As financial pressure builds on the regime of Libya's leader, Muammar Qaddafi, a global divide is emerging over whether to extend asset freezes against him and his associates to government institutions such as the Libyan Investment Authority (LIA).
While clear-cut asset freezes have been put into place by the UN, EU, US, UK, Canada, Switzerland and Austria in recent days against Col Qaddafi, his family and allies, it is less clear whether Libya's sovereign wealth will come under the same sort of scrutiny. The US and Austria have said their freezes apply both to individuals and the Libyan government, but other countries, including the UK, have yet to go that far.
UK treasury officials were considering the level of influence that Col Qaddafi and his family members had over the LIA's investments before freezing them, the Financial Times reported on Monday. If they had a direct say in how the fund deployed its money, LIA's UK assets, including property in London, could be put on ice.
"The LIA and its portfolio companies are all owned by the state rather than the Qaddafis themselves, so one would assume those assets aren't going to be frozen," said Victoria Barbary, an analyst at the Monitor Group in London.
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With pressure mounting on the Libyan leader to relinquish the post he has held for more than four decades, however, analysts say more countries could enlarge asset freezes to include Libya's state holdings if he does not stand down soon.
US and EU officials have said in recent days they are considering imposing a no-fly zone over Libya and restricting oil exports to contain the regime. Libya is Africa's largest oil producer, pumping about 1.4 million barrels a day.
The LIA, Libya's largest store of oil savings, controls about US$64 billion (Dh235.06bn) of assets. It owns 3 per cent of Pearson, the publisher of the Financial Times, and 7.5 per cent of Juventus Football Club, according to regulatory disclosures in November. It also has 2.6 per cent of UniCredit, one of Italy's largest banks, and 2 per cent of Finmeccanica, an Italian conglomerate.
Any freeze on those assets could further restrain the regime from using financial muscle to quash the popular uprising.
Pearson said yesterday the LIA's 3.27 per cent holding was "effectively frozen", as its lawyers advised that the shares were subject to UN and UK sanctions. The company has told the LIA that it "will not register any transfer or pay any dividend in respect of the shares until further notice".
Other government institutions also boast big foreign holdings. The Libyan central bank owns an additional 4 per cent of UniCredit, plus almost 60 per cent of Bahrain's Arab Banking Corporation (ABC) and 14.45 per cent of Arab Insurance Group in Bahrain. ABC said on Monday it had not been affected by the global asset freezes.
Despite its size, the LIA has existed only since 2006 and has invested cautiously across the region, mostly in Africa and Italy, Libya's former colonial power. Aside from its stake in Juventus, a legacy asset acquired in 2002, and its Italian holdings, the LIA has focused on inexpensive hotels and infrastructure in Africa. Ms Barbary described the fund's assets as "not particularly exciting".
"They have invested quite heavily in Africa," she said.
"The political idea of the regime was they wanted to be seen as African, but mainly those were the markets open to them."
