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How US sanctions on Libya might work

The United States on Friday said that it would pursue unilateral sanctions on Libya in response to longtime leader Muammar Gaddafi's crackdown on political opponents.

world Updated: Feb 26, 2011 09:11 IST

The United States on Friday said that it would pursue unilateral sanctions on Libya in response to longtime leader Muammar Gaddafi's crackdown on political opponents.

White House spokesman Jay Carney said the measures, which would accompany multilateral steps, were aimed at pressuring Gaddafi's regime "to stop killing its own people."

Following are some questions and answers on how the United States imposes and enforces sanctions, and what legal authorities would be required.

Does the United States have sanctions on Libya now?
No. The last financial sanctions against Libya ended in 2004 after Gaddafi renounced his country's programs to develop weapons of mass destructions and opened Libyan territory to international weapons inspectors. A trade embargo was lifted, and US companies were allowed to invest again in Libya's oil sector. The United States exported some $666 million in goods and services to Libya in 2009, with oil drilling equipment and motor vehicles as the largest segments.

Can the us treasury freeze assets of Gaddafi or Libyan officials?
Not until President Barack Obama issues an executive order imposing sanctions against Gaddafi and his regime. Various executive orders exist targeting governments that are accused of oppressing their people or that are seen as security threats to the United States, including Iran, Sudan, Zimbabwe and Myanmar. Other executive orders target behaviors such as financing of terrorism, proliferation of weapons of mass destruction or narcotics trafficking.

But there are no such orders in place for Gaddafi's regime, or for that of Egypt's ousted president, Hosni Mubarak. The Treasury would need a new order to act.

How can Obama impose an executive order?
Based on an assessment of the situation or threat, he could declare a "national emergency" under authorities granted by the National Emergencies Act and the International Emergency Economic Powers Act. It would allow an executive order blocking transactions with targeted parties and freezing their assets.

In addition, if the UN Security Council were to issue a resolution ordering sanctions on a country, Obama could issue an executive order to implement those sanctions, allowing the Treasury to act.

How do financial sanctions work?
Once an order is issued, the Treasury's Office of Foreign Assets Control identifies individuals, companies and other entities linked to the targeted regime or that show evidence of engaging in the targeted behaviors. It puts them on a list of "specially designated nationals," which blocks Americans from engaging in transactions with them. Assets they may have under US jurisdiction are frozen. Financial institutions are notified to scrutinize transactions for possible links to the blacklisted individuals or entities. The aim is to deny them access to the international financial system.

How effective are financial sanctions?
They have been effective in closing off access to the financial system for certain entities, such as accused terrorist financing networks, but it not clear whether they are effective in changing governments' policies or behavior.

In 2005, the blacklisting of Macau's Banco Delta Asia shut down North Korea's main conduit to the international financial system. Both US and foreign banks declined transactions with the bank, and the action became a major issue in nuclear talks with Pyongyang.

The strengthening of sanctions against Iran in 2010 over its nuclear and missile programs has hurt Iran's economy, cutting off access to imported materials. But there is little evidence it has had any effect on Tehran's nuclear program. Iran has also been adept at creating new shell companies to conceal transactions, Treasury officials say.

Could the US government seize Libyan assets in court?
Yes. The US Justice Department could go to federal court to try to seize any assets, such as money or property, that the government believes are the proceeds from alleged illegal activity. It can be a particularly lengthy process to seize assets, as it is subject to challenges by the owners and appeals. The process, known as civil asset forfeiture, can be undertaken if the funds from illicit activity overseas are found in the United States, either in bank accounts or in the form of property.

For example, the Justice Department has sought to seize two properties, including a luxury Manhattan apartment, that are believed to have ties to alleged corrupt activities by the former president of Taiwan and his family.