By James Kirkup
Britain is studying plans to take billions of dollars of Libyan oil revenues away from Colonel Muammar Gaddafi’s regime and place them under the control of the United Nations.
William Hague, the Foreign Secretary, has told MPs that he is considering the case for international action to divert oil revenues into an escrow account that would be administered by the UN on behalf of the Libyan people.
The plan, similar to the oil-for-food system imposed on Saddam Hussein’s Iraq after the first Gulf War, would require the UN Security Council to invoke its powers under Chapter VII of the UN charter.
Mr Hague said he was looking at the plan as part of efforts to “reduce the financial flows to the Gaddafi regime” amid fears that state oil revenues are helping to fund violence against opposition groups and civilian protesters.
The personal finances of the dictator and his household are subject to international sanctions and asset-freezes, but the regime continues to have access to hundreds of millions of dollars’ of state oil revenues.
Although some oil production facilities such as Ras Lanuf are in opposition hands, Col Gaddafi still holds Libya’s largest oil terminal, Es Sider.
Before the challenge to the regime, Libya was exporting around 1.6 million barrels of oil a day, making it the 12th largest exporter in the world. Today, exports are sharply down, with some industry analysts suggesting the regime can produce only about 200,000 barrels a day.
But even at those levels, high oil prices mean that oil exports could give the regime revenues of more than £100 million a week. Oil revenues make up about 80 per cent of the Libyan state’s budget.
Responding to a parliamentary question from Rory Stewart, a Conservative MP, Mr Hague confirmed that Britain was looking at the options for a Libyan escrow account.
“We continue to look at other options on top of the asset freeze and the measures we have already taken,” he said.
“We continue to look at other ways to reduce the financial flows to the Gaddafi regime that might be used to support the violence and attempts to suppress the civilian population’s protests. We will certainly be looking at that kind of measure.”
On Tuesday European Union member states agreed to add the Libyan Investment Authority to a sanctions list, with the restrictions expected to come into force on Friday.
Diplomats said the EU’s 27 countries had agreed to impose sanctions on the $70 billion Libyan Investment Authority and four other organisations. The embargo already covers 26 Libyans including Col Gaddafi and his family.
The LIA was set up in 2006 with initial capital of about $40 billion. It has expanded with investments in a range of European assets, from football clubs to publishing firms. The restrictions would freeze LIA investments in all EU countries, and any other stakes that asset management firms oversee on behalf of the sovereign wealth fund. Among the fund’s highest-profile investments is a 7.5 per cent stake in Italian football club Juventus.
Mr Hague has also insisted that imposing an international no-fly zone over Libya remains a real possibility.
Russia, a permanent member of the council, has said it will oppose any military intervention in Libya, and Robert Gates, the US defence secretary, has been cautious.
However, President Barack Obama has said that a no-fly zone remains a possibility, and several Gulf states have called for the intervention.
Mr Hague insisted a no-fly zone was “a realistic possibility and it is a practical possibility”.