Libya: Legislative Basis for U.S. Economic Sanctions
Released: 2006-01-23T00:00:00

Sanctions in Place Today

Effective September 21, 2004, when the President ended the national emergency between theUnited States and Libya, most economic sanctions that impeded trade and travel were lifted. Whatremains are restrictions mostly related to the United States having found that Libya is a state sponsorof acts of international terrorism, or that Libya does not cooperate fully with U.S. antiterrorismefforts:

the United States requires a validated license to export certain goods or technology to Libya;

the United States generally prohibits the export of defense articles and defenseservices to Libya;

the United States generally denies Libya non-humanitarian foreign assistance,non-emergency agricultural aid, Peace Corps programs, or Export-Import Banksupport;

the U.S. Executive Director in each international financial institution isinstructed to oppose loans or other funding to Libya; and

certain contracts awarded by the State Department for diplomatic securityconstruction may not be awarded to any person "doing business with Libya."

Background

Until recently, the United States has maintained a fairly comprehensive range of economicsanctions on Libya. Muammar al-Qadhafi rose to power, as part of a military overthrow of apro-Western king, in 1969. Early in his tenure, Qadhafi was drawn into the Soviet camp as animportant regional actor in the Cold War. In response to that alliance, the United States terminatedmilitary sales to Libya in 1973, began to suspend export licenses for dual-use material in 1978, andplaced Libya on the first list denoting state sponsors of international terrorism, issued in 1979.

Over the years, Libya's sanctionable adventures, at least from the perspective of U.S. foreignpolicymakers, have run second to none. In the early 1970s, Libya sent military troops and financedextremist Palestinian activities in Lebanon. Later in the decade, Libya sent armed forces into Chadand Uganda. Throughout the 1970s and well into the 1980s, Libya financed or materially supportedrevolutionary efforts in Chad, Corsica, Eritrea, Germany, Iran, Italy, Nicaragua, Northern Ireland,Japan, Lebanon, Philippines, Sardinia, Somalia, Sudan, Syria, Thailand, and Tunisia. Libya wasinvolved in aircraft hijackings, extraterritorial assassinations, bombings at European airports, andthe 1986 bombing of a Berlin nightclub popular with American Armed Forces. (1) Libya gave safe haven toBlack September, the Palestinian terrorists that seized Israeli athlete as hostages at the 1972Olympics in Munich. (2) Libya was found to have a central role in orchestrating and financing the in-air bombing of Pan Amflight 103 over Lockerbie, Scotland on December 21, 1988, killing 270, and the bombing of FrenchUTA flight 772, in flight from Niger to Paris, in September 1989, killing 177.

In March 1992, after the United States, France, and the United Kingdom began legalproceedings against Libyan intelligence officers, in absentia , for their role in the two airlinebombings, the United Nations Security Council, in 1992 and 1993, agreed to resolutions to condemnthe terrorist acts, impose an arms and air traffic embargo, prohibit trade in Libyan oil, and freezeLibya's assets. (3) Thesesanctions were lifted on September 12, 2003, after Libya took responsibility for the destruction ofthe two planes and agreed to pay a financial settlement to the families of those killed on PanAm 103and UTA 772. (4)

Recent Events(5)

On December 19, 2003, Libya's Foreign Ministry released a statement declaring that,following extended discussions with the United States and the United Kingdom in which it wasrevealed that Libya had the materials and the means to produce weapons of mass destruction andrelated delivery systems, Libya had "decided of its free will to get rid of these materials, equipmentand programs, and to become totally free of internationally banned weapons." Libya further statedits intention to comply with the Missile Technology Control Regime (MTCR), the nuclearNonproliferation Treaty (NPT), and international biological and chemical weapons treaties andagreements, and to open itself to inspections in all these areas. Libya "... is convinced that the armsrace is neither in its interest or in that of the region and goes against its strong desire for a worldenjoying security and peace and wants all states to follow suit, starting with the Middle East regionwithout exception." (6)

Both President Bush and Prime Minister Blair issued statements of cautious optimism,assuring that vigilance would guide any efforts to remove economic and diplomatic sanctions --imposed not only for arms control violations but also for Libya's support of international terrorismand revolutionary separatist movements.

On April 23, 2004, President Bush announced that "Libya has set a standard that we hopeother nations will emulate in rejecting weapons of mass destruction and in working withinternational organizations to halt the proliferation of the world's most dangerous systems." Hedetermined that Libya had met the terms required of it in United Nations Security Councilresolutions adopted in the aftermath of the destruction of PanAm Flight 103 over Lockerbie,Scotland in 1991. Thus, restrictions under the Iran and Libya Sanctions Act were removed, andsome restrictions on licensing and transactions were eased. (7) The President also announced that the United States would (1) liftits objection to Libya's accession to the World Trade Organization; (8) (2) work toward resuming fulldiplomatic ties; and (3) pursue educational exchanges between the two countries. (9)

To reward Libya for its changed stance on settling the PanAm103 and UTA 772 complaints,and for its new pronouncements to turn away from the pursuit of nuclear weapons capability, onFebruary 23, 2004, the Secretary of State removed restrictions on the use of U.S. passports in, to, orthrough Libya. And on June 28, 2004, the State Department announced it was opening a U.S.Liaison Office in Libya's capitol, to replace the Interests Section in the Embassy of Belgium that hadfilled the 24-year gap while the U.S. Embassy was shuttered. (10)

On September 10, 2004, the President determined that (1) Libya had violated terms of theArms Export Control Act by receiving nuclear enrichment equipment, material, or technology fromKhan Laboratories in Pakistan, but that (2) implementation of the sanctions required under the ArmsExport Control Act "would have a serious adverse effect on vital United States interests." ThePresident, further, determined that new restrictions on Export-Import Bank support to U.S. exporterspursuing business in Libya were not in the national interest of the United States. (11) A spokesperson for theExport-Import Bank pointed out that the new sanctions imposed and immediately waived onSeptember 10th did not affect other restrictions on Bank activity in effect because of Libya's placeon the list of state sponsors of international terrorism. (12)

Effective September 21, 2004, President Bush, citing Libya's commitments and actions toeliminate its weapons of mass destruction programs and related missiles, revoked four ExecutiveOrders that had restricted nearly all trade with Libya since 1985: (13)

Executive Order 12538, issued November 15, 1985, pursuant to sec. 504 of theInternational Security and Development Cooperation Act of 1985, which prohibited the importationof petroleum products from Libya;

Executive Order 12543, issued January 7, 1986, pursuant to the NationalEmergencies Act (NEA) and International Emergency Economic Powers Act (IEEPA), whichdeclared that a national emergency existed, and prohibited imports, exports, transactions related totransportation, the provision of transportation, purchase of Libyan products via a third country,performance of contracts, or extension of credit or loans;

Executive Order 12544, issued January 8, 1986, also under the authority ofNEA and IEEPA, which blocked all property, assets, and interests held by Libya in the jurisdictionof the United States; and

Executive Order 12801, issued April 15, 1992, under the authority of NEA andIEEPA, which prohibited the landing or taking off in U.S. airspace of aircraft coming from or goingto Libya.

Libya remains listed as a state sponsor of international terrorism. As such, it is ineligible formost foreign assistance, trade in defense articles and defense services, support in the internationalfinancial institutions, and some commercial transactions involving dual-use or high technologycontinue to be limited.

Restrictions Imposed for Support of International Terrorism

Libya is considered a state sponsor of international terrorism pursuant to Section 6(j) of theExport Administration Act of 1979 (50 U.S.C. app. 2405(j)) (hereafter "EAA"). (14) Under terms of thatsection, exports to Libya of goods or technology require a validated license, and there is otherwisea presumption of denial of licenses for items that the Secretary of State determines could make asignificant contribution to the country's military potential or could enhance the country's ability tosupport acts of international terrorism. The Secretary is further required to notify Congress inadvance of issuing any validated license. Section 6(j)(4) states that the Secretary's designation maynot be rescinded unless the President submits to Congress one of two possible reports. The firstwould certify that (I) there has been a fundamental change in the leadership and policies of thegovernment; (ii) the government is not supporting acts of international terrorism; and (iii) thegovernment has provided assurances that it will not support acts of international terrorism in thefuture. The second option available to the President would be to certify, at least 45 days before theproposed rescission would take effect, that (I) the government concerned has not provided anysupport for international terrorism during the preceding six-month period; and (ii) the governmentconcerned has provided assurances that it will not support acts of international terrorism in thefuture.

Similar language is contained in Section 40 of the Arms Export Control Act (22 U.S.C.2780) (hereafter "AECA"), and the list maintained by the Secretary of State under Section 6(j) of theEAA is generally understood to apply to both sections of law. The AECA states the terms underwhich government-to-government and commercial sales or transactions of defense articles anddefense services may be conducted. Unlike Section 6(j), however, Section 40(f)(2)(B) states a meansfor Congress to block a rescission of the sanction if it chooses to keep sanctions in place. Alsounlike the EAA, Section 40(g) authorizes the President to waive the prohibitions with respect to aspecific transaction if "(1) the President determines that the transaction is essential to the nationalsecurity interests of the United States; and (2) not less than 15 days prior to the proposed transaction,the President...." consults with Congress and submits a report detailing the proposedtransaction. (15)

Section 40A of the Arms Export Control Act (22 U.S.C. 2781) prohibits the providing ofdefense articles and defense services to a "foreign country that the President determines and certifiesto Congress...is not cooperating fully with United States antiterrorism efforts." Section 40A requiresan annual country list, on which Libya has been named since the language was first added to theAECA in 1996. (16) ThePresident may waive application of Section 40A "with respect to a specific transaction if thePresident determines that the transaction is important to the national interests of the United States."

If Libya were removed from the lists required under Section 6(j), EAA and Section 40A,AECA, a substantial body of economic sanctions imposed against that country could then beaddressed. Being named to the Section 6(j) list triggers other restrictions, either through legislationthat directly cites Section 6(j), or through legislation that denies aid or trade to a supporter ofinternational terrorism without specifically citing Section 6(j). For example, Section 620A of theForeign Assistance Act of 1961 (22 U.S.C. 2371) prohibits the provision of aid under the ForeignAssistance Act of 1961, the Agricultural Trade Development and Assistance Act of 1954, the PeaceCorps Act, or the Export-Import Bank Act of 1945 "to any country if the Secretary of Statedetermines that the government of that country has repeatedly provided support for acts ofinternational terrorism." The restriction may be rescinded in a manner identical to that in the EAA. The President has waiver authority, however, if he "determines that national security interests orhumanitarian reasons justify a waiver...." The waiver under "humanitarian reasons" is somewhatlimited, and the waiver authority may not be used on either basis to provide assistance that is alsorestricted under Section 40 of the AECA.

The Trade Sanctions Reform and Export Enhancement Act of 2000 (114 Stat. 1549A-67through 1549A-72) restricts the export of agricultural commodities, medicine, and medical devicesto any country that the Secretary of State has designated as a state sponsor of international terrorismunder the above-cited laws. While such exports are allowed, licenses to export are limited toone-year issuances, and government financing or underwriting of such exports is substantiallydenied. Section 908(a) of that act, however, authorizes the President to waive the restrictions onfinancing if he finds it in the national security interest to do so. The President waived restrictionson financing for Libya on September 20, 2004. (17) The one-year licensing limitation still holds.

The President is also granted authority to restrict trade or transactions with state supportersof international terrorism under the following laws:

Section 2(b)(1)(B) of the Export-Import Bank Act of 1945 (12 U.S.C. 635(b)(1)(B)) provides that only where the President, after consultation with Congress, determines that Ex-Imfinancing "would be in the national interest where such action would clearly and importantly advanceUnited States policy in such areas as international terrorism... [and] nuclear proliferation... shouldthe Export-Import Bank deny applications for credit for nonfinancial or noncommercialconsiderations." Considering that the President found, on September 10, 2004, "that it is in thenational interest for the Export-Import Bank to guarantee, insure, or extend credit, or participate inthe extension of credit in support of United States exports to Libya" to meet the requirements ofanother subsection of Sec. 2, any new determination to block Ex-Im Bank funding is unlikely. (18) It continues to be blocked,nonetheless, pursuant to the requirements of Sec. 620A of the Foreign Assistance Act of 1961.

Section 1621 of the International Financial Institutions Act (22 U.S.C. 262p-4q) requiresthe Secretary of the Treasury to instruct the U.S. executive director in each international financialinstitution to "use the voice and vote of the United States to oppose any loan or other use of funds... for a country for which the Secretary of State has made a determination under section 6(j) of theExport Administration Act of 1979 ... or section 620A of the Foreign Assistance Act of 1961...." This section contains no waiver authority.

Section 6 of the Bretton Woods Agreements Act Amendments of 1978 (22 U.S.C.286e-11) similarly prohibits U.S. support in the International Monetary Fund for loans to statessupporting international terrorism, and provides no waiver authority.

Section 527 of the Foreign Operations, Export Financing, and Related ProgramsAppropriations Act, 2006 ( P.L. 109-102 ; 119 Stat. 2205) prohibits bilateral assistance to anycountry found by the President to be harboring international terrorists or otherwise supportinginternational terrorism. The President may waive the application of Section 527 if he finds thatnational security or humanitarian reasons justify the waiver.

Other Libya-Specific Legislative Restrictions

Section 307 of the Foreign Assistance Act of 1961 (22 U.S.C. 2227) prohibits foreignassistance designated for International Organizations and Programs from being made available forthe U.S. proportionate share for programs that fund efforts in Libya and other countries. Thisrestriction does not apply to programs of the International Atomic Energy Agency (IAEA) or theUnited Nations Children's Fund (UNICEF). The section contains no waiver.

Section 507 of the Foreign Operations, Export Financing, and Related ProgramsAppropriations Act, 2006, prohibits direct assistance or reparations to Libya and other countries. This language has been included in annual foreign operations appropriations since Fiscal Year 1974,and Libya was added to the list of prohibited states in Fiscal Year 1982. (19) In FY2006, however, thesection allowed:

Provided further, That for purposes of this section, theprohibition shall not include activities of the Overseas Private Investment Corporation in Libya: Provided further, That the prohibition shall not include direct loans, credits, insurance andguarantees made available by the Export-Import Bank or its agents for or inLibya.

Despite this language, neither the Overseas Private Investment Corporation nor the Export-ImportBank have extended their programs to investment in Libya, still restricted due to its designation asa supporter of international terrorism.

Section 406 of the Omnibus Diplomatic Security and Antiterrorism Act of 1986 (22U.S.C. 4856) authorizes the Director of the Office of Foreign Buildings, Department of State, toestablish a contract system for the construction of new diplomatic facilities in light of rising concernsabout terrorist attacks and the security of U.S. missions abroad. Section 406(c), however, prohibitsany "person doing business with Libya" from being awarded any contract pursuant to this act. Thesection contains no waiver. This was enacted on the heels of the President's declaration that a U.S.national emergency existed because of Libya's terrorist activities, in January 1986, and the April1986 Berlin nightclub bombing. (20)

Exemptions to Legislative Restrictions

As noted above, most of the sanctions may be lifted if Libya is removed from the terroristlist, or if the President finds it in the national interest to waive the particular restriction. It shouldalso be noted that several assistance programs are exempted from strict adherence to the sanctionsregime. Emergency food assistance under the Agricultural Trade Development Assistance Act of1954 (PL 480, title II), development assistance and Economic Support Funds for health and diseaseprevention, assistance to respond to "unanticipated contingencies," international narcotics control,international disaster assistance, development assistance in response to a country's improved humanrights record, Trade and Development Agency funding (though TDA does not have projects inLibya), and debt-for-nature swaps are all stated in such a way in authorizing legislation thatassistance in those areas may continue despite the imposition of economic sanctions.

In the same vein, the current foreign operations appropriations, in funding nonproliferation,anti-terrorism, demining and related programs, includes a "Notwithstanding" clause that could allowfor assistance despite the sanctions regime currently in place against Libya (title II of P.L. 109-102 ;119 Stat. 2189).

Section 614 of the Foreign Assistance Act of 1961 (22 U.S.C. 2364) authorizes thePresident to furnish assistance "without regard to any provision of this act, the Arms Export ControlAct, any law relating to receipts and credits accruing to the United States, and any Act authorizingor appropriating funds for use under this act, in furtherance of any of the purposes of this act, whenthe President determines, and so notifies in writing the Speaker of the House of Representatives andthe chairman of the Committee on Foreign Relations of the Senate, that to do so is important to thesecurity interests of the United States." The section has limits on amounts of assistance that may bemade available in any given fiscal year, and the President is required to consult with Congress beforeaid is provided.

Other Legislation No Longer In Force Against Libya

The Iran and Libya Sanctions Act ( P.L. 104-172 ; 50 U.S.C. 1701 note), particularlySections 5 and 6 , (ILSA) had authorized the President to impose two or more sanctions on a personor corporation found to have invested above a certain amount in Libya's oil resources. On April 23,2004, President Bush determined that Libya had met the terms required of it in United NationsSecurity Council Resolutions adopted in the aftermath of the destruction of PanAm Flight 103 overLockerbie, Scotland in 1991. Thus, restrictions under the Iran and Libya Sanctions Act areremoved. (21)

Section 504 of the International Security and Development Cooperation Act of 1985 authorizes the President to prohibit imports from, or exports to, Libya. No waiver authority isrequired, as the authority to impose rests entirely with the President. On November 15, 1985, thePresident, citing this provision, issued Executive Order 12538 (50 F.R. 47527; 19 U.S.C. 1862 note),ordering that no petroleum products refined in Libya may be imported into the United States. ThePresident revoked E.O. 12538, effective September 21, 2004.

The U.S. government had restricted the use of U.S. passports to travel to or through Libyasince 1981, pursuant to authority granted the Secretary of State in the act of July 3, 1926 (22 U.S.C.211a) . On February 23, 2004, the Secretary of State removed this restriction. (22)

Section 505 of the International Security and Development Cooperation Act of 1985 (22U.S.C. 2349aa-9) authorizes the President to ban the importation of any goods and services fromany country that supports terrorism or terrorist organizations or harbors the same. Because theauthority rests with the President to impose, it may be assumed that the authority to lift restrictionsalso rests with the President; the law includes no explicit waiver or means of lifting restrictions. Although Section 505 is not cited in the President's Executive Order of September 20, 2004, and notmentioned in accompanying statements issued by the State Department, because all other restrictionson imports and exports are lifted, one may assume that application of this section on Libya isrescinded.

Table 1. Libya: Economic Sanctions Imposed in Furtherance of U.S. Foreign Policy or National Security Objectives