U.S. to hit Libya with sanctions, shuts embassy

WASHINGTON (Reuters) - The United States announced on Friday it would soon impose sanctions on Libya and bluntly said the legitimacy of longtime Libyan leader Muammar Gaddafi had been "reduced to zero."

White House spokesman Jay Carney did not specify what the measures were or when they would be imposed but said the sanctions would be coordinated with European allies.

With the Libyan crisis also being taken up at the United Nations, European Union governments agreed on the idea of imposing an arms embargo, asset freezes and a travel ban on the oil-producing North African nation, with diplomats saying a formal decision would be taken early next week.

Washington announced the sanctions move -- along with the closing of its embassy and withdrawal of U.S. diplomats -- after a chartered ferry and a plane carrying Americans and other evacuees left Libya earlier on Friday.

The Obama administration had been criticized for its relatively restrained response so far to Gaddafi's bloody crackdown on an uprising against his four-decade rule.

But U.S. officials said fears for the safety of the Americans had tempered Washington's response to the turmoil.

"(Gaddafi) is overseeing the brutal treatment of his people ... and his legitimacy has been reduced to zero in the eyes of his people," Carney said after Libyan security forces shot protesters in the streets of Tripoli on Friday.

"We are initiating a series of steps at the unilateral level and multilateral level to pressure the regime in Libya to stop killing its own people."

President Barack Obama discussed Washington's sanctions plan with the leaders of Britain, France and Italy on Thursday and Turkish Prime Minister Tayyip Erdogan on Friday.

CLINTON TO DRUM UP SUPPORT

The Obama administration said earlier this week it was studying a wide range of options, including the freezing of assets, a travel ban on members of Gaddafi's government, a "no-fly" zone over Libya and military action.

In a first step, the U.S. Treasury has told American banks to closely monitor transactions that may be related to unrest in Libya for possible signs that state assets were being misappropriated.

Several U.S. energy companies in Libya -- including Marathon, Hess and Occidental -- have continued working through the crisis as other foreign firms have curtailed or suspended operations.

If sanctions gain traction internationally, then Libya's oil output could be restricted.

"Although Libya is not a big supplier to the U.S., any sanctions imposed by the U.S. -- particularly on doing business with that country -- means the U.S. or other countries affected will still have to tap other suppliers," said Peter Beutel, president of trading consultants Cameron Hanover.

In New York, the U.N. Security Council was considering a French-British draft proposal for an arms embargo, financial sanctions and a request to the International Criminal Court to indict Libyan leaders for crimes against humanity.

The White House did not express direct support for the proposal but said it was discussing it with members of the Security Council, including the other four permanent members -- China, Russia, Britain and France.

Secretary of State Hillary Clinton will push for unity against Gaddafi on Monday at the U.N. Human Rights Council.

Washington once dismissed the Geneva-based council as toothless but Charles Ries, director of the Center for Middle East Public Policy at Rand Corporation, said it might be a good venue to build consensus.

"The U.N. Security Council is a very risky proposition if, for example, the Chinese were not in favor of voting a resolution, and I don't think the administration feels confident that it has all of those ducks lined up," Ries said.

The United States resumed diplomatic ties with Libya in 2004 after Gaddafi agreed to abandon his pursuit of weapons of mass destruction.

U.S. economic sanctions were progressively removed after Libya agreed to accept civil responsibility for the bombing of Pan Am Flight 103 over Scotland in 1988.

(Reporting by Jeff Mason, Patricia Zengerle, Alister Bull, Andrew Quinn, Paul Eckert, David Morgan and David Lawder and Luke Baker in Brussels; writing by Ross Colvin; Editing by John O'Callaghan and Peter Cooney)