Libya’s sovereign wealth fund says that five EU countries paid out money from frozen accounts in Europe that once belonged to Muammar Gaddafi, despite international sanctions.
Questions about mystery payments from the Libyan dictator’s supposedly frozen billions in Europe have already become a hot political issue in Belgium, because significant sums flowed out of accounts in Brussels.
But the Libyan Investment Authority’s announcement is the first time an official state body has said that countries other than Belgium may also have wrongly implemented the U.N.’s 2011 sanctions regime against Libya, and raises more questions about how much of Libya’s wealth has been transferred to unknown recipients since 2011.
Belgium defends payments of money from LIA’s frozen accounts by saying that interest accumulated on frozen funds is not covered by sanctions. A U.N.-backed panel of experts disagrees, however, and concluded in September that such payments were illegal and could be contributing to instability in the country.
The LIA said in an emailed statement to POLITICO that Belgium’s government was not alone in taking advantage of a loophole by paying out the interest earned on the frozen money.
“In many jurisdictions (the UK, Belgium, Germany, Italy and Luxembourg for example) the interest and dividends on holdings frozen under the U.N. sanctions are not frozen,” the LIA said through its London-based PR agency Maitland.
The statement also sought to deflect mounting questions about why Belgium decided to unfreeze funds from accounts managed by Euroclear, a financial institution headquartered in Brussels.
The LIA provided an email from the Belgian finance ministry to Euroclear dated October 4, 2012 in which Marc Monbaliu, a top civil servant, said that “the legal department of the European External Action Service of the European Union considers that there is no longer any legal basis to freeze interest on these funds.” Contacted by the Belgian broadcaster RTBF last week, Monbaliu said “at the time that the request arrived, I had no reason to refuse it.”
In February, POLITICO reported that Belgium was channeling tens of millions of euros of frozen Libyan cash in stock dividends, bond income and interest payments to unknown beneficiaries with bank accounts in Luxembourg and Bahrain.
Since then, senior officials in Belgium’s government including Foreign Minister Didier Reynders have been asked to explain why the payments were made and where they ended up. Neither Belgium nor the LIA have, however, been able to name the final recipients.
The Belgian finance ministry has justified the interest payments from the Belgian accounts by saying they were in accordance with a 2011 interpretation of the sanctions’ rules by RELEX, an expert group at the Council of the EU composed of diplomats from member countries.
Members of the U.N. panel of experts on Libya did not respond to questions about whether they were aware of the actions taken by the U.K., Germany, Italy and Luxembourg. José Luis Díaz, a U.N. spokesperson, said the experts’ findings from September had been sent to the U.N. Security Council, which can take action if appropriate.
The German representation to the EU declined to say whether Berlin had released funds to the LIA, though it noted that “the assets of LIA are frozen insofar as they were owned, held or controlled by this entity on 16 September 2011.”
A U.K. Treasury spokesperson also declined to say whether the government had released frozen funds generated by Gaddafi’s wealth.
“We are working with the U.N. panel of experts to better understand their recommendations and will reflect this in our ongoing discussion with the EU about how we implement Libyan sanctions,” the spokesperson said.
Officials from Luxembourg and Italy did not respond to questions. However, an EU official briefed on Luxembourg’s financial decisions who spoke on the condition of anonymity said no funds had been authorized by the treasury to leave the country.