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Italy poised to freeze Libyan shareholdings

March 1, 2011

By Guy Dinmore and Giulia Segreti in Rome and Joshua Chaffin in Brussels, published: March 1 2011

Libyan shareholdings in Italian companies worth billions of euros could be frozen by Rome as Silvio Berlusconi makes what diplomats describe as a tardy break with Muammer Gaddafi’s regime.

Italy has been slower than the US and UK in imposing sanctions on Libyan finances but Rome denies claims from Brussels that it blocked a move to freeze assets belonging to Libyan “entities” as well as individuals. The European Union announced travel bans and asset freezes for members of Mr Gaddafi’s regime on Monday but, unlike the US, neglected to include the Libyan Investment Authority or other government-controlled entities, a decision that has ignited concern about the sanctions’ effectiveness.

“We are very open in principle to this idea of freezing entities as part of agreed sanctions,” the Italian foreign ministry said.

As Libya’s former colonial ruler, Italy has emerged as its number one trading partner, primarily through imports of oil and gas. Investment ties were boosted when Mr Berlusconi met Mr Gaddafi in a tent outside Benghazi in August 2008 to apologise for Rome’s colonial atrocities. The Italian premier pledged to pay $5bn over 25 years in compensation.

Three Libyan government-controlled funds are estimated to have holdings worth a total of some €4bn ($5.5bn) in Italian companies, including 7.4 per cent of UniCredit, Italy’s largest bank by assets; 2 per cent of Finmeccanica, the defence and industrial conglomerate; 7.5 per cent of Juventus football club and under 2 per cent of Eni, the energy group.

Members of Rome’s interministerial financial security committee met on Tuesday to discuss how to prevent Libya receiving income from those assets.

Italian companies were studying a decision by Pearson, the UK-based educational publisher and owner of the Financial Times, to freeze a stake of just over 3 per cent in the company held by the Libyan Investment Authority and to withhold dividends.

Finmeccanica said Italian law did not allow it to refuse to pay a dividend to selective shareholders. People familiar with Unicredit’s shareholder structure said the Italian authorities were keen in principle to adopt the same stance as the UK and US, freezing the assets of Libyan shareholders in the country and barring the payment of dividends to them.

After Monday’s announcement, the European Union has turned its focus to business assets including the LIA, a sovereign wealth fund believed to have holdings worth $60bn to $80bn.

EU officials said they declined to include the LIA on Monday partly because of timing: the bloc’s 27-member states rushed to agree the sanctions list, they said. The legal work required to cover the LIA and other corporations would have made it impossible to unveil the sanctions on Monday as part of a co-ordinated effort with the US and the UN to raise pressure on the regime.

But officials said there was concern in some capitals, especially Rome, about adding the LIA to the list.

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