Report: Gaddafi uses gold to fund Libyan army

Libyan leader Col. Muammar Gaddafi.

JEREMY HOBSON: There's word this morning that the American-led military campaign has cut Libya's air defenses in half. The military action follows economic sanctions and a freeze of assets associated with Muammar Gaddafi. But a report in this morning's Financial Times says Gaddafi is sitting on so much gold that he and his army will be well-funded for some time, sanctions or not.

Jack Farchy wrote the story for the Financial Times and he's with us now from London. Good morning.

JACK FARCHY: Good morning.

HOBSON: So how much gold are we talking about here? And where did Gaddafi get it?

FARCHY: Well the Libyan Central Bank holds about 144 tons of gold according to the IMF. We suspect that actually it may hold a little bit more than that. And that's gold that they've had for quite a while. They bought it probably in the 80s, the 90s, the early part of this decade.

HOBSON: And the reason that this is such a big issue obviously is because Gaddafi can use this gold to pay the people who are fighting for him.

FARCHY: Exactly, and the gold price, as I'm sure you know, has shot up in the last decade. So 144-, 150 tons of gold is worth something like $6.5, $7 billion at the moment at current prices. The central bank is running quite short of hard currency because of the sanctions that have been put in place by the U.S. and European countries. So if he can sell the gold, he's got a source of an awful lot of hard currency that could keep him going for a lot longer.

HOBSON: And you write in your story today that gold is a particularly attractive currency for criminals and dictators.

FARCHY: Well, indeed. It's a currency which is very hard to trace, and of course unlike a dollar, or a euro, it doesn't rely on any government for its value so it was very easy. If Gaddafi can get the gold out of the country, it can be melted down and then it's impossible to know where it's come from.

HOBSON: Jack Farchy, reporter for the Financial Times. Thanks so much.

FARCHY: Thank you.

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