U.N. Moves to Ease Libya Sanctions

Fearing an acute shortage of medical and other essential supplies, Libya's rival factions are in talks with the United Nations to ease international sanctions on the war-torn nation, Agence France Presse has learned.

Well-placed U.N. officials said representatives from Libya's rebel council and Moammar Gadhafi's regime held talks last week with the World Health Organization aimed at drawing up a list of items for sanctions relief.

The Geneva meeting with the U.N. agency is part of a wider drive to prevent financial sanctions -- slapped on Libya's government and banks -- from creating a major humanitarian emergency.

Aid groups across Libya have reported shortages of basic items such as vaccines and painkillers. They say stockpiles in the Gadhafi-controlled west and the rebel-held east have been rapidly depleted by nearly five months of war.

Although some essential goods could be imported under the current sanctions regime, they cannot be paid for because Libyan assets abroad are frozen and foreign banks are refusing to do business with Libyan entities.

Diplomats said Tripoli's current quarterly order for vaccines is being held up because Dutch bank ABN-AMRO will not accept a Bank of Libya credit note, for fear of running foul of sanctions or risking a public backlash.

Aside from emergency supplies imported by the U.N. and non-governmental groups, the last major delivery of medicines to Libya was in January.

If the two sides could reach a deal on which items are needed on both sides of the Libyan front line, diplomats said it would be up to Tripoli to send a formal request to the U.N. sanctions committee in New York.

The details do not yet appear to have been agreed, but could involve Libyan assets abroad being unfrozen to pay for goods, or cash being transferred to the World Health Organization to procure goods on Libya's behalf.

The goods would then be distributed to both sides.

"We need to restore the capacity of the government to procure," said one U.N. official who asked not to be named. "We are really looking to try to find a solution to this problem, which is the shortage of drugs."

The Libyan government is thought to have spent around $2 billion a year on medicines, although some officials remarked that smarter procurement could lower that cost.

But the proposal could face stiff political and legal barriers.

Aside from political differences fuelled by NATO's interpretation of U.N. Security Council resolutions, the U.N. itself is fearful of repeating its experience of Iraq's much-troubled oil for food program.

The program punched a hole in international sanctions against Saddam Hussein's Iraq, allowing the proceeds from oil exports to be used to buy medical or other essential supplies.

But it was later found to be riddled with corruption. Saddam's government allegedly embezzled millions of dollars from the scheme, sparking a scandal that caused major embarrassment to the United Nations.

"I'm not sure we want to repeat that," one U.N. official said.

Officials also expected some resistance to sanctions being lifted on supplies of refined oil and food, which, while vital to humanitarian efforts, can also be used to bolster the military.

NATO members hoping to increase pressure on the Gadhafi regime are unlikely to want to create a pressure release valve for the strongman by easing conditions for his troops.

Any move to unfreeze assets is also likely to fuel long-standing calls from the rebels that they be able to use assets abroad to fund the war effort, something many nations have been reluctant to do.

But the anti-sanctions drive comes as non-profit and multilateral agencies are growing more fearful about the rapid degradation of Libyan supplies and critical infrastructure.

"Despite some donations, shortages and irregular supply of vaccines and medicines remains a problem," said World Health Organization spokesman Tarik Jasarevic.

A recent situation report by OCHA, the U.N. agency coordinating the humanitarian response, said food stocks were being depleted faster than they are replenished and there was a severe lack of fuel in west Libya.

The World Food Program has so far distributed around 6,000 metric tons of food to around 543,000 beneficiaries across the country.

In the east, the rebel National Transitional Council has been hobbled by a severe lack of funding, which is beginning to take a toll on critical infrastructure.

Blackouts have become more common in Benghazi and water supplies are said to be running low.

One major concern is that desalination plants and the Great Man-made River facility, which supplies around 70 percent of Libya's water, could be crippled by the lack of spare parts and chemicals.

So far U.N. agencies have supplied some basic components, but officials said the state-of-the-art facility is struggling to keep reservoirs at a level that can provide a sustainable supply.

If the project were to fail, agencies fear a massive humanitarian emergency.