U.S. Foreign Policy Sanctions: Libya

The most recent U.S. sanctions program on Libya during the 2011 revolution followed the pattern of targeted sanctions first used against Sudan. Asset freezes and other financial sanctions were fully deployed further developing a new template for unilateral foreign policy sanctions. The imposition of U.S. sanctions on Libya closely and the lifting of sanctions following the overthrow of Moammar Gadhafi took place in conjunction with the UN Security Council. U.S. asset freezes on the Gadhafi family and members of the regime remain in place.

Libya was first sanctioned by the United States in 1978 when the United States banned military sales to Libya in retaliation for their support of terrorist groups. In 1979, Libya was placed on the U.S. terrorist list, and in 1981, the United States imposed an embargo on aviation exports to Libya. In 1982, President Reagan used a section of the Trade Expansion Act of 1962 to embargo crude oil imports from Libya and exports to Libya of sophisticated oil and gas equipment. In 1985, the United States prohibited the import of refined petroleum from Libya. In 1986, in response to the bombing of a Berlin discotheque, President Reagan used the International Emergency Economic Powers Act (IEEPA) to implement comprehensive trade sanctions and financial controls against Libya, prohibiting exports of most goods and services and loans and credits to the Libyan government, as well as freezing Libyan government assets in U.S. banks. In 1986, the State Department also ordered U.S. oil companies to sell their holdings in Libya.

Following the bombing of Pan Am flight 103 in 1988, sanctions activity moved to the UN, but in 1995 at the urging of families of the Lockerbie victims, Senator Kennedy amended sanctions legislation directed at Iran, which became the Iran-Libya Sanctions Act of 1996 (ILSA). ILSA contained a menu of sanctions from which the President was to choose affecting U.S. and non-U.S. companies with $40 million or more (lowered to $20 million in 2001) invested in the oil sectors of the two countries. This formulation has become a standard template for subsequent Iran sanctions, including state and local measures. ILSA's extraterritorial reach met with strong opposition of European governments of countries with oil-related investments in Libya and Iran and resulted in the passage of blocking statutes by several OECD countries.

In 2003, Libya agreed to disclose and dismantle its weapons of mass destruction programs. In 2004, President Bush declared an end to the national emergency with respect to Libya, signed an Executive Order allowing the resumption of normal commerce, terminated the application of ILSA to Libya and restored diplomatic contact leading to the restoration of full diplomatic relations in 2008. This allowed U.S. oil companies with pre-sanctions holdings to return and to sign new contracts. Libya nonetheless remained on the U.S. list of state sponsors of terrorism and subject to export licensing for dual-use items until 2006.

In response to the 2011 rebellion against the Gadhafi regime, the United States utilized targeted financial sanctions. In February 2011, President Obama invoked IEEPA and signed an Executive Order freezing the assets of a specific list of "designated persons" and entities, as well as a general blocking order freezing the assets of Libyan government agencies in the United States, including those of Libya's central bank, foreign bank and sovereign wealth fund. The sanctions targeted Gadhafi, his family and inner circle, in addition to two charitable foundations controlled by the Gadhafi family. In effect, because of the extensive control of the Libyan economy by the Gadhafi family, virtually all commerce was impacted. The sanctions rules applied to non-U.S. branches, subsidiaries, joint-venture partners, affiliates and vendors. In September 2011, the United States unblocked the assets of the Libyan National Oil Company and the government of Libya. In December 2011, the United States, along with the UN, lifted sanctions on the Libyan central bank and the Libyan Foreign Bank. The United States retained the asset freeze on the Gadhafi family, former regime officials and the country's sovereign wealth fund, the Libyan Investment Authority.