Ivory Coast's Gbagbo seizes 4 international banks

ABIDJAN, Ivory Coast – Ivory Coast's incumbent leader who is clinging to power seized four major international banks Friday that had closed their operations earlier this week, attempting to pay civil servants amid a deepening liquidity crisis.

The spokesman for the sitting president Laurent Gbagbo read a decree on state TV late Thursday saying that the banks closed without giving the three months notice required by Ivorian law.

Ahoua Don Mello said the government would take over the offices for Britain's Standard Chartered, France's BNP-Paribas and Societe Generale along with U.S. bank Citibank.

On Friday, all four banks' head offices were still shuttered, and soldiers and policemen loyal to Gbagbo were posted outside the two French banks.

Between them, these banks hold virtually all of the bank accounts for civil servants, and their closures had sent panic through Ivory Coast's biggest city, with hundreds of people lining up desperate to withdraw cash.

The banks' closure "is part of the will of the international community to suffocate Ivory Coast," Minister of Communications Gnonzie Ouattara told the press Friday. "The government felt obliged to take this measure to alleviate the suffering of Ivorians."

Shaun Gamble, spokesman for Standard Chartered Bank in London, said "Our position hasn't changed from a couple of days ago when we said that given the increasingly challenging operating environment in the Ivory Coast, we have decided to temporarily suspend our operations there until it is safe to reopen." Gamble said they would continue monitoring the situation.

Both Societe Generale and BNP-Paribas declined immediate comment on Friday.

Gbagbo's government would nationalize the banks in order to pay February's salaries, Don Mello said. It is unclear, however, how Gbagbo will access the banks' funds.

Gbagbo has already nationalized the central bank, the electricity company and the stock exchange in an attempt to keep the Ivorian economy running amid increasing international financial pressure.

The European Union announced targeted sanctions in December and January on nearly 100 of Gbagbo's closest allies as well as key institutions like the ports.

"These sanctions are hitting home now," said Joseph Lake of the London-based Economist Intelligence Unit. "This move shows and increasing desperation on Gbagbo's part."

Even if Gbagbo is able to open the banks Monday, it's unlikely to solve the underlying economic problem in Ivory Coast, Lake said. "It's not that there aren't enough assets in the country to pay these salaries, it's that there's not enough cash," he said.

Banks began shutting down earlier this week and currently total nine, including Nigeria's Access bank and Ecobank. France's Societe Generale, the country's largest financial institution, announced it was shuttering all 47 branches of its local subsidiary serving 230,000 clients.

The international community had said it would use financial sanctions to dislodge Gbagbo, who is refusing to step down although results issued by his country's election commission and certified by the United Nations showed he had lost the Nov. 28 ballot by nearly 9 percentage points.

Among the sanctions slapped on Gbagbo's regime was the revocation of his signature on state accounts at the regional central bank, known by the French acronym BCEAO, which prints the currency used in Ivory Coast.

Once that happened late last month, the Gbagbo government was no longer able to make deposits into the private banks where government salaries are cashed.

Gbagbo responded by nationalizing the BCEAO office in the country and attempted to set up an ad-hoc national central bank. When the BCEAO threatened to sanction any bank dealing with Gbagbo's central bank, the private banks started closing their doors.

The move was expected to prevent public and private employees from receiving their salaries and once the first banks closed on Monday, panicked people lined up desperately seeking to take out their savings in fear of a cash shortage.

Now, it's unclear how Gbagbo will obtain enough liquidity to keep the economy from freezing up.

Last week, U.S. Ambassador Phillip Carter III said that Gbagbo has been shaking businesses down for cash by sending armed men to demand payment of taxes in cash.

He may resort to emergency methods of obtaining cash like having a fire sale of state assets, Lake said.

But Gbagbo's government maintains that it will have no problem paying salaries next week.

"There isn't an economic problem in Ivory Coast. There isn't a problem of liquidity in Ivory Coast," the communications minister said Friday. "All our problems are political."

Diplomats and analysts have been wagering that once civil servants stop receiving their pay, they will defect en masse away from Gbagbo. He is still backed by the army which has brutally cracked down on supporters of opposition leader Alassane Ouattara, who has been unable to assume office even though he is internationally recognized as the winner of the vote.

An African Union appointed panel of five African presidents is due in Abidjan on Monday to meet with both sides in the power struggle and propose a binding solution. But it's unclear whether their propositions have any chance of being listened to.

Gbagbo's camp has already dismissed a handful of previous mediators and said last month it would not accept any solution that contradicted the constitutional council, which proclaimed Gbagbo winner.