The Complex Interlocking of the Libyan Crisis

By Karim Mezran & Alessia Melcangi

After so many years of civil war, it has become evident that competition among various actors is principally over the country’s resources and control of its financial institutions.

PART ONE

In the last days of September 2020, Libya’s oil industry seemed to be on the verge of restarting its production after Gen. Khalifa Haftar announced the reopening of the oil fields and terminals that he had occupied and closed in the course of his offensive against Tripoli.

The main damage caused by Haftar’s blockade is the dramatic plummet of oil production to less than 100,000 barrels per day (bpd) from the previous 1.2 million. The importance of the oil and gas industry in Libya cannot be underestimated since it is the main driver of the Libyan economy and accounts for about 60% of the country’s GDP.

Oil production revenues and the dividends from oil sales are one of the main causes of the conflict that has been continuously ravaging the country since the fall of Qadhafi in 2011.

The announced reopening represents good news that bodes well not only for a real resumption of political talks between the warring parties, but also for a more general improvement of the economic and social condition in the country, which is now on the verge of collapse.

After the January 2020 blockade, the quick shutdown of oil sales led to a budget collapse: In April 2020 oil production data showed a drop of more than 80% with a loss of more than $10 billion in oil revenues.

The economic impact of this stoppage directly hit the Tripoli-based National Oil Corporation (NOC), preventing the company from fulfilling contracts with international oil companies.

After so many years of civil war, it has become evident that competition among various actors is principally over the country’s resources and control of its financial institutions.

According to the 2015 UN-backed Libyan Political Agreement, the Tripoli government headed by Fayez Serraj retains control of the Tripoli-based NOC and oversees the allocation of state funds deposited in the Tripoli-based Central Bank — these are the two channels through which oil revenues can flow legally and the only two institutions recognized by the UN Security Council.

Haftar and the Eastern government accuse Tripoli of mismanaging hydrocarbon revenues and state funds, using them to fund militias backing the Government of National Accord (GNA), and failing to carry out reforms to stabilize the economy. For this reason, the Eastern authorities demand a change of leadership in both institutions: The Central Bank and the NOC.

Indeed, the problem for Haftar has always been that he controlled oil production, but not oil revenues. After almost a year locked in a stalemate, the situation on the battlefield was reversed in April 2020.

Thanks to Turkey’s military support, the GNA was able to counterattack and defeat the Haftar-controlled Libyan National Army (LNA) and push them back to the gates of the city of Sirte near the “oil crescent,” a coastal area home to most of Libya’s oil export terminals.

The ceasefire proposed by the GNA at the end of August 2020 and accepted by the Tobruk parliament and its spokesman, Aguila Saleh, has restarted the political dialogue between the conflicting parties.

Meanwhile, the malcontent of the population in both Tripoli and Benghazi, due to the deterioration of living conditions and lack of economic reforms, led to protests and demonstrations in both cities.

The eventual success of this ceasefire could lead to an agreement between the main factions on the management and redistribution of economic resources. This eventual agreement in the economic sphere could be an essential first step towards reaching a positive agreement around the political issues.

Nevertheless, albeit essential, the possibility of reaching an agreement remains uncertain because of the complex of different and often conflicting interests both within Libya and outside of the country. These interests are difficult to resolve due to deep institutional divisions, mistrust accumulated by the failure of the Shkirat agreement, and divergent strategies between Libyan actors and external players.

On Sept. 18, 2020, a very important step toward improving the situation occurred. GNA’s Deputy Prime Minister Ahmed Maiteeq reached a deal with Haftar’s LNA to lift a nine-month blockade on Libyan oil assets.

The immediate effect was that the NOC could gradually reopen the fields and terminals that it designates as being “safe” from armed groups. This first initial opening allowed the production of oil to reach 270,000 b/d, up from around 100,000 b/d. Unfortunately, this initial positive step on the economic level has not been matched by an improvement on the political stage, where a new phase of tensions appears ready to emerge among rival factions.

Beyond the decision to reopen the oil fields, the new proposed deal also includes an economic settlement over oil revenues, involving the creation of a mixed joint technical committee with participation of representatives from both regions.

This mixed joint technical committee would have the task to ensure fair distribution of revenues, avoiding their utilization to finance militias, and, simultaneously, to resolve financial disputes between the two conflicting sides.

This oil deal definitely represents an excellent opportunity for Ahmed Maiteeq, Libya’s Deputy Prime Minister, who could take advantage of this pact to overshadow Serraj and reposition himself within the Tripoli government.

At the same time, this deal provides an escape route for Haftar, whose position after the failure of the attack on Tripoli has been faltering in the East, as well as within the ranks of his external sponsors. However, the Maiteeq oil deal appears to

be impractical since the agreement would cancel the debt contracted by the East in years of financial mismanagement and parallel monetary policy by absorbing it within the Western national debt.

This means that, paradoxically, the Tripoli Central Bank would have subsidized Haftar’s war on Tripoli and all the destruction it caused. Even more serious is the problem linked to the establishment of the joint technical committee, which would infringe on the legal jurisdiction of the Central Bank by directly acquiring oil proceeds to distribute nationwide, thus jeopardizing the ndependence of internationally recognized Libyan economic institutions.

Finally, this agreement, signed in Sochi, appears to be sponsored by Russia and not under the auspices of the UN or the respective leadership of both Libyan governments. This is more than enough to provoke the disappointment of several actors within the GNA, the Central Bank and the NOC.

The oil controversy will inevitably weigh on the apparently reactivated political dialogue, as the next struggle seems to be over oil revenues funneled through the Central Bank.

Haftar’s declaration over the restart of oil production comes after Sarraj announced his desire to resign from his position by the end of October. This action will inevitably bring out deep internal tensions within the various components of the GNA.

At the same time, Abdullah Al-Thani, prime minister of the Eastern-based government, resigned from his position following public riots over corruption and deteriorating living conditions in Benghazi.

In the midst of this confused scenario, rogue militias, criminal organizations or terrorist groups could take advantage of this political vacuum and increase their activities, particularly in Southern Libya.

Despite the proliferation of official meetings and under-the-table deal-making, either led domestically or sponsored by international actors, the situation within the Libyan context seems more fragmented than ever with GNA and LNA supporters no longer cohesive but internally divided and in competition for diverging interests.

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Karim Mezran is a Resident Senior Fellow at the Atlantic Council’s Rafik Hariri Center for the Middle East.

Alessia Melcangi is a TT Assistant Professor of Contemporary History of North Africa and the Middle East at Sapienza University of Rome.

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The Foreign Policy Research Institute