* Austria says at least 1.2 bln euros Libya assets in banks
* Unclear how much money tied to Gaddafi and his circle
* Gaddafi son was Vienna student, lived in luxury - media
(Updates with comments from sources and Libyan ambassador)
By Sylvia Westall and Michael Shields
VIENNA, March 1 Austria took steps to freeze any assets of Libyan leader Muammar Gaddafi's family and other associates subject to European Union sanctions, its central bank said on Tuesday.
The bank said around 1.2 billion euros ($1.66 billion) in Libyan assets were deposited in Austrian institutions.
"What part of this relates to people on the sanctions list still needs to be clarified," it said in a statement, issued a day after the 27-nation EU bloc imposed financial and other sanctions on the Libyan leadership.
Sources with knowledge of the procedure played down the idea that the investigation would turn up large sums of money.
"Very little of (the 1.2 billion euros) is likely to be Gaddafi and, if it is, it is not going to have Gaddafi written all over it," one source said.
Gaddafi's son Saif al-Islam studied in Vienna and was a close friend of the late Austrian far-right politician Joerg Haider, accompanying him to the high-profile Opera Ball in 2006.
In Austria, he lived in a luxury villa on the outskirts of Vienna and housed his two white pet tigers in the city's zoo, according to Austrian media.
European powers have called on Gaddafi, in power for more than four decades, to stand down after his attempts to suppress two weeks of anti-government protests.
On top of an arms embargo and travel ban, the EU agreed on Monday to freeze the assets of Gaddafi, his family and government.
The Austrian National Bank declined to give a figure for the total amount of Libyan assets in Austria, which could include property and company stakes.
Authorities need to check carefully whether money has been deposited under pseudonyms, Austrian Foreign Minister Michael Spindelegger said. He told the national news agency APA that Austria would seize any property linked to Gaddafi's circle.
The decree drawn up by the central bank takes effect once it is published in the official gazette on Wednesday.
The Libyan ambassador in Vienna, Ahmed Menesi, called on "Brother Gaddafi" to show courage and resign.
"What is going on in Libya today in terms of oppression and the deliberate murder of the Libyan people is horrific and beyond words," he said in a statement.
Menesi has said he is on the side of the Libyan people but has not resigned, unlike some counterparts in other capitals. (Editing by Kevin Liffey)