U.S. business community asks for leeway on Libya sanctions

A group of U.S. companies that do business in Libya is asking the Treasury Department to take measures to protect them despite wide-ranging sanctions announced by President Barack Obama last week.

National Foreign Trade Council President William Reinsch wrote a letter on March 1 to Adam Szubin, the head of Treasury’s Office of Foreign Assets Control (OFAC), asking for several clarifications on how the Libya sanctions will be implemented and whether U.S. companies will be able to protect their assets there and keep paying their local employees. In the letter, obtained by The Cable, Reinsch also said he represents the U.S.-Libya Business Association, which is composed of U.S. businesses dealing with the Libyan government.

"While U.S. companies have evacuated most or all of their expatriate employees from Libya, numerous Libyan nationals and others remain in Libya and continue to maintain the operations and facilities of the companies to the extent permissible," Reinsch wrote, noting that American companies "seek authorization to provide for the continued safety, welfare, and support of their employees and contractors by paying their salaries and for other routine taxes, fees, benefits, goods and services associated with their employment."

The companies want to be able to send money to their Libyan bank accounts, which would then be used to pay salaries, income taxes, social security taxes, telecommunications bills, residential lease payments, and many other day-to-day expenses that require giving money to the Libyan government, although not directly to the Qaddafi family.

"We request that OFAC consider issuing a general license authorizing transactions covering support for employees in Libya," he wrote.

The concerns outlined in the letter highlight the complexity of sanctioning the Qaddafi regime without hurting the Libyan people, as the administration has pledged to do.

"Will OFAC regulations distinguish between entities controlled by opposition forces and entities controlled by Qadhafi and other Libyans whose assets have been frozen?" Reinsch asked.

A Treasury Department spokesperson told The Cable that OFAC officials met Wednesday with members of the National Foreign Trade Council and U.S.-Libya Business Association.

"OFAC is studying the issues raised in their letter, and plans to act quickly to take appropriate action," the spokesperson said. "While OFAC considers these ideas for general licenses, these U.S. companies have the option of applying for OFAC authorization in the form of specific licenses."

Full text of the letter after the jump:

RE: Executive Order: Blocking Property and Prohibiting Certain Transactions Related to Libya

Dear Adam:

I write on behalf of the National Foreign Trade Council and the U.S. Libya Business Association; the former with broad private sector membership, the latter composed of companies with business in Libya. We understand that OFAC desires to hear from U.S. companies affected by the February 25 Executive Order concerning Libya. We offer the following suggestion for OFAC’s consideration concerning a possible general license to address certain humanitarian issues relevant to employees of U.S. company affiliates operating in Libya, and also a number of general questions. In addition, we are likely to receive additional inquiries from our members which we will pass on to you.

*Employee concerns*

While U.S. companies have evacuated most or all of their expatriate employees from Libya, numerous Libyan nationals and others remain in Libya and continue to maintain the operations and facilities of the companies to the extent permissible. Particularly given the increasingly difficult living conditions in Libya, the companies seek authorization to provide for the continued safety, welfare, and support of their employees and contractors by paying their salaries and for other routine taxes, fees, benefits, goods and services associated with their employment. These nominal payments would need to be paid out of local bank accounts in most circumstances. Payments specifically would include, for example: salaries, related payroll tax (income tax) and social security tax; business and resident visa fees; stamp taxes; exit/re-entry visa fees; medical checks for annual resident visas; fees or payments to service providers to maintain telephone, internet, and other telecommunications services, and to provide watchmen and drivers; propane bottles for houses, residential lease payments to governmental authorities, and diesel fuel for standby generators at offices/houses; fuel and payments for vehicles; and utilities. Companies would need to replenish the local bank accounts in Libyan banks from abroad to cover these expenses and account maintenance fees, and to pay associated bank account fees.

None of the recipients (or beneficiaries in the case of taxes or fees) of these payments would be persons covered by Section 1 of the Order.

We expect that individual companies will submit specific license requests to cover such transactions, but given the apparently common issues of concern, and the statement of support for the Libyan people that a general license would send, we request that OFAC consider issuing a general license authorizing transactions covering support for employees in Libya as outlined above, so long as such persons are not individually blocked.

*General Questions*

We also would welcome any guidance that OFAC can provide about the following

questions:

• Given the importance of Libya’s oil production, will OFAC issue a general license for oil-related transactions in train before the effective date of U.S. sanctions? In this regard, when President Reagan issued Executive Order 12543 sanctioning Libya, it included a three week grace period to conclude transactions in train. It was subsequently amended to permit maintenance of effort to avoid "abandonment of contracts of concessions [which] would result in a substantial economic windfall to Libya."

* *

• Our members have heard reports that some in the European Union have proposed creation of a trust account, sponsored by an international organization, into which blocked payments would be made. Can you shed any light on the prospects for such an account?

• May companies receive payments for goods and services rendered prior to the effective date of the Executive Order from Libyan banks and not deposit those payment into blocked accounts?

* *

• Will OFAC regulations distinguish between entities controlled by opposition forces and entities controlled by Qadhafi and other Libyans whose assets have been frozen?

* *

• Will OFAC provide any guidance on how donations of humanitarian goods and services be handled to persons that are not blocked under the Order?

* *

We appreciate your good offices, and we would like to set up a meeting with you and your colleagues to discuss these issues further.

Thank you for your consideration.

Warm regards,

William A. Reinsch