A number of Libyan government officials object to sanctions as a matter of principle. They take issue with the punitive nature of the sanctions, which they say constitute “a significant departure” from their original function of protecting Libya’s assets from Qadhafi’s abuses.
They do not think Libya should be penalised through the same measures used against Qadhafi, and they question the Security Council’s authority to oversee Libyan finances. “Who are they to establish what benchmarks are required for management [of LIA’s assets]?”, one asked.
The internationally recognised government in Tripoli, however, has refrained from pressing for an outright end to sanctions on the LIA. It has long called for the Security Council to reform the restrictions on the LIA, citing the same issues that the fund has highlighted, but gone no further.
Officials point to two main reasons for this stance:
The first is pragmatic: the Security Council is unlikely to wholly lift the sanctions as long as Libya is a divided nation without an elected government, so lobbying for this goal would be a waste of effort.
The second is that the government in Tripoli also values the protection that sanctions give to Libya’s assets in a period of prolonged turmoil. According to public officials, sanctions shield LIA assets from potential misappropriation.
In the words of the permanent representative of Libya to the UN, “I admit that the funds could have been wasted if they were totally unfrozen because of the instability”.
[Lyban Officials] are worried about foreign countries and companies extracting compensation from frozen LIA funds for claims brought against the Libyan state. Even so, Libyan officials highlight the need for reform.
While acknowledging the benefits of sanctions, they are worried about foreign countries and companies extracting compensation from frozen LIA funds for claims brought against the Libyan state.
Various cases already exist. In one, an NGO associated with a Belgian prince that completed a project in Libya during the Qadhafi era sought €50 million in compensation from frozen LIA funds held in Belgium.
In another, a Kuwaiti construction company secured a court-ordered freeze on over $360 million of the LIA’s assets in France (this decision was later overturned on appeal).
Libyan officials are concerned that such cases will become more common or create precedents for awarding frozen LIA funds to foreign companies.
Besides LIA staff themselves, other Libyan officials have occasionally made ad hoc pleas for sanctions relief from the Security Council.
In 2023, the Tripoli government inquired with foreign embassies whether they would agree to unfreeze some of the LIA’s funds for development projects such as solar energy farms and reconstruction in Derna, which had been hit by a severe flood. The LIA chairman, however, did not endorse these requests. Embassies were hesitant to take the conversation further.
They might have been willing to unfreeze funds to tackle the flood’s effects, ideally with the World Bank overseeing disbursements. But Western diplomats in Tripoli wanted the two Libyan governments to agree on how the funds would be used, and no such deal came about.
Authorities in eastern Libya, meanwhile, toe the official line that LIA assets should not be left in the hands of the Tripoli-based managers, but rather should be transferred to judicial receivership.
They occasionally express support for a parallel LIA leadership aligned with the eastern authorities and make allegations that the Tripoli government is involved in corruption at the fund.
They are rarely vocal on the LIA issue, however. They ignored the proposal to use unfrozen funds for Derna’s reconstruction.76
Dozens of Libyans from civil society groups, the business class and political circles told Crisis Group that they did not support the wholesale lifting of sanctions on the LIA.
They saw the restrictions as a “safety net” sheltering the country from the chaos of political instability and conflict, as well as from endemic corruption. “Lifting the sanctions while the country is divided would be catastrophic”, a businessman said.
Few have confidence in the capacity of the LIA’s management to manage the assets fairly and competently. As another businessman said, “What is the insurance that this money will be invested competently? The risks of mismanagement are very high”.
Many Libyans believe that the sanctions constrain elites from stealing or mismanaging LIA’s assets.
IV. Security Council Positions on
Sanctions Relief
Until the Security Council decided to allow the LIA to invest some of its frozen cash reserves following presentation of the fund’s investment plan, its members were wary of agreeing to any reform because of Libya’s political and economic turmoil as well as their doubts about the LIA’s competence.
Members say lifting the sanctions fully would require a legitimate, elected government and proof by the LIA that it can responsibly manage Libyan wealth.
A. Council Members Agree on Reforms
Security Council members had started to coalesce around the idea that the asset freeze required updating in 2024. A diplomat expressed the emerging consensus, noting that “the sanctions regime is out of sync with the current reality”. Several agreed with the LIA that the sanctions had contributed to material losses.
They arrived at this view after hearing similar ones from others. In part, they were influenced by the LIA’s own reinvigorated advocacy for sanctions reform when it submitted its investment plan.
In its review of the LIA’s proposals, the Panel of Experts also recommended that the Security Council approve reforms to allow the LIA to reinvest frozen cash reserves, with safeguards in place.
In December 2024, China called for developing “a reasonable plan” for the frozen assets and expressed openness to adjusting the asset freeze measures.86 Other Western Council members expressed similar views in private.
Council members still had concerns about the LIA’s competence, which were reinforced rather than mitigated by the LIA’s investment plan. Council members described it as “jumbled” and said it “does nothing to inspire confidence”, a view bolstered by the Panel of Expert’s blistering assessment of the plan’s numerous inaccuracies and inconsistencies.
The Panel report offers an extensive analysis of the transparency, accuracy and comprehensiveness of the plan, which it found to be lacking; catalogues the plan’s errors; and details risks of misuse and misappropriation should all the LIA’s requests be fulfilled.
Informed by the Panel’s conclusions, member states nevertheless came to the conclusion that the sanctions could be reformed – so long as robust safeguards were maintained.
On 16 January 2025, the Security Council decided in a resolution, approved by fourteen members with one abstaining, to reform the LIA sanctions. (Russia abstained for reasons having to do with the arms embargo that were unrelated to the LIA.)
The Security Council welcomed the Panel of Experts’ recommendations on actions to reinvest the LIA’s frozen assets. It decided to allow the fund’s frozen cash reserves to be invested, in line with the LIA’s requests, but with modifications and conditions.
The Council, however, did not grant other requests from the LIA’s investment plan, such as permission to transfer $2.4 billion in cash from Euroclear to the Bank ABC or to countenance active management of the equities and securities in the LIA’s portfolio.93
B. Credibility of the Libyan Investment
Authority
While Council members agreed on reforms, they maintain that a full-scale lifting of LIA sanctions would be irresponsible. A central reason is concern about the LIA’s ability to manage Libyan state funds.
Diplomats see any move to give the LIA authority or management responsibility over the frozen assets as “problematic” because it could open the door to corruption.95 A Western official said his government would not consider unfreezing assets “unless it could be guaranteed that the funds will not be siphoned off”.
They are also concerned that the LIA would make irresponsible investments if given a free hand. Foreign investors, such as multinational corporations and investment firms eager to tap into the LIA’s capital – in addition to states lobbying on their behalf – do not, as a Western official said, “have a history of responsible use of the money”.
Past lawsuits have highlighted the LIA’s poor investment choices, especially in its dealings with more sophisticated financial businesses. Without sanctions, Council members said, unscrupulous actors might jump at the opportunity to get their hands on tens of billions of dollars. As one expert put it, “the vultures will descend”.
The influence of Libya’s political elite and armed groups over the LIA’s operations also worries Security Council members. Armed groups connected to different leaders repeatedly used force in and around the LIA’s headquarters from 2016 until at least 2023.
The groups tried to influence hiring decisions and instal into or force from office various people vying for control. Incidents of intimidation by armed groups peaked in 2018, when a militia abducted a fund employee for several hours and forced senior fund managers to move out of Tripoli for security reasons.
Council members fear that unlocking the LIA’s assets would allow these same armed groups to influence the LIA’s decision-making and compromise the fund’s independence.
Another major concern for Council members is the LIA’s technical and managerial capacity. As an official told Crisis Group, “part of it is a genuine lack of technical ability, but also part of it is … the inability of management to lead the organisation”.
The official said the LIA has so far been unwilling to adopt international standards such as the Santiago Principles for good governance of sovereign wealth funds (although the LIA has taken steps toward honouring these principles), a view that the Panel of Experts shares.
Security Council members say the LIA lacks transparency, asking why it has been unable to produce a consolidated financial statement in accordance with international standards, despite repeated requests from the Council for such a document.
For its part, the LIA confirmed to Crisis Group in 2023 that it was working to complete its financial statements with the help of Deloitte, an advisory firm. To date, however, these statements are unfinished. Council members also say the LIA’s formal requests, such as for sanction licences, often do not meet their standards.
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