This post was written by Joelle E.K. Laszlo.

In response to the increasingly grave political, commercial, and humanitarian turmoil that Libya has endured in the recent weeks, the international community has combined forces in an effort to subdue Muammar Qadhafi’s brutal regime. The United Nations Security Council has called its Member States to enact, among other initiatives, trade sanctions targeted against not only Qadhafi and his close associates, but also against the entire Libyan Government.

In affirming this concerted stance against Qadhafi, President Obama put into force an Executive Order Blocking Property and Prohibiting Certain Actions Related to Libya (“the Order”) on February 25, 2011. The Order immediately blocks the assets of and prohibits the provision of goods or services (including humanitarian donations) to: the Libyan Government and its agencies, instrumentalities, and controlled entities; the Central Bank of Libya; and Qadhafi and those closely associated with him. The Order further provides for the blocking of assets of anyone determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be a senior official of the Libyan Government; a child or agent of Qadhafi; a spouse, dependant child, or agent of any of Qadhafi’s children named in the Order; or in any way responsible for or materially involved in “the commission of human rights abuses related to political oppression in Libya.”

On the day the Order was signed, aside from adding the designated Qadhafi family members to the Specially Designated Nationals List (each with a sizeable list of aliases), the Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued a general license authorizing transactions with Libyan Government –owned or –controlled financial institutions organized under the laws of a country other than Libya. On February 26th, the State Department’s Directorate of Defense Trade Controls announced the immediate suspension of all licenses it had issued for exports to Libya, and advised that no exemption in the International Traffic in Arms Regulations may be used to export defense articles and services to Libya until further notice (forthcoming in the Federal Register). Shortly thereafter, OFAC issued a second general license on March 1, 2011 authorizing the provision of and payment for goods and services to Libya’s diplomatic missions to the United States and the United Nations (limited to items to support official business and for employee personal use).

The Order, which actively blocks an estimated $30 billion, was described by the White House as “the most rapid and forceful sanctions” ever, and has already caused considerable commercial backlash. For instance, Morgan Stanley, in complying with the OFAC sanctions, has been left with no alternative but to entirely cease its operations in Libyan oil trade. Other members of the U.S. business community have expressed their concern and continue to seek authorization to provide measures of safety, welfare, and support of their employees and contractors who remain in Libya by paying their salaries and for other routine taxes, fees, benefits, goods and services associated with their employment. As developments with respect to Libya’s political and commercial climate become alarmingly unpredictable, investors and other potential stakeholders should remain aware of the situation at hand and should also exercise a heightened level of prudence, particularly with respect to transactions that may implicate the Libyan government or its agencies, instrumentalities or controlled entities.

Acting alongside the U.S, other nations and coalitions have recently demonstrated their united opposition against Qadhafi with sanctions of their own. A Reed Smith Shipping Alert addressing the measures taken by the U.S., the United Nations, and the European Union is available here.

This post was co-authored by Reed Smith Intern Henry R. Barnes.