10/04/2011 12:55 EDT | Updated 12/04/2011 05:12 EST

$2.2 billion in Libyan assets out of deep freeze; thawing slowly: official

OTTAWA - Canadian officials have yet to entirely thaw $2.2 billion in Libyan assets, more than three weeks after Foreign Affairs Minister John Baird ordered them freed for use by the country's transitional council.

The Harper government went to the United Nations Security Council to get a special dispensation in order to quickly free the funds for humanitarian purposes.

But a senior Foreign Affairs official told a House of Commons committee Tuesday that it's still the subject of negotiations.

"This is a complicated process," Barbara Martin, director general of the department's Middle East bureau, told the foreign affairs committee.

Part of the problem is the convoluted way the funds are being held. The cash is in U.S. dollars, but located in the Canadian branches of British banks.

Martin told MPs the process of getting at the money is "largely complete," and Libya's interim government needs to decide where to direct the cash.

The federal government imposed the asset freeze and a ban on financial transactions with the government of Libya soon after the uprising against dictator Moammar Gadhafi began last March.

Canada was among several countries to the take step under the direction of the United Nations, a worldwide effort in which $168 billion was locked down.

But after recognizing the National Transitional Council, the loose affiliation of rebel groups responsible for toppling Gadhafi, Ottawa went to the UN for an exemption to quickly free Libyan assets held in Canada.

"These funds will help the Libyan people in the short- and the medium-term," Baird said on Sept. 13. "Whether it's helping to pay for police officers, or teachers, restoring electricity or water or helping to ensure hospitals have what they need to operate, this money will help the new government of Libya get back on its feet."

Although Tripoli fell to the rebels weeks ago, heavy fighting continues in the cities of Beni Walid and Sirte, Gadafi's hometown.

NDP Opposition members on the Commons committee said they wanted to know what Canada is doing to deliver humanitarian assistance in those embattled regions and also worried about Canada's post-war aid plans, which are largely still on the drawing board.

"As you're probably aware, it's tough to deliver humanitarian assistance when bombs are dropping. You know, we are very concerned about the safety and security of humanitarian workers," said Leslie Norton, who heads the humanitarian assistance directorate at the Canadian International Development Agency.

A Red Cross convoy carrying relief into Sirte, a once-sleepy fishing village, was forced to turn back Monday after it was caught in a hail of gunfire, according to multiple reports from the region.

The International Committee of the Red Cross (ICRC) did manage to get into the city of 75,000 last week and reported that thousands of civilians are trapped and caught in the crossfire.

Martin said Canada has yet to fully determine how it will help in post-war Libya and is waiting to see what the United Nations and other countries are planning.

But she suggested Ottawa could contribute police trainers and do capacity-building in other institutions, such as the courts.

Rebuilding would not be as daunting a task as in some other nations that have been part of pro-democracy revolts sweeping the region. Despite 42 years of dictatorship, Libya has oil wealth and many ex-patriot citizens who are well-acquainted with Western democratic institutions, Martin told the committee.