other than the account holder.”
Finally, there is the important fact that Gaddafi's and Libya's assets abroad have been seized by the UN Security Council resolution on sanctions and, legally speaking, before the money can be touched, it requires another vote by the body to unfreeze all these assets. They are then faced with the problem of possible opposition from Russia and China.
An indication of how the Russians might view such a proposal was given on Russian State TV
yesterday, which reported a Belgian Professor at the University of Louvain as saying the UN resolution does not allow for taking money from Libya and giving it to the rebels and went on to quote Christoph Hoerstel, a government consultant in Germany, who said, “In a way, it is totally illegal. You can’t just take the money away from the government and give it to rebels.”
Philip Zelikow, a former counselor to the State Department told the Washington Post
that the US should have granted recognition months ago, “Back then, it might have been a decisive factor. It could have knocked the wind out of Gaddafi’s sails.” Now this may not be the case and, anyhow, the West is pushing for a quick negotiated settlement to the conflict, by which time, the funds for the rebels may be an academic question.
In other words, welcome as the German loan might be, the money could be too little, too late and Gaddafi knows this.