The Cable

State: Libyan rebels can have the embassy … but not the money

Almost a month after Secretary of State Hillary Clinton announced that the United States now sees the Libyan Transitional National Council (TNC) as the official government of Libya, the TNC is on the verge of reclaiming the Libyan embassy in Washington but it’s nowhere near getting its hands on billions of dollars in frozen assets ...

Almost a month after Secretary of State Hillary Clinton announced that the United States now sees the Libyan Transitional National Council (TNC) as the official government of Libya, the TNC is on the verge of reclaiming the Libyan embassy in Washington but it’s nowhere near getting its hands on billions of dollars in frozen assets formerly held by Muammar al-Qaddafi.

The Libyan rebels, who are represented in Washington by former Qaddafi envoy Ali Aujali, have been working out of donated office space in northwest Washington for months. The State Department signed an order last week handing control of the Libyan embassy, located in the Watergate complex, over to the rebels. However, they have yet to move in to their new digs

Sources close to the TNC mission in Washington said that Aujali is in Canada right now, helping the Canadian government expel their own Qaddafi officials and setting up the TNC embassy in Ottowa. He is planning to return to the United States after the State Department finalizes his diplomatic status, which will allow him to become the official head of mission of the new Libyan embassy.

When that happens, the TNC will gain access to the $13 million in the embassy’s bank accounts, which is probably enough to keep the lights on, pay salaries, and maybe even pay their lobbyists, Patton Boggs. But the bulk of Qaddafi’s funds remain frozen and will likely remain so for quite a while.

"We had difficult internal U.S. procedures with regard to the banking situation, et cetera," State Department spokeswoman Victoria Nuland said at Tuesday’s briefing. "And we’re also in an environment where U.N. Security Council Resolution 1970 put some restrictions on what we can do. So we’re continuing to work internally on various routes to get some of this money to the TNC."

There is probably only about $150 to $200 million of frozen Qaddafi money in U.S. banks, but even that money is affected by the U.N. sanctions. The rest of the $30 billion is held outside the U.S. banking system. What’s more, Nuland said that the United States wants to make sure that the money "if given, is used properly and for humanitarian purposes."

"So it’s going to be a little bit of time yet, but please know that we are working on it and we’re working on it hard," she said.

Meanwhile, the State Department continues to communicate privately to the TNC that the investigation into the killing of their military commander, Abdel Fatah Younis, last month is crucial to maintaining the TNC’s credibility and reputation.

Publicly, Nuland portrayed the killing and the reorganization of their cabinet as a watershed moment in the TNC’s evolution into a functioning, democratic organization ‘So, frankly, while the killing was an awful event, the fact [is] that the TNC has not just stood pat but has really taken this as an opportunity for internal reflection, for renewal," she said.

One of the State Department press corps members responded to her, "I’m not sure I’ve ever heard a glass-half-full explanation better than that one in a long time."

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