The U.S. and others are beginning to release the money to Libya's new government, but slowly for fear of creating new problems
Anti-Gaddafi fighters walk in Burkan air defense military base
If the Transitional National Council wants Libya's money back, it's going to have to make a shopping list.
So far, the council seems to be making sensible choices, claiming it wants to spend the billions in frozen assets for humanitarian needs, providing basic services, and easing the country into a democratic transition. But "what's the likelihood that, at the end of the day they end up in control" of the release of the funds to Libya's interim government, asked Kori Schake, research fellow at Stanford University's Hoover Institution.
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The international community is starting to transfer Libyan government money back into Libyan hands, and as it does, diplomats are walking a fine line, balancing an obligation to return billions of dollars and a desire to avoid a humanitarian crisis with concern that Libya's interim government might not be able to handle the cash influx.
Usually, transition governments find themselves "squabbling over chicken bones," said Thomas Carothers, a democratization expert at the Carnegie Endowment for International Peace. Libya does not have that problem--and that's a "tremendous challenge."
Libyans have two sources of wealth to tap: oil reserves, and the Qaddafi regime's overseas holdings, estimated at $160 billion. Legal, political, and practical barriers ensure that the assets will be unfrozen slowly, and much of that money may never reach the new Libyan leadership. But as diplomats met in Paris on Thursday to discuss Libya's future, billions of dollars were already on the move.