Libya: OFAC Lifts Most Sanctions On Libya, Maintains Targeted Sanctions On Qaddafi-Related Entities

On September 19, 2011, the Office of Foreign Assets Control, US Department of the Treasury (OFAC), issued two new general licenses to the Libyan Sanctions Regulations (LSR), 31 C.F.R. 570.  The new licenses are consistent with the United Nations Security Council resolution 2009 (2011), adopted on September 16, 2011, establishing a Libyan support mission and partly lifting the arms embargo on Libya and the asset freeze targeting entities connected to the previous Qaddafi regime.  The new licenses effectively end the broader Libya embargo imposed on the Government of Libya as a whole, and re-open opportunities for US persons and companies to conduct business with the Libyan petroleum sector.  OFAC's Libya sanctions program can now be characterized, for the most part, as a blocking regime targeting specifically designated entities affiliated with the former Qaddafi government.

New General License No. 7a replaces and supersedes General License No. 7 (discussed in our previous advisory), and authorizes all transactions involving the Libyan National Oil Corporation (NOC) or entities it owns or controls.  This new general license largely restates the non-exhaustive list of 16 specific entities with which transactions are now authorized initially laid out in General License No. 7, including entities such as the Arabian Gulf Oil Corporation and Harouge Oil Operations.  Notably, this new general license applies to the Libyan National Oil Company itself, and the Zueitina Oil Company, another NOC-affiliated company.  These two entities were previously excluded from the scope of General License No. 7.

This new general license also clarifies the treatment of previously blocked property in which the now-authorized entities have an interest.  General License No. 7a unblocks all property and interests in property of the NOC and entities owned or controlled by the NOC, provided that, within 10 business days of the release of blocked funds, including cash and securities, a report is filed with the Sanctions Compliance and Evaluation Division of OFAC.  The new general license does not authorize transactions involving the NOC or entities it owns or controls when such transactions involve Specially Designated Nationals (SDN) whose property and interests in property are otherwise blocked. 

New General License No. 8 supersedes General License No. 1b, and authorizes all transactions involving the Government of Libya, its agencies, instrumentalities, and controlled entities, and the Central Bank of Libya.  This new general license is subject to two conditions: (1) property that had previously been subject to a blocking requirement remains blocked, except as provided in new General License No. 7a above; and, (2) the transactions must not involve any persons listed in the annex of the license.  The annex includes, among others, Muammar Qaddafi, his family, charities, and several high-ranking officials in the Qaddafi regime.  Note that this new general license clearly authorizes new transactions with the Government of Libya and its controlled entities, but it does not "unblock" property that had previously been subject to a blocking requirement.  (As noted above, General License No. 7a does unblock property and property interests of NOC and its controlled entities, and General License No. 8 does not detract from that authorization.)

While these modifications to the Libya sanctions program expand the ability of US companies and persons to engage in transactions and dealings with certain Libyan entities deemed by OFAC to be unaffiliated with the former Qaddafi regime, US export controls regulating the export of hardware, technical data, and certain services to Libya remain in place and should be reviewed prior to engaging in such transactions.  Moreover, US persons need to remember that OFAC and the LSR do not permit business dealings with any entity that is 50% or more owned by an SDN.  See "Office of Foreign Assets Control, Guidance on Entities Owned by Persons Whose Property and Interests in Property Are Blocked," Feb. 14, 2008; 31 C.F.R. § 570.406.  Therefore, US persons should undertake reasonable steps to ensure entities with which it engages in business are not majority owned by any SDN, including those still identified under the Libyan sanctions program.

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