(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T01017R000302950001-1
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 7
• Document Creation Date: January 12, 2017
• Document Release Date: January 28, 2011
• Sequence Number: 1
• Publication Date: August 18, 1986
• Content Type: MEMO

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Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
18 August 1986
Libyan Abuse of Commercial Ventures Since 7 January 1986
Summary
Tripoli continues to use overseas offices of the
Libyan Arab Airlines, Libyan Arab Foreign Investment
Company affiliates, and a variety of ostensibly
independent front companies to carry out acts of
subversion or to procure denied goods. The closure of
Libyan Peoples bureaus in many countries increases the
likelihood that Tripoli will place even greater
emphasis on using semi-private channels to strike at
Libyan exiles or possibly US targets. Moreover,
Libya's international network of interbank
relationships and equity ownership in foreign financial
institutions has given the regime great flexibility to
manage international financial transactions including
the support of terrorist activity.
Available information does not indicate that
Tripoli has used its small equity share in UBAF Arab
American Bank in New York to channel funds to
terrorists or to circumvent US economic sanctions. We
believe, however, that the regime probably will make
even greater efforts in the future to obtain denied
goods--especially civilian aircraft, computer
equipment, and Western military goods--through
corporate cut-outs. Greater cooperation between
Washington and our West European allies probably will
be necessary to detect and prevent Libyan use of front
This memorandum was prepared byl the
Office of Near Eastern and South Asian Analysis. Information as 25X1
of 15 August 1986 was used in its preparation. Questions and
comments should be directed to Chief, Arab-Israeli Division F 2!25X1
NESAM #86-20130C 25X1
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companies to obtain restricted goods or to support
Libya continues to use overseas offices of the Libyan Arab
Airline (LAA) as well as affiliates of the Libyan Arab Foreign
Investment Company (LAFICO) as cover for Tripoli's support of
subversion and terrorist activity. Money, personnel, and even
some arms may have been passed through these entities since
7 January. The closure or curtailment of Libyan Peoples Bureau
operations has almost certainly encouraged the use of Libya's
commercial enterprises to support subversion.
Moreover, Tripoli has used select front companies to
circumvent US economic sanctions. These corporate cut-outs have
been instrumental in helping Libya procure spare parts, two
commercial aircraft, and a variety of services since 7 January.
Libya's extensive international network of interbank
relationships and equity ownership have helped, to ease the impact
of US financial sanctions against the regime.
Libyan Arab Airlines
Libya in the past has often used its civil air operations to
support subversive activities. Since airline operations have
commercial cover and easy access to European and Asian cities,
LAA offices provide attractive bases for expediting Tripoli's
politically motivated operations against Libyan exiles and other
target groups. While LAA carries on considerable le itimate
trade, Tripoli's 25X1
use of LAA offices overseas for non-legitimate purposes has
continued. F__~ 25X1
Since 7 January, Libyan intelligence operatives working
under airline cover probably have been involved in at least
several terrorist related activities:
-- A LAA operative probably was a key contact in a failed
attempt to bomb the US officers club in Ankara on
18 April. Grenades to be used in the attack may have
been provided through the local LAA office.
-- A LAA representative was to provide instructions,
payment, and airline tickets for terrorists planning a
rocket attack against the US Embassy in Nicosia in April.
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 a plot to assassinate the US Ambassador in Rome returned
to Italy late last year under LAFICO cover. The Italian
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Use of LAFICO Affiliates and Front Companies
The establishment or use of existing independent companies
to support Libyan terrorist activity continues:
believed to be involved in
Government arrested him in April, but he has subsequently
been released.
-- In April an officall lin
Karachi was arrested and questioned for his suspected
role in the fire bombing of the Pak-Libyan office
ostensibly to destroy incriminating financial records.
The officer also was suspected of heading and funding a
network of anti-government dissidents in Pakistan. The
officer was eventually released after the visit of a high
level Libyan deligation to Pakistan.
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Several of LAFICO's largest affiliates such as Fiat--the
Italian auto maker--and possibly the Carl Kaelble Gmeinder
Company--a West German manufacturer of heavy equipment--have had
ongoing commercial relations with US firms since 7 January.
Moreover, LAFICO's extensive international business connections
give Libya considerable flexibility and ample cover to trade with
US firms. Many LAFICO affiliates, however, are small regional
ventures. Most of these money losing concerns probably have had
little or no contact with US companies since January.
Of greater concern is Libya's ability to use seemingly
unrelated front companies to circumvent US trade restrictions.
These companies often give no indication of Libyan complicity,
yet are established by Libyans or work in conjunction with Libya
to obtain denied goods or services. Since 7 January a number of
front companies have been used:
-- A new Libyan,company called "Nitron" was established in
Belgium, Switzerland, and Luxembourg to handle orders for
automobiles which are in short supply in Libya.
-- Two front companies, Service Airlines, Ltd., and Cobra
AW, Ltd., of Hong Kong and the United Kingdom
respectively, were used by Tripoli to obtain two A310-200
aircraft with US manufactured engines from British
Caledonian airlines. Both of the aircraft have been
shipped to Libya. Moreover, Contrust Benin SARL, another
Libyan front company operating out of West Germany and
Benin obtained two US C-130 aircraft for Libya last year.
-- Another company called Air Spares, Ltd., may be a key
supplier of Boeing parts for Libya's largely US origin
civil air fleet, according to the US Embassy in Paris.
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Tripoli's growing ability to disguise its affiliation with
front companies and the large number of companies which still
deal with Libya makes the task of detecting Libyan corporate cut-
outs difficult. Moreover, legitimate companies could be
unwitting of Libya's affiliation with a front company, as 25X1
probably was the case in the sale of two A310-200 aircraft to
Service Airlines, Ltd., in June. Libya's ability to pay several
times the price for denied goods or services also provides a 25X1
great incentive for some firms to look the other way in dealing
with suspected Libyan cut-outs.
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The UBAF Arab American Bank
The freeze on Libyan financial activity and assets in the US
has not prevented Tripoli from maintaining a small equity stake
in the UBAF Arab American Bank, Inc., located in New York.
Tripoli holds a 7.73 percent equity share in the bank and is one
of twenty--primarily Arab--owners of the bank. Total deposits of
$900 million were recorded for the bank at the end of 1985. The
UBAF is a member of the Federal Reserve System and the Federal
Deposit Insurance Corporation.
Despite Libya's equity share, Tripoli does not appear to
exercise any control over the UBAF's activities and does not have
a representative among senior bank management. Moreover, we have
no information that Libya has attempted to move funds through
this bank since 8 January. Libyan profits from its investment in
the UBAF probably are deposited in a European bank on Libyan
Libya's worldwide network of interbank relationships and
equity ownership in foreign banks gives Tripoli considerable
flexibility to handle its international finances. A number of
foreign banks have even offered to assist Libya in handling US
dollar transactions. In some cases these banks are partly owned
by Libya. Several banks in Italy and Austria have been
particulaly helpful in assisting Libya on US dollar
transactions.
Outlook
Tripoli's movement toward using commercial companies to
support subversion or circumvent US trade restrictions is likely
to continue, in our judgement. The closure of Libyan diplomatic
offices abroad, and the closer scrutiny of Libyan personnel and
corporate offices weighs in favor of the use of corporate cut-
outs in support of Libyan subversion or terrorist activity.
Greater reliance on front companies, however, will make the task
of monitoring and preventing Libyan acts of subversion or
terrorism more difficult. Under such conditions, greater support
from allied governments probably will be necessary to establish
Libyan affiliation and abuse of corporate or financial
enterprises.
Tripoli probably will increasingly emphasize acquiring goods
denied by US and allied trade sanctions. Civilian aircraft,
computer equipment, and select oil technology have been items
most frequently obtained through front companies. We believe
that Libya also may use front companies to a larger degree to
obtain western military goods and technology, since many West
European states have curtailed such sales to Tripoli. The
international sale of such goods or related services will require
even closer scrutiny in the future to prevent denied goods from
reaching Libya.
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25X1
SUBJECT: Libyan Abuse of Commercial Ventures SInce 7 January 1986.
NESA M# 86-20130C
DISTRIBUTION:
EXTERNAL:
Copy 1 - Craig Coy (NSC)
INTERNAL
Copy 2
3
4
5
6
7-12
13
14
3.5
16
17
18
19-20
21
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25-26
DIR/DCI/DDCI/Exec Staff
DDI
ADDI
NIO/NESA
CPAS/ILS b ~~ Yom, M
CPAS/IMC/CB DAsfr-/.eo I2' I
C/PES
NID/Staff
PDB Staff
D/NSEA
DD/NESA
C/PPS/NESA
PPS/NESA (One copy to analyst to source
NESA/IA
NESA/PG
NESA/SO
NESA/AI
NESA/AI/M
DDI/NESA/AI/M)
/18 August 1986 25X1
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