UPDATE 1-Italy won't oppose LIA on EU sanctions list-source

Mon Mar 7, 2011 12:21pm EST

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ROME, March 7 (Reuters) - Italy will not oppose European Union sanctions on Libya being extended to include the Libyan Investment Authority, which holds stakes in UniCredit (CRDI.MI) and Finmeccanica FIA.MI, an Italian source familiar with the matter said.

European Union member states are set to add the $70 billion Libyan sovereign wealth fund to the embargoed list on Tuesday if none of the EU's 27 member states voices an objection, diplomats have said. [ID:nLDE7261J9]

Italy has so far refused to freeze Libyan stakes in Italian companies, saying Libyan entities like the LIA are not included on the EU assets freeze list and that Italy would not adopt unilateral initiatives to freeze them. The LIA's addition to the EU sanctions list would force Italy to freeze those holdings. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a factbox on Italy-Libya investment, click on: [ID:nLDE7260SZ] For the latest on the conflict, click on [ID:nLDE7260G5] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The LIA and Libya's central bank together own about 7.5 percent of Italian bank UniCredit. The LIA also holds 2 percent of defence and aerospace giant Finmeccanica. Libya also owns stakes in soccer club Juventus (JUVE.MI), automaker Fiat FIA.MI and a small stake in oil company ENI (ENI.MI)

Other European countries have been more aggressive in their pursuit of assets linked to Gaddafi and his top aides, but Italy -- Libya's closest Western ally until a few weeks ago -- has been cautious about takinga vigorously anti-Gaddafi stance.

Mindful that Libya supplies a quarter of Italy's crude oil needs, Italian Prime Minister Silvio Berlusconi has pursued warm ties between the two nations and signed a friendship treaty in 2008 that included a $5 billion reparations deal.

Libyan officials have also actively scouted opportunities for investing in Italy in the last couple of years, and Italian companies have benefitted from contracts for energy and infrastructure projects in Libya. (Reporting by Giselda Vagnoni; Writing by Deepa Babington; Editing by David Holmes)

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