By Michael Peel in Tripoli and Jack Farchy and Roula Khalaf in London
Colonel Muammer Gaddafi’s embattled Libyan regime resorted to an escalating sell-off of the country’s gold reservesduring its final months, according to the central bank and local gold traders, as it scrambled to survive a rebel uprising, Nato bombing and international financial sanctions.
Qassim Azzuz, the new central bank governor, said the Gaddafi regime raised more than $1bn to pay salaries from trading 29 tonnes of gold with local traders in April, with the metal then possibly being taken out of the country for resale.
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The sell-off – which the victorious anti-Gaddafi opposition says consumed a fifth of the nation’s gold reserves – highlights the squeeze facing Col Gaddafi as the uprising grew and international sanctions took hold while raising the question of whether he used the money to directly fund his war effort.
In the narrow Old City alleyways across the street from the central bank, jewellery shop owners said on Thursday that while the regime’s sales of the precious metal had indeed begun in about April it continued until the successful rebel uprising in Tripoli last month.
Jewellers in Tripoli said the central bank began by offering small 22-carat coins but later marketed 12kg bars costing almost more than half a million dollars each, as its need for cash became more desperate.
Abdulghani Kara, owner of a jewellry shop whose back wall was dominated by a giant rebel flag, said: “A lot of the gold dealers who bought this from the bank are not working now. They know they did something wrong, and they are trying to lie low.”
Traders said the coins retailing at well under $1,000 and chocolate bar-sized 1kg slabs had sold well enough, but few people other than Gaddafi ultra-loyalists who had done well financially out of the regime had the resources to buy the 12kg offerings.
The sale became increasingly contentious, with warnings from pro-rebel television stations and from one of Tripoli’s main Islamic leaders not to buy the metal.
Unusually for a central bank, Libya held its gold reserves of 144 tonnes inside the country. Hugo Chávez, Venezuela’s president, recently ordered his country’s gold reserves to be repatriated because of concerns it could be seized.
The Libyan sell-off was equivalent to about two weeks of peace-time government spending, according to Central Intelligence Agency estimates, but would have been enough to pay the salaries of the army for much longer.
Farhat Bengdara, the former central bank governor who defected from the regime, said: “Gaddafi sold the gold to finance the troops and I’ve been told that every week the regime was taking money out of the central bank.”
He suggested that the gold sold in April could have been taken to Tunisia by relatives of Col Gaddafi or senior members of the army as a means of getting it out of the country, before being sold elsewhere. “They travel to Tunisia, and from Tunisia they would start looking where to sell,” he told the Financial Times.
Few western traders would have been prepared to buy the gold, however. “Right now people are very cautious on their trading partners and wouldn’t just go in and buy cheap gold if they didn’t know the source of it,” said an executive at one large gold refiner.
Tripoli jewellers and their associates – none of whom admitted to buying any of the gold themselves – were more ambivalent about the sales, with some saying they believed the regime had genuinely used the money for salaries.
With scores of billions of assets frozen and the oil industry on which Libya depends all but mothballed, the Gaddafi regime had few financial options apart from spending its domestic reserves of foreign exchange and easily tradeable assets such as gold.
Poised over a tub of gold bracelets, necklaces and lockets ready for melting down, Ali Ghadour, a precious metals craftsman, said the income had helped some Libyans at a time of crisis when official salaries weren’t being paid and bank withdrawals were severely limited.
“Buying the gold [provided] support for the government. But on the other hand, the money was used to bring food for the public,” he said.
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