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Resilient Gadhafi circumventing UN sanctions to fund regime

Libyan leader Moammar Gadhafi and his international business partners are circumventing UN sanctions in order to channel cash and oil into Libya, funding and fuelling his counter-rebellion forces.

Ships in the Mediterranean sea next to the Zawiya Oil Refinery in Zawiya, west of Tripoli

Ship-to-ship transfers lead to oil coming into Zawiya

If Gadhafi's international opponents are learning any lessons from the campaign to bring his regime under control - or indeed depose and replace it - the most glaring so far must be that the Libyan leader is far more resilient and enterprising than many thought.

NATO airstrikes and the UN-backed no-fly zone were supposed to decimate Gadhafi's forces on the ground and keep his jets out of the air. While the Libyan air force is no longer a threat to rebel forces and civilians across the embattled North African country, over a month of bombing has seemingly failed to stop Gadhafi's army.

Away from the battleground, the diplomatic efforts being used to pressure the Libyan regime have also had less of an impact than Gadhafi's opponents hoped they would have.

Despite German Foreign Minister Guido Westerwelle's recent assertion that sanctions against the regime were working and therefore should be maintained, evidence suggests that while Libya is certainly feeling the effects, international restrictions on the regime are some way off from bringing the country's dictator to his knees as quickly as NATO leaders were hoping.

"To that end they have been ineffective," Dr. Kristian Ulrichsen, a Middle East and North Africa expert at the London School of Economics, told Deutsche Welle.

"So long as the civilian population of Misurata and other cities are being targeted by the regime the sanctions are not achieving their primary objective, which was to offer humanitarian protection to the civilian population."

It appears that Gadhafi's experience of living with sanctions for most of his 42 years in power has taught the Libyan leader how to circumvent attempts by the international community to crackdown on his finances and the businesses which fund his regime.

Oil and gas trading fuels regime

Moammar Gadhafi

Gadhafi is sitting on enough capital to keep his regime going

One such tactic was revealed in a recent Reuters report which claimed that the Gadhafi regime is using intermediaries in Tunisia and a company registered in Hong Kong to import gasoline to western Libya via ship-to-ship transfers.

These transfers, which include the dubious renaming of source and destination details on official documents, are allegedly designed to get around UN Security Council sanctions banning any transactions with Libya's state-owned National Oil Corp (NOC).

While it is currently not illegal for Libya to export or import oil or gasoline, it is illegal to trade with the NOC. And while there is no hard evidence that NOC is involved, UN investigators believe that it's almost impossible for NOC not to be involved to some extent if gasoline is being imported into Libya.

A subsequent Reuters report also revealed that Libya's General National Maritime Transport Company (GNMTC) imported gasoline from Italian refiner Saras in early April, taking advantage of a loophole in UN sanctions that permits purchases by companies not on a list of banned companies.

GNMTC, which is thought to be controlled by Colonel Gadhafi's son Hannibal, is not on any UN blacklist, although Hannibal is. Dealing with GNMTC is legal only if there is no evidence that Hannibal directly benefits from any transaction.

Sanction-busting allies

Other countries involved in dealing with Gadhafi are breaking the sanctions, and doing so willingly and for their own purposes and gains.

While the US and EU have blocked the Libyan leader's access to more than $60 billion (41 billion euros) in overseas bank accounts and investments, countries such as Turkey and Kenya have refused to freeze Gadhafi's assets, allowing him to move billions of dollars back to Tripoli since the rebellion began in mid-February.

Other countries such as India, China, and Russia, who have also resisted efforts to expand sanctions, have only promised to halt payments to their own industries that work in Libya - not inflict restrictions on Libyan businesses.

Turkey flags in front of buildings in Libya

Turkey wants to keep good business relations with Libya

"The fact that Gadhafi is able to rely on finances flowing in from businesses and countries which are ignoring the sanctions demonstrates one of its major flaws," Ulrichsen said. "Until it is rectified, and the sanctions made absolute, Gadhafi will continue to receive funding and support that will prolong the survival of his regime."

It is unknown just how much money the Libyan leader has stashed away but the International Monetary Fund (IMF) believes that before Gadhafi rerouted his various cash flows back to Tripoli from all over the world, he was sitting on an estimated fortune of $104.5 billion in cash and gold. That amount is thought to have significantly increased during the early days of the rebellion.

The hesitation of the international community to act more rapidly may have given Gadhafi the time he needed to empty his bank accounts before the bombs started to fall.

Kimberly Ann Elliott, an expert on economic sanctions who is affiliated with the Peterson Institute for International Economics, said sanctions usually fail because dictators normally have plenty of time to move their assets to avoid taking a financial hit.

"Typically the move to these kinds of sanctions is announced in advance of imposition so there's always time for these guys to move or hide their assets," she told Deutsche Welle.

Gadhafi digs in

Moammar Gadhafi

Gadhafi is sitting on enough capital to keep his regime going

"The Gadhafi regime is attempting to outlast the bombing campaign by betting that international support for the air strikes will fragment if the present stalemate continues," said Ulrichsen. "This poses the primary danger to the coalition as serious questions already are being asked about the utility of the present approach, and consensus may soon begin to break down if there is no appearance of a successful resolution."

There are signs in Libya that the sanctions are already working and proponents believe that in time, the international restrictions will have the desired effect, especially if they are strengthened and expanded.

However, regional analysts say sanctions are often effective in achieving modest goals but they rarely force dictators to step down or radically reform, leaving their opponents with little choice but to explore or expand other options.

"Short of greatly accelerating the military strikes and the level of material support to the anti-Gadhafi forces, it is difficult to see how increasing sanctions could make much of a difference in the current climate of stalemate," Ulrichsen said.

According to Kimberly Ann Elliot the West will have to show tenacity and perseverance to achieve its goals.

"Democratization and regime change are pretty difficult goals, especially with autocracies," Elliott said. "Quite often you are giving up absolute or a great amount of power for no power and no chance of returning to power. And potentially in some cases, where the government is corrupt, you're giving up wealth and risking your life," she said.

Author: Nick Amies

Editor: Rob Mudge

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