Frozen Funds The Complicated Hunt for Gadhafi's Billions
The West had been hoping to use frozen assets belonging to Libyan dictator Moammar Gadhafi and his clan to support the rebels. But that effort is proving much more complicated than first envisioned. Washington and Europe find themselves in an embarrassing predicament.
The German bank Commerzbank received an unusual transfer order in late February. The amount was 1.9 million ($2.7 million) and the bank was instructed to immediately transfer the funds from a Commerzbank account to a foreign account with another bank.
The holder of the Commerzbank account was Saif al-Arab al-Gadhafi, born in 1982, the presumed youngest son of Libyan autocrat Moammar Gadhafi. The dictator's son, who had been living in a villa in Munich's Waldperlach neighborhood, suddenly left Germany and returned to Tripoli -- a sad loss for those members of Munich's jet set that had become accustomed to attending the younger Gadhafi's wild parties.
Commerzbank was reluctant to transfer the money and notified the authorities. The German Ministry of Economics, which has jurisdiction over such matters under the Foreign Trade Act, ordered the account frozen, adding that Gadhafi's son had to be prevented from removing the funds from the country. As a result, the money is still collecting interest in the Commerzbank account today.
The move, which occurred a few weeks ago, marked the beginning of a global treasure hunt. Throughout the Western world, investigators are now tracking down the money the Gadhafi clan earned in the oil business in past decades and set aside. And it's not just the Gadhafis. In addition, there are worldwide efforts underway to uncover the silent reserves of other potentates.
The United States has already frozen Gadhafi regime assets worth more than $60 billion (42 billion), which includes about $32 billion in the United States, close to $20 billion in Great Britain and $1.7 billion in Austria. The amount of Libyan money in German banks, almost $9 billion, is surprisingly large, given that Gadhafi's terrorists blew up the La Belle nightclub in Berlin more than 25 years ago, killing three and injuring 230.
But even as the search for the Gadhafi billions progresses, what will happen with the frozen funds remains completely unclear. Serious problems have arisen in connection with the attempt to deprive the Gadhafi clan of its funds.
Indeed, the fortune hunters could suffer a setback, particularly given that it has become increasingly clear how close relations were between the Libyan dictator and Western countries. Furthermore, Gadhafi's cash is not the direct result of fraud, but came from profits from his perfectly normal businesses.
The hope in Germany had been to use the billions in Gadhafi assets to support the rebel troops in eastern Libya and to pay for humanitarian aid to the victims of troops loyal to the dictator. The thug of Tripoli was to be defeated with his own money. It was a wonderful idea, as the so-called Libya Contact Group concluded during a meeting on the Thursday before last.
The group, consisting of foreign ministers from more than 20 countries, including German Foreign Minister Guido Westerwelle, announced that it was setting up a special fund for the rebels. For a moment, it seemed as if global politics was simple.
An Embarrassing Position
Now, though, it has become clear to those involved that the matter is far more complicated. In an internal assessment, German government experts conclude that even a dictator can invoke the constitutional protection of his property, at least as long as he is in power in his country. Although the German government can freeze his account, it cannot withdraw funds from them. Until further notice, the money belongs to the Gadhafi regime.
The German government experts say that expropriation of the Gadhafi funds would require approval under international law, which is unlikely to occur. Russia and China have made it clear that they will not support another anti-Gadhafi resolution in the United Nations Security Council.
The West has maneuvered itself into an embarrassing position. The money it has already promised the rebels to fund their struggle for freedom is in fact not even available yet. The mood within the German camp, not surprisingly, has sobered significantly. After the German government did not vote for military action against Gadhafi in the Security Council, Germany wanted to show a particularly strong commitment and "make the frozen assets available to the Libyan people for its use as soon as possible," according to an Economics Ministry document.
The amounts in question are enormous. According to a German government overview, Gadhafi's account with the German central bank, the Bundesbank, has a balance of 1.96 billion. The rest of the money is distributed among almost 200 accounts with more than 13 other financial institutions.
Some of the funds are officially registered to the Libyan central bank, others to the Libyan Foreign Bank, and still others to the Libyan Investment Authority, the country's official sovereign wealth fund.
A few accounts are registered directly in Moammar Gadhafi's name, while others are in the name of one of his sons. In most cases, the balances are denominated in US dollars. The scrupulously correct Germans have used the exchange rate from early April to convert the funds into euros.
- Part 1: The Complicated Hunt for Gadhafi's Billions
- Part 2: Going After Dictators
© SPIEGEL ONLINE 2011
All Rights Reserved
Reproduction only allowed with the permission of SPIEGELnet GmbH