Community Dynamics and Economic Interests
By Tim Eaton, Abdul Rahman Alageli, Emadeddin Badi, Mohamed Eljarh, and Valerie Stocker
This paper is based on approximately 200 interviews carried out by the authors – in person and remotely – with a wide range of Libyan actors between November 2018 and September 2019. This the paper does not claim to cover all armed groups in the country.
PART FIVE
Access to state resources and assets
The hyper-centralization of Libya’s official system of governance – though not, of course, of de facto rule – means that control of the capital confers a significant degree of control over the distribution
of state resources and assets. The various approaches used by armed groups in Tripoli to raise finances are overwhelmingly based on extracting resources from the state.
Their methods differ in terms of the scale of funding targeted, but one way or another all rely on permutations of the following: salaries and direct payments; unofficial transfers via state, public or private institutions (e.g. through the shadow economy, taxation and the monetization of security services); and de facto expropriation of state assets (e.g. through control of critical infrastructure).
It is rare for armed groups to focus exclusively on one source of income, as different modalities often overlap or complement each other, thus rendering diversification both lucrative and relatively easy to pursue.
Salaries are drawn from chapter 1 of the state budget, which is proposed by the GNA and negotiated with both the Tripoli-based CBL and the Interim Government (which negotiates disbursements to the east of the country).
Chapter 2 of the budget covers operational costs – e.g. of equipment and arms – for the defence and interior ministries. It is also used to allocate funding for contractual work, security provision, catering and cleaning services.
Contracts offer an alternative means of payment for armed groups. Contractors (essentially consultants) are not subject to the same salary grids as state employees, and their contract pay can therefore be much higher.
All members of the Tripoli ‘quartet’ benefit, in part, from access to chapter 2 funding for operational services. While an average monthly
salary for a member of an armed group in Tripoli is around LYD1,500 (based on contractual work), rates are believed to vary significantly from group to group, depending on the terms negotiated.
The SDF, for example, is believed to have negotiated higher salaries than other groups. In contrast, many members of the TRB lack access to state salaries, instead leveraging the TRB’s influence over political and economic networks to generate income.
The four groups usually contend that they lack official income streams to underwrite their operational costs, though in most cases the cleaning and catering companies servicing each group are covertly owned by its leadership.
Physical control of state institutions provides a key source of revenue. Tripoli’s armed groups have devoted much effort to securing control over areas of the capital that contain public sector offices, markets, banks and companies.
Payments of protection money to the ‘quartet’ are largely perceived as an unavoidable operating cost: indeed, state-owned institutions and public companies specifically allocate a portion of their budgets to paying Tripoli’s groups to ensure security in their locality.
In some cases, physical control of an office building has enabled an armed group to add its members to the payroll of the institution in question and/or secure lucrative contracts.
In 2018 the Nawasi Brigade, which controls access to the headquarters of the Libyan Investment Authority (LIA), used violence to compel the LIA’s management to recruit and employ its fighters.
When the LIA’s management resisted, the management team was forced to move out of Tripoli for several months. A plan to relocate its headquarters away from the Nawasi Brigade’s territory met with strong opposition from the armed group.
The brigade also forced the Libyan Foreign Investment Company (LAFICO) to place a commander’s relative on its board. In the private sector, the most lucrative protection rackets have been those targeting banks. Little coercion has been required in these instances, because armed groups have often been the only viable option for providing security around banks and ensuring the effective distribution of cash.
Armed groups have utilized the networks they have developed in this way not only to leverage their access to letters of credit (LCs) but also to derive revenues through credit card schemes.
These schemes have involved exploiting the difference between the official exchange rate and the black-market rate. Among other mechanisms, armed groups have obtained pre-charged credit cards at the official rate.
They have then hired ‘mules’ to carry the cards abroad and withdraw foreign currency, which has been funnelled back into Libya, at times through hawala networks. Tripoli’s armed groups have also sought to compensate for losses of direct state-derived income (i.e. from the Ministry of Defence or Ministry of Interior) by charging monthly fees to the banks.
Importantly, the provision of protection services around banks has given armed groups privileged access to liquidity, of which there was a critical shortage in the banking sector between 2014 and late 2018.
Other protection services appear to have been set up on a consensus basis. Abdulghani al-Kikli (known as Ghneiwa), who exercises tight control over the Abu Slim Central Security Unit which he commands, has instituted a taxation mechanism to raise revenues that are subsequently reinvested into public works in the areas under his group’s control.
It appears that the mechanism is informally implemented, yet sensitivities remain about how it operates and what exactly is entailed.
In conversations with residents of the Abu Slim neighbourhood, Chatham House was told that any member of Ghneiwa’s entourage who divulges details of the taxation scheme’s operations is likely to be subject to physical violence.
The Abu Slim Central Security Unit does not have the same access to resources as some of its rivals in Tripoli. This may explain why it still consistently relies on kidnapping to raise income.
Some interviewees for this paper alleged that, unlike when people are kidnapped or imprisoned by the SDF for indeterminate periods, those kidnapped by the Abu Slim Central Security Unit are usually freed upon receipt of a ransom.
Over the period 2014–18, armed groups increasingly relied on import/export fraud involving the use of LCs as a financing mechanism. Around $58 billion in overseas financial transfers appear to have been paid via LCs between 2012 and 2017.
It is difficult to assess how much of this total was fraudulent, but the figure is likely to have exceeded $5 billion in 2012–18.
In 2016, the Libyan Audit Bureau found that more than $570 million worth of fraudulent LCs had been issued in the first 11 months of the year; it is reasonable to assume that this figure falls far short of the total sums involved.
Since then, the Libyan Audit Bureau has been denied access to the CBL’s database of Lcs, preventing similar investigations, although the CBL contends that its decision to remove restrictions on companies applying for LCs in 2018 means that this is not an obstacle to transparency.
Initially, collaboration between armed groups and black-market dealers relied on the latter to provide expertise in navigating the trade finance system. Yet by 2018, the armed groups had gained expertise of their own in these processes.
As Tripoli’s armed groups have cemented their control over the capital, the level of coercion needed to obtain LCs has diminished. Initially, collaboration between armed groups and black-market dealers relied on the latter to provide expertise in navigating the trade finance system – e.g. advising
on the use of front companies and financial channels – in return for the armed groups ensuring the ready approval of LC applications (something that the traders on their own were unable to guarantee).
Yet by 2018, the armed groups had gained expertise of their own in these processes.
They had developed front companies and financial channels, had cemented connections with their own members (or affiliates) and politicians, and had embedded fully operational units inside state institutions.
The pre-existing quid pro quo with black-marketeers was thus obsolete. With armed groups now increasingly unaccountable and enjoying full control over the city, they were able to develop their own networks of profiteers.
The scheme deployed to profit from LCs was determined by the influence and capacity of each armed group. Such dynamics also illustrate how businesses have remained willing to fund armed groups in return both for protection and for the use of the latter’s coercive capacities in furthering their commercial interests.
Infiltration of state institutions has made it easier for armed groups to access state resources without the need for violence. A notable example was the appointment of the son-in-law of the Nawasi Brigade’s leader as the head of the budget department at the Ministry of Finance.
Such tactics indicate that armed groups are intent on taking over decision-making within state institutions to ensure access to resources, while avoiding coercion unless necessary.
At the same time, the ongoing conflict in the capital has reduced the ability of Tripoli’s armed groups to extract resources and rents from the state.
The arrival of non-Tripolitanian armed groups in the capital after Haftar’s offensive in April 2019 – as well as the prominence of Fathi Bashagha, the minister of interior, as the key GNA figure responsible for resourcing the war effort (and also as the intermediary with Turkey for the coordination of military support) – has diminished the influence of some local groups.
Infighting has caused the TRB, in particular, to decline in prominence. On the other hand, the Nawasi Brigade’s revolutionary ideology and wide mobilization in response to the LAAF offensive have allowed it to garner significant influence within and around Tripoli, to the detriment of rival groups from the capital.
The Nawasi Brigade also benefits from the fact that several of its members are part of security ‘teams’, such as the Special Operations Forces, that report directly to the Ministry of Interior and are thus well supplied.
The discrepancy between the Nawasi Brigade’s superior access to equipment supplies (through official state channels) and the access available to other groups is wide.
Intra-group variations in economic activity
The extent to which revenues are distributed within Tripoli’s armed groups varies significantly. For example, many TRB fighters and officials do not receive state salaries, instead having to raise revenue individually through diverse means.
The nature of the group’s revenue-generating model means that, in the words of one TRB member interviewed for this paper, ‘the trickle-down in TRB is very limited’.
The interviewee added: We aren’t usually made aware of the way money goes in and out. However, what is visible to us is the discrepancy between commanders, who possess large amounts of cash along with fancy and expensive cars, and rank-and-file fighters who would only be receiving salaries or some form of compensation for being on active duty.
These comments indicate that the most lucrative revenue-generating activities are concentrated in the hands of a limited number of group members.
It is worth noting that most of the TRB’s official members (i.e. those affiliated to the Ministry of Interior) are in fact demobilized most of the time, but that they still utilize their TRB connections as a means of generating income.
Members of the TRB have adopted a number of approaches in this regard, reflecting the group’s status more as a network than as a clearly defined armed group.
Some have sought to enter political life: a number had planned to run in the elections anticipated in 2018 – although the elections did not ultimately take place.
Others have managed to get appointed to positions in various ministries and institutions, or have utilized their connections to secure positions on the boards of private businesses.
Our interviews with Tripoli residents indicate that the SDF, meanwhile, raises revenue by appropriating money, goods and materiel during raids and arrests.
One interviewee asserted: Not one single piece of information is disclosed regarding where the money that the SDF seizes from raids on drug hubs ends up. [The group] also resells most of the cars that it seizes, which creates avenues through which it can create income, supply itself and build up its own power.
Unlike with other armed groups in the capital, there is little evidence that SDF funds are concentrated in the hands of its top commanders. Revenue distribution appears to be organized through a formal payroll, with rank-and-file members receiving generous salaries.
For revenues generated illicitly, it is likely that individual members and units operate with a degree of autonomy from the SDF’s leaders, although the revenues are likely to be shared among the subgroup involved.
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About the Authors:
Tim Eaton is a senior research fellow with the MENA Programme at Chatham House, where he focuses on the political economy of the Libyan conflict. Tim previously worked for BBC Media Action, the BBC’s international development charity, on projects in Iraq, Egypt, Tunisia and Libya, and helped to set up and manage its Libya bureau from 2013 to 2014.
Abdul Rahman Alageli is an associate fellow with the Middle East and North Africa Programme, based in Tripoli, Libya. He is currently an adviser to the GNA Chief-of-General Staff of the Libyan Army. Abdul Rahman previously worked with the stabilization team of the Libyan Prime Minister’s Office in 2011 before becoming the national security file coordinator in the Office of the Libyan Prime Minister and a member of the Libyan government’s National Security Coordination Team until 2015.
Emadeddin Badi is a researcher and political analyst who focuses on governance, conflict and the political economy of Libya. He has worked with multiple international development organizations and business risk firms as a consultant, and his analysis has been published widely.
Mohamed Eljarh is a Libyan affairs specialist who has covered Libya’s developments since 2011. He is the co-founder and CEO of Libya Outlook, and he acts as the regional manager for CRCM North Africa in Libya. Previously, Eljarh worked with the Atlantic Council and Foreign Policy magazine.
Valerie Stocker is a researcher who has studied Libyan politics and society extensively, mostly focusing on the southern region. She has worked with various development organizations since 2013, conducting fieldwork and analysis on conflict dynamics, peace processes, migration and other subjects. Valerie was based in Tripoli for several years starting in 2008, and has previously worked as a freelance journalist and business risk consultant.
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