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 THREE

The LNA’s involvement in semi-legal exports

In December 2017, Haftar asked the Interim Government’s Minister of Economy and Industry to issue a series of decisions and laws that would grant the Military Committee exclusive authority over exports of scrap metal and the right to supply fuel to vessels anchored off the Libyan coast.

In addition, law no. 3 (2018) granted the Military Committee exemptions on export taxes and administrative fees, to the considerable competitive advantage of companies and entities owned by the LNA.

Exports of scrap metal: A new source of income for the LNA Successive Libyan governments, including under the former regime, repeatedly banned exports of scrap metal from Libya, which represents a strategic national economic asset used by the country’s steel plants to produce iron and steel products at competitive prices. The National Transitional Council banned exports of scrap metal in 2011.

This policy decision was later confirmed by the Libyan Transitional Government in 2012 and by the House of Iftaa, the highest religious authority in Libya, in 2017.

The country has large quantities of scrap, which were increased by abandoned military vehicles and material from Gaddafi’s army in 2011. A confidential market study of the steel industry in Libya in 2014 reveals that there were between 12 and 21 million tonnes of scrap in Libya.

Local steel and iron production plants, notably the state-owned Libya Iron and Steel Corporation (LISCO), buy local scrap at competitive prices discounted from international market

rates. In Libya, a tonne of scrap was bought by LISCO at an average price of LYD150 (US$108), when international market prices were between US$230 and US$290. However, over recent years, prices of local scrap in Libya have been driven up by illegal exports.

The business is very lucrative, and has benefited armed groups that were in charge of port facilities. On 10 May 2017, in a letter addressed to the House of Iftaa, the Chairman of LISCO said that increasing exports of scrap metal in large quantities and at low prices were presenting ‘a serious threat’ to the national economy.

Authorities in Tripoli and Misrata have therefore tried to enforce the ban on exports of scrap since late 2016. In November 2016, the Municipal Council of Misrata instructed port authorities to enforce the ban, while the GNA’s Ministry of Interior called to cease exports of scrap metal from Libya. However, measures taken to reinstate the ban

after the scrap exports boom in 2014 had limited success. It is estimated that Turkey is currently the world’s major importer of aluminium scrap, and that Libya is now the major exporter.

As the ban on scrap exports was partially enforced in western Libya in late 2016, scrap collectors and dealers, who were more interested in selling their goods on foreign markets in hard currency, started sending shipments to eastern Libya.

Scrap shipments were first sent to al-Breiga port in Tobruk, and later to Benghazi after the re-opening of its port in December 2017.

Exports of scrap sold for hard currency were seen as an opportunity to generate more revenue for groups in charge of the eastern ports, which became the main gateway for Libyan metal scrap.

On 18 December 2017, the Interim Government exempted the Military Committee from the export ban imposed in 2012 by the Libyan Transitional Government.

Besides the fact that the Interim Government lacks international and local legitimacy, this decision demonstrates how the LNA leveraged its military hegemony to its economic advantage.

The decision by the minister to exempt the Military Committee was made after a request signed by Haftar to the Interim Government.

With this, the Military Committee, as well as armed groups affiliated with the LNA, started taking control of the scrap export supply chain.

First, the committee received between US$50 and US$70 for every exported tonne of scrap, sold at an average price of US$150 (which is significantly below international market prices).

Secondly, armed groups affiliated with the LNA started taking over public infrastructure and private properties, dismantling them for scrap metal to sell to wholesalers. Collection of scrap metal has taken a more official form more recently.

In application of the General Commander to collect scrap in the city of Benghazi’. Sources also indicated that LNA appropriated facilities, such as warehouses around oil fields.

Truck convoys headed from oilfields transporting scrap metal to Benghazi and Tobruk were reported on several occasions.

Sources indicated that several senior commanders of the LNA shared the profits generated by this business, triggering tensions between them.

When the port of Benghazi reopened in late 2017, the LNA General Command ordered the closure of the port of Tobruk in December 2017 over allegations of illicit trade practices, just as the Military Committee took control over scrap exports from eastern Libya.

(The port of Tobruk was later reopened following negotiations between the LNA, local authorities and powerful clans in Tobruk.)

At around the same time, in late 2017, the Military Committee imposed a monopoly over supply of fuel to vessels anchored in the country’s eastern ports, arousing suspicions that refined petroleum products were being illegally exported from eastern Libya by the LNA.

Smuggling of refined petroleum products

In 2010, before the Libyan revolution, the country exported 1.65 million barrels of crude oil per day and 594 billion cubic feet of natural gas, which, combined, accounted for 96 per cent of the government’s budget and 65 per cent of its GDP.

Following the revolution, the country experienced a sharp decrease in oil exports, which slumped to 0.4 million barrels per day in 2016, while yearly oil revenues declined from US$40 billion to US$4.6 billion between 2013 and 2016.

Libya has very limited refining capacity, and imports 90 per cent of its refined petroleum products for domestic consumption, a rate that has continued at a steady level since 2011.

The Libyan Audit Bureau estimates that smuggling of refined petroleum products cost the Libyan state around US$20 billion between 2014 and 2017.

Refined products are distributed by four distribution companies, which barely pay for products they purchase and distribute.

To limit exports of refined petroleum products, the Transitional Government regulated exports of strategic goods, giving exclusive rights to export refined petroleum products to the National Oil Corporation.

In the absence of an effective control over exports by state authorities and the exponential rise of smuggled quantities of fuel and diesel, the UN Security Council in June 2017 passed Resolution 2362, which made those (including institutions not acting under the authority of the GNA) who illicitly export petroleum from Libya, including crude oil and refined petroleum products, subject to international sanctions.

A few months later, in August 2017, a GNA-affiliated armed group officially arrested one of the most active smugglers of refined petroleum products in western Libya, Fahmi Slim Bin Khalifa.

His detention, the subsequent arrests of some of the smuggling agents and rounds of fighting that took place in the city of Sabratha along the smuggling route from Zawiya to Zuwara contributed to a significant decrease in smuggled quantities during the first months of 2018.

Smuggling of refined petroleum products by the LNA in eastern Libya by sea

On 28 September 2017, as the fighting was at its peak in Sabratha, 41 Libya’s maritime agencies were informed that the supply of fuel and other oil derivatives to vessels was the ‘exclusive prerogative’ of the Military Committee.

The committee motivated its decision to take control of the trade by a will to (supposedly) ‘preserve national security and interest’, it said.

While some hailed the decision as a positive move towards preventing smuggling of refined petroleum products in the east, others criticized it as merely a cover for smuggling operations.

As it turns out, the record of supplies, registered by the National Oil Corporation, to vessels in Benghazi and Tobruk during the period following the committee’s decision indicated a number of anomalies.

They showed that quantities supplied were higher than vessels’ consumption needs for navigation. Quantities are artificially boosted to be smuggled, notably to Malta.

In 2018 sources working in Libya’s oil sector identified a suspicious pattern among vessels involved in the smuggling of refined petroleum products.

Vessels usually call in the ports of Benghazi or Tobruk, or coast the Libyan eastern shores every three weeks to a month, before sailing to destination ports in Egypt, Malta and Cyprus.

The same sources indicated that close connections between the Maltese and Libyan networks allowed a smooth shift of some of the smuggling activities from Zuwara to the east of the country.

The arrest of Fahmi Slim, the uncertain security situation along the coastal road between Tripoli and the Tunisian border, and recent international sanctions against Mohammad Koshlaf (the man in charge of the Zawiya refinery) all contributed to a marked decrease in smuggled products in 2018 off the west coast.

It is known that there are connections between smugglers in western Libya and prominent eastern Libyan politicians linked to the LNA. On 23 November 2015, Presidency Council member Ali al-Gatrani, in his capacity as the Chairman of the International Investments and Trade Committee of the Libyan House of Representatives, wrote a letter to the Maltese authorities attesting that the company owned by Fahmi Slim was legitimate, adding that its activities would help ‘develop Libya’s economy’.

Al-Gatrani issued another communiqué a few months later claiming that he was not aware of Slim’s smuggling activities. This seems unlikely, considering that many Libyans were already aware of Fahmi Slim’s notorious role in the smuggling business, even prior to the revolution.

On 23 October 2015, Fahmi Slim’s activities were also revealed by the Asia Times and relayed in Libyan media outlets: ‘The smuggling kingpin is Fahmi Slim Mousa Ben Khalifa, aka Fahmi Slim.

Slim, a Zwara native said to be about 45, served a few years of a 15-year sentence for drug smuggling in [the] Gaddafi days before the revolution opened the prisons.’

This episode illustrates that links between persons affiliated with the LNA and smuggling networks of refined petroleum products have existed since 2015. As a matter of fact, al-Gatrani was the major financial sponsor of the LNA in 2014 at the start of Operation Karama.

In parallel to the development of smuggling of refined petroleum products by sea, armed groups affiliated with the LNA continued to benefit from smuggling of fuel and diesel by land, across Libya’s southern borders.

The country’s main fuel depots are controlled by armed groups affiliated with the LNA.

to be continued

***

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.

_____________