Libya Tribune

The dominant role of the Libyan National Army

By Noria Research

This report is based on interviews conducted with a range of actors in Libya, Tunis, Cairo and Istanbul, including businessmen, administrators, victims of armed groups, LNA dissidents, local notables and others.

Some interviews were conducted remotely. The report also draws from information contained in official documents, some of which are confidential and are not sourced in this paper.

PART TWO

The LNA’s use of force: Racketeering, extortion, and misappropriation of public funds

Urban warfare and militia-like behaviour in Benghazi, 2014 to 2017

During the three years of fighting in Benghazi between May 2014 and July 2017, pitting the LNA against a coalition of jihadists and revolutionary hardliners, armed groups affiliated with the LNA developed an economy of predation, taking possession of property by force and exploiting resources within the territory they controlled.

Proliferation of weapons and the absence of the rule of law allowed armed groups to take possession of private properties and public facilities. Certain ethnic groups were forced to flee the city, mostly people originating from Misrata and other parts of western Libya.

Individuals and families were targeted by LNA-affiliated armed groups for allegedly belonging to or supporting terrorist organizations, even if they had no specific political or ethnic affiliations.

Witnesses’ reports indicated that individuals were kidnapped, detained, tortured or killed, and their properties were taken over by members of local armed groups.

During this period, the behaviour of LNA-affiliated armed groups was similar in many aspects to patterns observed in other urban warfare theatres, operating along lines of territorial control, and carrying out racketeering and extortion.

By mid-2017, following the announcement of the LNA’s victory in Benghazi, there was growing popular discontent towards the behaviour of armed groups, and the LNA leadership attempted to limit their activities.

However, as the LNA attempted to impose greater control over their armed groups in Benghazi, senior officers of the LNA also became predatory in their activities, demanding a share of economic assets and investments.

A more systematic and organized form of predatory behaviour was put in place by commanders of the LNA, and coordinated by the Military Investment and Public Works Committee (referred to in this report as the ‘Military Committee’).

The Military Investment and Public Works Committee

The Military Investment and Public Works Committee was first established by the LNA General Commander by decision 56 (2016) but had remained inactive until the nomination of Air Force Colonel al-Madani al-Fakhri on 5 June 2017 to head the Committee.

The committee was officially designed to oversee and coordinate the LNA’s economic activities and increase its military and production capacities.

Following the appointment of al-Fakhri, the committee was tasked to take charge of the LNA’s fixed and movable assets that had been accumulated over previous years, to run the LNA’s export businesses and to generally manage the LNA’s economic activities.

Article 4 of the LNA’s General Command decision to appoint al-Fakhri states that ‘all productive and services projects belonging to the armed forces, as well as their movable and fixed assets are transferred to the Military Committee’.

Article 5 adds, ‘The Office in charge of military properties is affiliated with the Military Committee.’

Commanders behind the creation of the Military Committee used their positions to extort local businessmen, alternating threats with offers to provide protection.

Reports of such practices were corroborated by testimonies given to the author.

Extortion took several forms. A prominent businessman, known for his role in providing direct financial support to LNA-affiliated groups in Benghazi between 2014 and 2017, shared the details of a meeting with a senior commander of the LNA after having been summoned to his office, during which he was asked to provide financing through the LNA leadership.

Another businessman reported that warehouses and homes belonging to him were taken over by units of the LNA. He managed to save his family home only after a court decision that found he was the rightful owner.

He said that one of his warehouses was dismantled to be sold as scrap metal, which was exported by the Military Committee.

Another businessman was forced to pay a bribe of hundreds of thousands of dollars to a certain LNA commander to permit him to undertake a business investment in Benghazi.

Such examples of racketeering and extortion carried out by LNA leaders were motivated not only by a need to finance the LNA’s expenses, but also by fierce internal competition for money and power.

However, this process of concentrating economic resources in the hands of the few at the top of the LNA’s pyramid was met with resistance by local armed groups, notably those that had benefited from the state of lawlessness in Benghazi in previous years.

In July 2018, a local armed group affiliated with the LNA’s Special Forces took over the headquarters of the Military Committee in Benghazi, publicly accusing its head of ‘misappropriation of funds allocated to the wounded of the LNA’.

The occupying group also blocked access to Benghazi’s port in a show of force to demonstrate its capacity to interrupt the Military Committee’s export activities.

As well as expropriating private assets and extorting private economic actors, the LNA developed a strategy of taking control of public infrastructure and other economic assets, transferring them to the management of the Military Committee.

To take a few examples, the General Commander transferred the control of the three major production projects in eastern Libya to the Military Committee in October 2017:

(a) al-Sarir Production Project,

(b) al-Kufra Agriculture Project, and

(c) al-Kufra Settlement Project.

Al-Fakhri appointed the military to take over and manage the projects but provided no legal or economic basis to justify this decision.

Although these enterprises do not seem to constitute valuable economic assets, this decision is nevertheless significant, in that seems to correspond to a systematic predatory behaviour on the part of the LNA to become the most important, if not the only, economic actor in eastern Libya, where it has been in control of political affairs, the media and religious affairs (through a network of Salafi clerics).

Now it is also in control of the economy.

In September 2016, the LNA succeeded in taking control of key oil infrastructure in the Oil Crescent, allowing exports of crude oil to resume under the supervision of the state-owned National Oil Corporation.

Oil terminals had been under blockade by a local armed group between summer 2013 and September 2016.

In March 2019, the LNA’s takeover of the al-Sharara and al-Fil oilfields places most of Libya’s oil infrastructure under its control.

The international community has repeatedly warned against any attempts to establish parallel export channels in Libya, emphasizing that only the Tripoli-based National Oil Corporation can legally export oil from Libya.

To this day, the LNA does not seem willing to change that status quo, a stance that seems to have been taken to allow the LNA to gain some international respectability and become an essential Libyan interlocutor in dialogues with the international community.

As mentioned in the Introduction, the LNA was not endorsed by the internationally recognized GNA, and its legal status remains uncertain.

The HoR granted the LNA legitimacy in March 2015 but did not provide it with the mandate to undertake economic activities. It was only in November 2018, two years after the establishment of the Military Committee, that the HoR passed law no. 3 (2018), granting the Committee and the General Commander extensive control over economic affairs, which will be detailed in later sections.

This law provides a ‘legal’ basis for expropriation of private and public properties, with retroactive effect.

Paragraph 6 of Article 6 of the law states: ‘The Committee has the right to assign, cancel or transfer ownership of assets, estates and land properties falling under its authority to affiliated apparatuses, affiliated or contracted companies in accordance with Libyan laws.’

The term ‘falling under its authority’ is ambiguous and allows room for interpretation. However, given that many private and public assets are today under the direct control of the LNA or groups affiliated with it, it would seem to have been drafted to legally authorize de facto possession of properties.

And it would seem to simultaneously encourage predatory behaviour and compel landlords to sell their properties at very competitive prices in Libya’s east.

Several accounts have confirmed this pattern, even if information on property transfers is still missing at this stage. Paragraph 7 of Article 6 states that the Committee has authority to ‘acquire assets, estates and land properties required for its economic and investment activities’, without adding further conditions.

Given the LNA’s undisputed political and military hegemony in eastern Libya, and in the absence of any control mechanisms, such legal sanction will probably help the LNA leadership to become eastern Libya’s primary property owner.

Misappropriation of state funds and access to cash

The LNA have also used force in their strategy to misappropriate cash. LNA commanders have used blackmail to extort cash from public servants and bank employees. There have been incidents of armed groups kidnapping the relatives of targeted individuals and blackmailing them for money.

The director of a commercial bank operating in eastern Libya said that he has been threatened by people linked to the LNA to release cash from CBL deposits contained in one of his bank’s branches in eastern Libya.

The banking sector has been a primary source of financing of armed groups in Libya, including the LNA. The CBL finances and distributes quotas of letters of credit to each bank, which, in turn, distributes letters of credit to its branches.

A confidential report issued in 2018 indicated that letters of credit issued by banks in eastern Libya between 2016 and 2018 reached more than LYD1.5 billion (US$1.08 billion). The report added that letters of credit did not comply with required procedures, as established by the CBL.

The report also indicated that most entry ports for imported goods are in western Libya, which made it difficult for the authorities to verify if imported goods matched

the descriptions given on invoices presented to the issuing banks, especially given the political division between western and eastern Libya.

On behalf of the importer, banks issuing a letter of credit will provide a financial guarantee to the exporter in hard currency deposited in a correspondent bank abroad. The payment usually takes place upon verification of the goods.

However, in the absence of efficient controls over the banking sector and customs authorities in Libya, letters of credit granted to businessmen or private individuals linked to armed groups were in reality used to buy hard currency at the official rate of LYD1.4 to US$1.

Hard currency is then injected into the Libyan currency black market through a network of currency brokers and sold at the black-market rate, which fluctuated between LYD4 and LYD9 to $1, from 2016 to 2018.

This has resulted in draining the country’s reserves of hard currency and depreciating the value of the Libyan dinar, leading to an unprecedented liquidity crisis and a significant rise in commodity prices. In reality,

fraudulent use of letters of credit has been widely observed across the country, but mostly in Tripoli and Misrata, since 2013.

Recent reforms introduced by the Presidency Council have attempted to limit the impact of this phenomenon by reducing the gap between the official exchange rate and the black-market rate of the dinar to the US dollar.

A letter of credit is a guarantee from a (Libyan) bank stating that a local buyer’s payment to a foreign seller will be correct and made on time. Banks typically require a pledge of securities or cash as collateral for issuing a letter of credit, as well as charging a service fee.

The scheme is similar to document for collection, with a slightly different mechanism, and the fact there is no annual quota for transactions. In fraudulent transactions, the buyer obtains a letter of credit for a much larger sum than the imported goods are worth.

This corrupt scheme was a large source of revenue for currency brokers and their accomplices, including leaders of LNA-affiliated armed groups. The transfer of large quantities of hard currency abroad is a violation of Libyan law, which bans the practice outside conventional banking channels agreed by the CBL.

Nationwide networks of currency brokers have flourished with the scam, and it has had ramifications overseas, notably in the United Arab Emirates (UAE), Turkey and Tunisia. The same networks were also used to smuggle money out of the country.

In a television report broadcast on al-Hadath TV (reportedly owned by Haftar), the governor of the Eastern CBL announced that the bank had recovered €45 million worth of damaged banknotes, which were transferred from the CBL branch in Benghazi to the new headquarters of the Eastern CBL in January 2018 under the protection of LNA navy units.

The governor added that €25 million worth of the damaged banknotes were sold by the Eastern CBL to local currency brokers at the official exchange rate of LYD1.7 to 1 euro. Local sources in Benghazi said that currency brokers who bought the banknotes were linked to a prominent LNA commander.

Large quantities of the damaged banknotes were then smuggled abroad where they were exchanged against ‘new’ banknotes for around 80 per cent of their nominal value. The new banknotes were later injected back into the Libyan currency black market where they were exchanged for an average price of LYD5 (US$3.58) for €1.

Similar financial schemes involving smuggling of hard currency have been very common in Libya over recent years, not only constituting a violation of Libyan law, but also draining the country’s reserves of hard currency.

Competition to take control of Libya’s reserves of hard currency continues. Law no. 3 (2018) passed by the HoR provides the Military Committee with privileged access to hard currencies (see Article 26, ‘The Central Bank of Libya has a legal obligation to provide the Military Committee’s bank account with requested amounts of hard currency, in accordance with the law.’)

Alongside its predatory strategy of expanding its property acquisitions and gaining access to the country’s cash reserves, the LNA has also taken control of a number of illegal export businesses.

to be continued

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Noria (Network of Researchers in International Affairs) is an independent network of political analysts and researchers. It brings together specialists around shared methods and objectives, producing and disseminating fieldwork-based research and political analysis. Noria also provides political analysis for decision-makers, and fosters public dialogue and reflection on key international issues.

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