Sharia Compliant Finance Slips Past Libya Sanctions



Roughly 95% of Libya’s wealth stems from the fossil fuel industry. In this, the energy layer of the sanctions regimes imposed by the UN, the U.S. and the E.U. dominate Western media discussions.
While the energy layer is crucial to understand to gather traction in the overall picture of the Libyan economic footprint in its region and beyond, the Sharia Compliant Finance layer is perhaps the least recognized element of opaque sovereign wealth funds such as the Libya Investment Authority.
The international community has purposely stopped sanctions short on Tamoil.
The United States has purposely stopped sanctions short on the Arab Banking Corporation.
Indeed, the United Nations, the European Union and the United States are actively protecting one thing in this evasive collusion – Islamic Finance.
The Energy Layer
On February 25, 2011, President Obama signed Executive Order 13566, unilaterally sanctioning the financial holdings and activities of Muammar Gaddafi and any who might funnel money to him. Within days U.S. Treasury Secretary Tim Geithner announced that the United States had frozen nearly $32 billion in Libyan assets, including funds of the Libya Investment Authority and the Libya’s central bank. The language of the UN sanctions regime imposed by UNSCR 1970 on February 26th allowed member states to follow the lead of the United States and expand the measure as they saw fit. Britain quickly froze over $3 billion in Libyan funds. Austria froze over $1 billion in Libyan assets and widened the freeze to include Mustafa Zarti, an Austrian citizen and leading official at the Libyan Investment Authority.  The EU’s blacklist grew to 27 members of Gaddafi’s inner circle by March 11th with the addition of Zarti.
Mustafa Zarti.
Following the launch of Operation Odyssey Dawn, the U.S. Treasury Department sanctioned 14 Libyan energy companies, while the EU opted to sanction only five. Interestingly, Tamoil was not among Libya’s sanctioned firms though Mustafa Zarti was the CEO of Tamoil through his resignation in February of 2011.
Tamoil, a subsidiary of Oilinvest B.V., is the European centerpiece of the Libya Investment Authority’s investment portfolio. Tamoil’s refineries in Europe are located in Germany, Switzerland and Italy; its distribution network includes Spain and the Netherlands. In North Africa, Tamoil operates pipelines into Uganda and is currently extending the Mombasa-Eldoret pipeline into Kenya.
Though Tamoil was not sanctioned by the U.S., the E.U. or the U.N., it is in trouble. BP wound up in court in Germany for refusing to honor contracts with Tamoil until clarifications along the sanctions domino line are settled.  On March 24th, Uganda said “it will freeze assets worth $375 million belonging to the Libyan government, in line with U.N. sanctions against the North African country.”
According to a March 25th Wall Street Journal report:
A Dutch Finance ministry spokesman confirmed it hadn’t put Tamoil’s European holding, Oilinvest (Netherlands) BV, under sanctions, but he did say Oilinvest’s “ownership structure” contains a “couple of companies” that are on the U.N.’s sanctions list.
By March 30th, Reuters Africa reported Tamoil’s Italian refinery production operations had halted, its Swiss refinery was scheduled for a two-month “planned shutdown” for maintenance, and its German refinery had decreased its output by 20% of its capacity.
On April 1st, Frank Jordans and John Heilprin, looking into Tamoil’s troubles in Europe, released a scathing set of findings that called into question the wisdom of intentionally stopping short of naming Tamoil in the sanctions regime against Libya:
Dutch opposition lawmaker Harry van Bommel said Tamoil’s many shell companies in tax havens – from Monaco to Curacao in the Caribbean – make it impossible to guard against Gaddafi’s allies funneling money out of the company.
“All assets of Tamoil should be frozen, period,” he said. “We’re talking about U.N. resolutions, we’re talking about Gaddafi who is willing to kill his own people. Would he not ask a company under his control to transfer assets?”
In this light, the Wall Street Journal notation of a Curacao Oilinvest shutdown begins to make sense:
The registration documents of Oilinvest’s offshore holding in Curacao reveals that “the business [was] discontinued as of March 21, 2011.” An official at the tax haven’s registrar said the discontinuation came from the resignation of its local agent, without providing more details.
The Sharia Compliant Finance Layer
Mustafa Zarti was not only the CEO of Tamoil as the uprisings in Libya began. Zarti was also the Vice Chairman of First Energy Bank, a Sharia Compliant Finance Investment Bank focused solely on the energy market in the Middle East and North Africa. The Libya Investment Authority was the primary North African investor in First Energy Bank of Bahrain.
The fact that Austria was the driving force behind Zarti’s addition to the E.U. sanctions black list was not merely due his Austrian citizenship. OMV, the oil and gas giant of Austria, has sizeable stakes in the Libya sand. This reality is revealed in the February 23rd press release of First Energy Bank, in which Khadem Abdulla Al Qubaisi was named as the bank’s new chairman:
Al Qubaisi comes to FEB with breadth of experience in the field. He has served as a key figure on many management teams throughout the financial industry, including serving currently as the Managing Director of International Petroleum Investment Company (IPIC) in Abu Dhabi, as well as serving as Chairman for each of Aabar Investments (PJSC), Abu Dhabi Chemicals Co. (Chemaweyaat), National Central Cooling Co. (Tabreed), Abu Dhabi National Takaful Co. (Takaful), and I-Media Newspaper (Alrroya Aleqtisadiya). Al Qubaisi is also a board member for a number of international companies, including Chairman of Borealis AG (Austria), Nova Chemicals (Canada), Falcon Bank (Switzerland), and as Deputy Chairman at OMV Group (Austria), and Compañía Española de Petróleos, S.A. (CEPSA) (Spain). Additionally, Al Qubaisi was honoured as the ICIS No. 1 Chemical Industry Power Player for 2009 and the 2009 Arabian Businessman of the Year.
The fact that a Chairman of Borealis AG and Deputy Chairman of OMV was now in the lead of First Energy Bank came to pass on February 9th, yet Austrian investor concerns over the future of First Energy Bank were meant to be allayed by the knowledge that the bank’s Libya investments were soundly beyond sanctions, announcing without reserve the successful completion of “the purchase transaction of 40% of Arab Drilling and Workover Company (ADWOC) – Libya, one of the leading oil and gas onshore contract drilling and workover companies.” Notably, ADWOC has skirted the extensive U.S. Sanctions list. More striking, though, is the fact that the First Energy Bank of Bahrain has escaped the sanctions regime.
In 2008, following the first shareholder’s meeting, it was revealed in a press release
that “Mustafa Zarti will represent the primary North African Investor, the Libyan Investment Authority.”
The same 2008 press release revealed that KPMG would reside as external auditors and two members of the Shariah Supervisory Board were announced:
The newly appointed members of the Sharia Advisory Board are Shaikh Nidham Mohammed Saleh Yaquby and Dr. Mohammad Akram Laldin.
At present, the FEB Sharia Advisory Board includes Sheikh Dr. Mohammed Ali bin Ibrahim Elgari. It should be noted, that completely different spellings of Yaquby and Laldin’s names and titles appear in their FEB bio page from the initial press release announcement of their appointment.
It should not have been surprising, then, when Bloomberg’s Donal Griffin and Bob Ivry revealed that the majority Libya owned Arab Banking Corporation’s New York branch received 73 loans totaling $5 billion from the U.S. Federal Reserve amid the aftermath of the Lehman Brothers failure.
On March 9th, in an article entitled “The Libya Investment Authority’s Date with Destiny” at Family Security Matters, I noted the fact that White & Case LLP, a DC lobby firm advised on financing arrangements for a hotel renovation with Arab Banking Corporation International Bank, plc in the lead. I took care to reveal who the Shariah Advisors were:
ABC International Bank is a member of the AAOIFI, operates in the UK, and offers its exclusive product known as “alburaq.” As an Islamic finance institution, ABCIB has three Sharia Advisors on staff: Sheikh Nizam Yaquby, Mufti Abdul Kadir Barkatullah, and Mufti Muhammad Nurullah Shikder. 

Notably, Sheikh Nizam Yaquby sits on the boards of London-based HSBC Amanah, and NY-based Citigroup, and the Accounting and Auditing Organization for Islamic Finance and Insurance (AAOIFI). Yaquby sits on the Shariah Advisory boards of over 50 international banks.
From 2008 to 2009, the Libya Investment Authority, with funds earned as a newly normalized oil exporting nation, with ready loans drawn from its NY Islamic Finance windows, purchased a number of banks in Ireland, Spain and even Luxemburg. The TARP bailouts and discount windows designed to buoy U.S. banking interests, then, were used by the Libya Investment Authority CEO Mohammad Hussain Layas to bail out failed European Banks and to invest in First Energy Bank of Bahrain. The treasurer of ABC’s New York branch, David Siegel, declined to comment because U.S. taxpayers footed the bill for a bailout of the Sharia Compliant Finance industry. The spokesman for the NY Fed, Jack Gutt declined as well…a spokesman declined to comment. According to Griffin and Ivry over at Bloomberg: 

The U.S. government has since frozen assets linked to the regime of Libyan ruler Muammar Gaddafi and engaged in air strikes against his military forces, which are battling a rebel uprising in the North African country. Arab Banking [Corp.] got an exemption that allows the firm to continue operating while barring it from engaging in any transactions with the Libyan government, according to the U.S. Treasury Department.
One can only hope the U.S. Treasury Department can spell “hawala” as its agents tie up the loose ends of Zarti, Layas and Yaquby in closed door sessions as the coalition of the willing attempts to drive Gaddafi out of Libya and hide SCF at the same time.
Family Security Matters Contributing Editor Gary H. Johnson, Jr. is the Senior Advisor for International Security Affairs at the Victory Institute and is host of The Elemental Struggle on the Radio Jihad Network at 6pm every Wednesday.