Libya’s sovereign wealth fund has been under UN sanctions since the revolt against Muammar al-Qadhafi in 2011. These measures restrict investment that would enlarge the fund. The UN has eased them, but further changes would better protect the Libyan people’s patrimony while posing minimal risks.
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What’s new?
The UN Security Council has granted the Libyan sovereign wealth fund permission to reinvest some of its assets that have been frozen since 2011. But Council members remain reluctant to reform the sanctions constraining Libya’s finances while the country is divided. They also lack confidence in the fund’s competence.
Why does it matter?
The Security Council imposed an asset freeze on the fund during Libya’s 2011 civil war, with the aim of preventing the Qadhafi regime from plundering the fund, estimated then at over $60 billion. Over a decade after the regime’s ouster, the sanctions still act as a brake on the fund.
What should be done?
Council members should make further reforms to the sanctions regime to enable the fund to grow, while maintaining safeguards. Since resolution of Libya’s political crisis is not imminent, they should also define a realistic plan for long-term sanctions relief. The fund should do more to enhance its credibility and transparency.
Libya’s sovereign wealth fund, the Libyan Investment Authority (LIA), has been under UN sanctions since the country’s 2011 civil war. Established in 2006 to invest Libya’s surplus oil revenues abroad, the fund consists of a vast network of subsidiaries worth around $70 billion.
At least half of that amount remains under an asset freeze that has severely restricted the fund’s growth. In 2024, Libyan authorities submitted a first request to the Security Council to enact reforms allowing them to reinvest some of the frozen assets. The Council has long been reluctant to relax its sanctions, given Libya’s tumult and its lack of confidence in the LIA, but in early 2025 it acceded to some of the requests.
These reforms are a good start, but the Council should not wait for resolution of Libya’s political crisis to make additional changes to its sanctions regime. Instead, the Council should develop realistic conditions for broader sanctions relief over the long term, while the LIA should take steps to bolster its credibility.
The Security Council originally sanctioned Libya’s sovereign wealth fund to prevent the regime of Muammar al-Qadhafi from plundering Libya’s coffers during the civil war that erupted in 2011 when rebels rose up to topple the regime. Although the Qadhafi regime was overthrown months later, the freeze remains in place almost fifteen years on.
After the regime fell, the Council delisted other Libyan institutions such as the Central Bank of Libya and the National Oil Corporation, which had also been sanctioned during the 2011 war, but left the sanctions on the LIA in place. The rationale for maintaining these restrictions was to give post-Qadhafi fund managers time to map out all the fund’s assets.
Yet Libya’s transition quickly descended into chaos, with rival governments intermittently at war from 2014 until today. Council members were accordingly wary of lifting the sanctions.
Over the years, Security Council members have cited various justifications for keeping the sanctions in place. At first, they pointed to the emergence of competing governments, each with its own group of loyalists claiming to be the legitimate managers of the country’s sovereign wealth fund.
While the dispute over the LIA leadership was eventually resolved, allegations of corruption plagued Libya’s other institutions and fighting broke out periodically. Council members worried that if they unfroze the LIA funds, armed groups and other powerbrokers would embezzle the money.
Council members also cited a lack of confidence in the LIA’s ability to manage the fund competently, transparently and independently. In recent years, the fact that neither claimant to government power had an electoral mandate became another reason to maintain the freeze. The Council, like many Libyans, sees the sanctions as a means of protecting the population’s sovereign wealth nest egg from these various ills.
Libyan political elites benefit from the country’s enormous oil wealth, but the Libyan people see little of it.
Today, Libya has again lurched into political and economic turmoil. Two rival governments are still vying for power, and there are no elections in sight. Libyan political elites benefit from the country’s enormous oil wealth, but the Libyan people see little of it.
Foreign officials have sounded alarms about mismanagement in the National Oil Corporation and the Central Bank of Libya, which are foundational to Libya’s economy. These officials also point to institutionalised embezzlement throughout the state. Meanwhile, Libya’s leaders have channelled hardly any oil money into development projects, and the Libyan people face poverty, high unemployment and economic stagnation.
Yet the sanctions may be making things worse. Libyan officials, while refraining from calling for lifting them wholesale, say these measures have caused financial losses and curbed the sovereign wealth fund’s growth. For years, sanctions meant that billions of dollars of Libyan assets sat in cash, which lost value over time due to inflation.
Outside firms charged hefty fees to administer frozen accounts, on terms that had been negotiated before 2011, while doing little to manage the LIA’s holdings due to restrictions. Citing these and other reasons, the fund asked the Council to consider reforms to allow for reinvestment of some LIA assets while maintaining the freeze.
In January 2025, the Council made a novel decision to reform the LIA sanctions regime by allowing the investment authority to invest its cash reserves on certain conditions, including the requirement that the reinvested funds and the interest they accrue remain frozen.
The reforms remove important curbs on the fund, but sanctions still block it from growing to its full potential. Council members are nonetheless hesitant to offer broader sanctions relief, given Libya’s dysfunctional politics and the LIA’s flawed management. Yet, counterintuitively, Libya’s long-running crisis only underscores the importance of bolder reforms. Neither political unification nor an election is likely to happen soon, and without action now, the sanctions on the LIA could persist for many more years.
In the meantime, the fund’s growth will be slower than it could be, and the Council will have overseen a decades-long sanctions regime disconnected from its original purpose. To address these challenges, the following reforms should be pursued:
The Security Council should consider reforming additional elements of the LIA sanctions that curb its growth, such as by allowing low-risk reinvestments for non-cash assets, while keeping the assets and accrued interest frozen.
The Security Council and the LIA should consider creating a pilot project where LIA partners and a credible third party such as the UN or the World Bank co-manage a portion of the frozen assets.
The LIA should take vigorous steps to enhance transparency, accountability and independence, such as by complying more fully with the Santiago Principles on sovereign wealth fund best practices and producing comprehensive reports on its holdings.
The Security Council should set realistic goalposts for sanctions relief for the LIA, considering that resolution of Libya’s crisis and elections are far off.
The opportunity to improve the long-term prospects of all Libyans should not be missed. Modest reforms pose minimal risks and could better protect Libyan wealth. They would enhance the credibility of Council sanctions on Libya, which if left unaltered would face fair criticism for being discriminatory and anachronistic. The Security Council and the LIA should take corrective action.
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