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How US froze Libyan assets

world Updated: Mar 25, 2011 01:38 IST

The Treasury Department team had been working nonstop on a plan to freeze Libyan assets in US banks, hoping they might snare $100 million or more and prevent Muammar Gaddafi from tapping it as he unleashed deadly attacks against protesters in Libya.

Now, at Friday afternoon, February 25, an e-mail arrived from a Treasury official with startling news. Their $100 million estimate was off - orders of magnitude off. The e-mail said there was in "excess of $29.7 billion - yes, that's a B." And most of the money was at one bank.

It was a piece of extraordinary good fortune for the Obama administration at a crucial moment in the efforts to address the bizarre and deadly events unfolding in Libya. The $32 billion frozen so far by the United States represents a significant portion of the nation's wealth. In 2009, Libya had a gross domestic product of $62 billion; its sovereign wealth fund is estimated at $40 billion and its central bank reserves at $110 billion.

The plan to find and freeze Libyan assets began taking shape February 23.

Libya was deteriorating quickly. The Libyan air force had bombed civilian protesters. In a rambling and incoherent speech on state television, Muammar Gaddafi had blamed "foreign rats" for the chaos.

The possibility of a military response or imposition of a no-fly zone over Libya came up at the meeting that morning. But those steps were considered politically untenable for the moment. National Security Adviser Thomas E Donilon asked Treasury to prepare options for economic sanctions, an undertaking usually weeks or months in the works. But Levey and the others at Treasury scrambled virtually nonstop over the next two days.

Some of the Treasury people immediately reached out to their contacts in US financial institutions. The Treasury officials quietly asked the bankers to identify assets controlled by the Libyan government, Gaddafi, his family and their associates, and thereby freezing Gaddafi's assets.

(In exclusive partnership with The Washington Post)