By this point, the assets of the Libyan Investment Authority are frozen in just about every major financial jurisdiction. Except, of course, Libya.
So, a quick question. Is a sovereign wealth fund financing a war?
Because here’s a revelation from the NYT:
The Libyan leader Col. Muammar el-Qaddafi has “tens of billions” in cash secretly hidden away in Tripoli, allowing him to prolong his fight against rebel forces despite an international freeze on many of the Libyan government’s assets, according to American and other intelligence officials.
Colonel Qaddafi has control over the huge cash deposits, which have been stored at the Libyan Central Bank and other banks around the Libyan capital in recent years, the officials said…
The money — in Libyan dinars, United States dollars and possibly other foreign currencies — allows Colonel Qaddafi to pay his troops, African mercenaries and political supporters in the face of a determined uprising, said the intelligence officials, speaking on the condition of anonymity.
What’s not mentioned here — many such Libyan bank deposits were most probably filled by the Libyan Investment Authority.
For a sovereign wealth fund, the LIA is (was) unusually liquid: around half of its $70bn assets seem to have been held in bank deposits or cash, despite some high-profile holdings in western companies and property — and less high-profile ones in MENA banks. Judging by the UK’s asset freeze, quite a few of the deposits were held with London banks, but the NYT has made clear the majority of them were held at home.
Which makes sense: LIA money came from Libya’s oil revenues and oil trading (the LIA was a party in several western company contracts), and this was all apparently conducted in cash. As cash spigots go, this one is now blowing up, hence the dash for deposits.
So, we think there is a good chance that LIA money has become part of the Gaddafi war effort. It’s amazing we can even ask the question about a SWF, although much news about the LIA has already been gobsmacking enough lately.
Everyone’s been very focused on the assets of the Libyan Central Bank lately, following the elusive European peregrinations of the bank’s governor, Farhat Bengdara. Who has now been fired. Less well-known is his other role — as a member of the LIA’s board of trustees.
So, the fund appears to be even more formally leaderless than ever. As it happens, foreign governments are finally moving to extend diplomatic recognition to Libya’s rebel national council, which we’d submit may affect the question of who can use the LIA’s international assets down the line. Very unsure though.
But in that case, with domestic LIA assets in danger of being burned through by the desert madman, wouldn’t the UN asset freeze be one of the best things ever to happen to Libya’s fund?
Related links:
Tripoli pours old notes back in circulation – FT
Navigating the Gaddafi asset freeze – FT Alphaville
Freezing Gaddafi’s billions - FT Alphaville