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Italy’s Qaddafi Sanctions Stop Short of Libyan-Owned UBAE

Italian budget cuts needed to defend Euro says Berlusconi
Italy's finance minister Giulio Tremonti, left, and the prime minister Silvio Berlusconi prepare to depart following a news conference in Rome. Photographer: Alessandra Benedetti/Bloomberg

Italy’s sanctions against Muammar Qaddafi and his family have stopped short of curtailing the activities of Banca UBAE SpA, the Rome-based trade-financing bank controlled by Libya’s central bank.

UBAE, which had 3.1 billion euros ($4.3 billion) of deposits at the end of 2009, continues to provide letters of credit, said an executive at UBAE’s Milan branch, who declined to be identified, citing company policy. UBAE’s 11th floor office, with views of Milan’s Duomo Cathedral, was serving customers yesterday. Officials at the Rome-based Bank of Italy, which has licensed UBAE since 1972, declined to comment.

Italy, Libya’s main trading partner, imposed on March 5 a freeze on Libyan assets under a wider ban by the United Nations. While countries, including the U.K. and Austria, extended the freeze to members of the country’s sovereign wealth fund, the Libyan Investment Authority, or LIA, Italy said it will monitor activity involving other Libyan entities.

The 27 governments of the European Union may this week extend the freeze to the holdings of LIA, its former Deputy Chief Executive Officer Mustafa Zarti, the Libya Africa Investment Portfolio, the Libyan Foreign Bank, the Libyan Housing and Infrastructure Board and the country’s central bank, four people informed of the matter said.

Qaddafi Family

“Only when and if we understand what belongs to the Qaddafi family and what belongs to the sovereign funds, can we have a correct implementation of the United Nations resolution,” said Giuseppe Di Taranto, an economics professor at Rome’s Luiss University. “UBAE is an example in this sense: as a government, you can only act when that distinction is absolutely clear.”

UBAE’s biggest shareholder is Libyan Foreign Bank with a 68 percent stake and other owners include UniCredit SpA, Italy’s biggest lender, with an 11 percent stake, according to UBAE’s website. A spokesman for UniCredit declined to comment on UBAE.

The bank, which employed about 170 people as of last year, provides finance for exports to countries such as Libya and Sudan, as well as imports of oil. Libyan Foreign Bank, owned by the country’s central bank, accounted for about 37 percent of UBAE’s deposits in 2009, Fitch Ratings said in a report in May.

Ratings on Review

Fitch placed UBAE’s BB+ rating, the top non-investment grade, on review on March 2, citing instability in Libya. The bank’s liquidity benefits from a “high proportion of liquid assets, comprising the investment of deposits, predominantly from banks, government and quasi-government entities that make up UBAE’s customer base in the Middle East and North Africa region,” Fitch said in a statement. UBAE’s rating remains on review, Fitch said yesterday.

Founded in 1972 by Italian, Libyan and French shareholders, UBAE assisted Libyans seeking business with Europe when the country faced sanctions during the 1980s and 1990s. Since the easing of restrictions in 2004, UBAE expanded outside Libya and added services. It has a brokerage license and assists Libyan companies in finding European partners for local projects.

The bank has ties to the country’s sovereign fund, the Libyan Investment Authority, through its main shareholder, and acts as a broker to the LIA on its European securities trades, former UBAE general manager Marco Ferrario said in an interview last year.

Both Libya’s central bank and the Libyan Investment Authority own shares in UniCredit, and the country has invested in Finmeccanica SpA and Juventus Football Club SpA, owner of Italy’s most successful soccer team.

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