UAE repeals asset freeze on Libya to aid recovery

Libya's economy expected to see a boost from Gulf investors after the UAE Central Bank lifted asset freezes on key libyan assets this weekend.

The UAE watchdog its lifted ban in compliance with UN resolutions but censured Iran financing. Hannibal Hanschke / EPA
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UAE and Gulf businesses are poised to flood into Libya after the Emirates' Central Bank lifted a freeze on the African country's assets.

Complying with UN resolutions, Abdulrahim Mohamed Al Awadi, the UAE Central Bank's executive director and head of anti-money laundering, instructed financial institutions to "cancel the freeze on accounts in the names of central bank of Libya, Libyan Arab Foreign Bank and related bank accounts, and Libyan Oil Supply DMCC."

In a separate move, the UAE Central Bank also instructed lenders to halt trade finance with Iran amid heightened sanctions to pressure the country to end its nuclear programme, reported Reuters.

Fund managers in the UAE hailed the Libya move as the start of a new page for the country and for businesses in the region, which have been preparing for months for a clear path into the post-revolution country and the major opportunity it represents. The late dictator Muammar Qaddafi's rule, "a state of constant revolution", left the country lacking government infrastructure including decent health care and schools for decades.

"Libya has the potential to be a major recipient from the Gulf region, given how rich it is and how hungry the country is for capital and investment after being a closed economy for more than 30 years," said Rami Sidani, the head of Middle East and North Africa investments at Schroder Investment Management in Dubai.

"The market will open up and will be an attractive growth story."

The UN froze US$150 billion (Dh550.95bn) worth of Libyan assets held in overseas bank accounts almost a year ago amid sanctions imposed to weaken Qaddafi's regime. He was ousted and killed in August after nearly 42 years of rule. Libya's economy is expected to recover this year amid a rise in oil production, the IMF said last month. As the holder of Africa's biggest oil reserves, it is producing more than 1 million barrels a day.

New oil concessions are expected to be given after the country's elections scheduled for June, Ali Tarhouni, the former Libyan oil minister, said this month. The country is currently being led by the National Transitional Council. Italy's Eni, America's ExxonMobil and the UK's BP operate in the country.

The move by the UAE watchdog to lift asset freezes is expected to bolster trade and foreign direct investment in Libya, said Fathi ben Grira, the chief executive of MenaCorp, an investment company based in Abu Dhabi.

"The federal authorities have sent a strong signal that now business can start," Mr ben Grira said. "The Gulf has already started to look at Libya very seriously a few months ago and we have received several inquiries to do feasibility studies and research on an array of sectors such as construction, oil services and even food and beverage."

Libya's GDP contracted as much as 60 per cent last year, after the country descended into civil war, and oil output crashed to 22,000 barrels a day in July from 1.6 million barrels in the same month the year before, the IMF said.

The UAE Central Bank's Iran bancould hit 8,000 Iranian businesses are registered in Dubai. Re-export trade between the two countries reached Dh19.5bn in the first half of last year, according to the latest data published by the Federal Customs Authority.

Gulf banks had been expected to fill a funding gap left by European lenders banned from financing trade by EU sanctions for the import of grains.

"Banks in Dubai were asked by the UAE Central Bank to stop issuing letters of credit to finance trade with Iran. Before the sanctions, the Central Bank regularly checked on trading with Iran and wanted to know of all dealings between the two countries," an unnamed banker in Dubai told Reuters. "Banks can't do this any more."

The move came after a similar censure was imposed recently by Qatar's Central Bank.

* with Reuters

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