WASHINGTON (Reuters) - The United States on Monday gave a green light to sales of Libyan crude oil from rebel-held territory, giving a potential boost to forces battling Muammar Gaddafi.

A U.S. Treasury Department official said Libyan rebels would not be subject to U.S. sanctions if they avoid entities linked to Gaddafi’s regime, which would allow them to sell oil under their control.

“The rebels are not part of the government of Libya. They are not subject to the sanctions,” the official said.

But the rebels, who retook a number of oil fields and terminals in eastern Libya over the weekend and were advancing west toward Gaddafi’s hometown of Sirte, must first establish clear lines of control and payment systems that do not involve Libya’s National Oil Corp, its central bank nor any other government entity, the official said.

U.N. diplomats echoed these sentiments, helping further clarify the status of rebel-held oil, which could provide vital revenues to forces trying to topple Gaddafi.

“There is no U.N. embargo on Libyan oil,” a U.N. Security Council diplomat told Reuters on condition of anonymity. “The rebels can sell oil. But they can’t do it through the Libyan National Oil Corporation.”

No special permission would be needed from the Security Council’s Libya sanctions committee, which oversees compliance with the sanctions, for the rebels to sell oil, envoys said.

The Treasury on February 25 banned U.S. transactions with Libya’s state oil producer, the central bank and other state entities in an effort to cut off revenues to Gaddafi’s regime, in line with sanctions imposed by the U.N. and European Union.

It later put another 14 subsidiaries of the National Oil Corp, or NOC, on its blacklist, which also seeks to freeze any Gaddafi regime assets under U.S. jurisdiction.

With the backing of Western air strikes, Libyan rebels have retaken the main oil terminal cities in eastern Libya, including Es Sider, Ras Lanuf, Brega, Zueitina and Tobruk.

A senior Libyan rebel official said on Monday that rebels were in “active discussions” to have sanctions lifted on sales of oil from east Libyan fields.

Ali Tarhouni, who is in charge of the rebels’ economic, financial and oil matters in Benghazi said the fields were capable of pumping 100,000 to 130,000 barrels per day of crude, and most of this would be exported because of low refining capacity in eastern Libya. Before the crisis began, Libya was producing about 1.6 million barrels per day.

“We hope they will be lifted for the liberated areas as quickly as possible,” Tarhouni said of the sanctions. “Not with everybody, but with some countries.”

QATAR MARKETING PLAN

Tarhouni said he hoped the first shipment associated with a plan to market rebel-held crude through Gulf oil producer Qatar could happen within a week but some “technical details” need to be worked out.

The U.S. Treasury official declined to comment on the Libyan rebel plan. Qatar became the first Arab country to recognize the rebels as the Libyan people’s legitimate representative.

The rebel successes against Gaddafi’s forces pushed oil prices lower. Brent crude futures fell 79 cents to settle at $114.80 a barrel.

The U.S. official emphasized that the Treasury has not altered any of the sanctions on Gaddafi’s regime, which involve freezes on more than $32 billion in assets. But the sanctions do not apply to Libyan entities that are outside of the government and outside of Gaddafi’s control.

One of the NOC subsidiaries subjected to sanctions but controlled by rebels is Benghazi-based Arabian Gulf Oil Co, or Agoco. Its status remained unclear on Monday, but the Treasury had left the door open to a possible lifting of sanctions when it put this exploration, production and refining unit on the blacklist.

“Treasury will continue monitoring the National Oil Corporation’s operations in Libya,” it said at the time. “Should National Oil Corporation subsidiaries or facilities come under different ownership and control, Treasury may consider authorizing dealings with such entities.”

It could keep the sanctions in place, but issue licenses that allow firms to transact business with certain NOC subsidiaries.

A U.N. Security Council diplomat told Reuters that Agoco was “most likely” subject to U.N. sanctions in addition to U.S. and EU measures. However, he said that it would probably be possible to “work something out” so the rebels could sell their oil, such as by creating a new oil export company.

MANY RISKS

Although the clouds over rebel-held oil may be starting to clear from a sanctions standpoint, there are many practical hurdles to oil traders loading up tankers.

Marathon Oil Corp., which has the largest Libyan presence of any U.S. company with 18.8 percent of its total production coming from there, said it is not currently lifting crude oil from Libya given the political and civil unrest, and has no further comment.

Its Waha concession is located in the Sirte basin. Rebel forces were pushing west into that region on Monday.

Trading sources told Reuters they did not think the latest developments would easily unblock Libya’s oil trade, which has been suspended for weeks due to sanctions and heavy fighting.

Firms buying crude would have to be absolutely sure that they are not violating any sanctions before they proceed and establish clear title to the oil, traders said. Finding ship owners and insurers willing to handle cargoes worth tens of millions of dollars may be difficult.

“We need to understand who we are trading with, what sort of company is selling crude, who controls it, who manages it,” a trader with a major oil company said.