By Tim Eaton

The extraordinary story of Libya’s overseas investments and seemingly endless battles over their control.


Attention is once again focused on Libya as the political process being convened by the United Nations (UN) has agreed the appointment of a new interim government to see Libya through to elections at the end of 2021.

But, while the ongoing failure of governance in Libya continues to make international headlines, the impact it leaves on the management of Libyan state assets overseas receives minimal coverage – even though this impact is highly significant for the people of Libya.

Since 2006, the country’s investments in global markets have been made principally through a sovereign wealth fund – the Libyan Investment Authority (LIA). And yet, after all this time, it remains unclear precisely what the total value of the LIA’s assets are, even to its current leadership. The commonly-cited estimate of the LIA’s value is $67 billion.

Problems of structure and governance have persisted as the LIA struggles to escape the legacy of the Muammar Gaddafi regime. The LIA was formed not just as a means of allocating the windfall from the sale of oil and gas for the benefit of future generations, but also as a tool for distributing patronage and leveraging political influence.

Since the 2011 revolution, the LIA has been a battleground. Interests entrenched from the Gaddafi era have sought to preserve their stake while new actors work to wrestle control of parts of the organization.

And these Libyan battles have been exported to courtrooms around the world – from London to the Cayman Islands – while the UN asset freeze on the LIA does not in reality cover all of its structure, meaning some elements remain up for grabs.

Examining these dynamics, and the story of how the LIA came to prominence, provides extraordinary insight into what has happened to the wealth of the Libyan population, as well as highlighting what external states – in whose markets the LIA still engages – should be doing about it.

Early investments and the debate over the ‘mujanib’

In 1977, the Italian car giant Fiat was struggling. On the hunt for investment it obtained $400m from Libya, the country’s first such major investment.

The resulting shares in Fiat were held by the Libyan Arab Foreign Investment Company (LAFICO). But as Fiat’s fortunes improved in the 1980s, it reportedly feared that the Libyan investment could be an impediment to entering the US market because of allegations at the time of Libyan support for international terrorism.

Libya sold its shares in 1986 for $3 billion, a huge profit, which was placed in a new investment vehicle, the Long-Term Portfolio (LTP). But sinking global oil prices and the sanctions on Libya following the 1988 Lockerbie incident made similar international forays difficult.

Although the OilInvest Group emerged in 1988 after the Libyan state purchased Tamoil – a fuel refining and distribution company – the imposition of sanctions in 1992 saw Tamoil’s corporate structure amended to place the majority of its shareholding into non-Libyan ownership, seemingly to insulate the company from the impact of the sanctions.

More was possible in African markets, to which Gaddafi pivoted to further his political influence, and a stream of investments overseen by Bashir Saleh – known as ‘Gaddafi’s banker’ – were made before being formalized as the Libya Africa Investment Portfolio (LAIP) in 2006.

By now a significant surplus was being generated, but Libya’s budget remained under strict control as oil prices were high and running costs low – so the ‘mujanib’, essentially meaning ‘leftovers’, needed investing somewhere.

At the time, the Libyan market had limited absorptive capacity and the rather frugal leadership of Libya’s existing sovereign institutions were cautious. But a younger group of leaders, including individuals such as former Libyan prime minister Shukri Ghanem, argued for the establishment of a sovereign wealth fund.

In 2006, a resolution within Libya’s then legislature, the General Peoples Committee (GPC), created the Libyan Investment Authority (LIA) as an investment department for regular and alternative investments, with around $8 billion of funds.

Coming in from the Cold

The LIA’s emergence came just as Libya was being rehabilitated by the international community, and the financial world’s elite jetted into Tripoli to court Libyan investment. But a political power struggle was also now underway within Libya over which of Gaddafi’s sons would succeed their father, and institutional islands of influence were emerging along with different visions for how Libya should be governed.

The LIA fell under the influence of Gaddafi’s eldest son Seif al-Islam and the fiscally-liberal crowd surrounding him – such as Mohamed Layas who became the first CEO of the LIA and his deputy Mustafa Zarti. The pair built up the LIA investment portfolio, but generated losses from 2007-2009 which cast a shadow over the organization still apparent today. Insiders have suggested Seif was the real power within the organization.  

The scale of these losses became clear in a 2010 KPMG audit of LIA assets. The report, leaked and released publicly in 2011, made for grim reading as it identified five funds which made a loss of 23 per cent on a $1.4 billion investment, despite the market overall increasing 25 per cent in the previous year. Interestingly, it also valued the LIA’s overall assets in September 2010 at $64.2 billion.

The audit was timely as lawmakers had recently decided to consolidate all of Libya’s major overseas investment vehicles under an expanded LIA. Law 13 (2010) brought LAFICO, the LTP, OilInvest, LAIP and the Libyan Local Investment Development Fund under the aegis of the LIA. In the words of Ahmed Jehani, a former Libyan minister who has worked with the LIA in various guises, the law had created a ‘humpy dumpty’ of five subsidiaries and around 550 companies.

Revolution, Upheaval and Division

With the end of the Gaddafi regime in 2011, the LIA along with many other Libyan state institutions became embroiled in a post-revolutionary struggle for control, hindering necessary reform.

Although Layas was retained as chair by the interim governing authorities, Zarti distanced himself from the organization and was replaced by Rafiq Nayed as acting CEO.

The first post-revolution prime minister, Abdelrahman al-Keib, appointed Mohsen Derregia as chair and CEO in April 2012 to replace Zarti and Nayed. He inherited an LIA that, despite the passing of Law 13, had not truly united. He complained there were no audited accounts since 2008 and that he received no official handover.

Derregia decided to hire PwC to help fill in gaps in the accounts from 2009-2011, Deloitte to conduct an audit to value the assets of the LIA and its subsidiaries on the books, and Oliver Wyman to develop its investment strategy and reform governance.

He also noted the value of the assets owned by the LIA had been treated as fixed at the historic price and not independently valued. The systems established in the Gaddafi era meant nobody was prepared to report losses even if they came due to a global financial crash.

But Derregia insists he felt there was resistance to change and transparency from the outset, saying: ‘When I arrived, I found out that all of the departmental managers [for the LIA] had been given a one-month holiday.’ He chose to replace the managers of all the LIA main subsidiaries – LTP, LAICO, LAFICO, OilInvest, and LLIDF – calculating they had either not been performing appropriately, or dealing inadequately with concerns over possible mismanagement of the funds, or even both.

Derregia also says he tried to replace several LIA directors because, he felt they were subject to potential conflicts of interest as they worked, or had worked, with firms that received investments from the LIA. But support from the prime minister – who was the chair of the LIA board of trustees by virtue of his government position – was not forthcoming. This brought Derregia into conflict with the new board of directors over allegations that appointments were being made without appropriate due process.

As relations with the board of directors worsened, Derregia was removed by newly appointed prime minister Ali Zidan in March 2013 after less than one year in post. He was replaced by Abdulmagid Breish in June 2013.

Breish again brought in the major international firms – Deloitte to value assets and undertake forensic accounting, and Oliver Wyman to use the information collected by Deloitte to benchmark the LIA against leading sovereign wealth funds, and to develop a strategic roadmap.

Breish also wanted to investigate what happened in relation to some of the major investments in the LIA’s early years – identified as what he termed ‘$5-6 billion of highly suspicious’ assets – but his time as chair and CEO was curtailed by the new highly controversial Political Isolation Law which barred those who held leadership posts in state institutions under Gaddafi from holding them again. Breish was removed from his position in June 2014, timing that he noted coincided with his investigation into the assets.

He was succeeded by Abderahmane Ben Yezza as LIA Chair and CEO.  The nature of Ben Yezza’s appointment – whether it was temporary, while Breish fought his case in court, or permanent – is contested. This would have a bearing on the future dispute over leadership of the organization.

Meanwhile, following the disputed June 2014 parliamentary election results, Libya had once again descended into civil war. The House of Representatives – the newly-elected, albeit contested, parliament – relocated to the east of the country citing security concerns and would appoint a new ‘Interim Government’ based in the eastern city of al-Bayda. But many members of the House of Representatives did not relocate.

A reconstituted rump of the General National Congress (GNC) subsequently appointed its own ‘Government of National Salvation’ in Tripoli. 

The existence of two governments led to administrative chaos. The absence of both a unified and universally recognised executive and legislative led to the emergence of parallel leaderships of state institutions and undermined any checks and balances that did exist in Libya’s governance. The LIA was no exception.

In October 2014, the eastern-based Interim Government – then the only government in Libya – appointed LIA board member Hassan Bouhadi as the new chair and CEO of the LIA. Bouhadi, citing the same security concerns, set up the LIA office in Malta following the conduct of a memorandum of understanding with the Maltese government.

Then in April 2015, the LIA board of trustees – made up of the executive members of the Tripoli-based Government of National Salvation – actioned a decision by the Libyan court to overturn the ruling of the Political Isolation Committee against Breish and reinstate him as chair and CEO of the LIA.

This led to an ongoing dispute as to whether Breish could return to his position or whether Bouhadi had already succeeded Ben Yezza, meaning that there was no position to which Breish could return.

Practically, this meant the Tripoli headquarters of the LIA was controlled by Breish and the Malta office was controlled by Bouhadi – the LIA was split, albeit with all board members but Ben Yezza reporting to Bouhadi.


Tim Eaton is a senior research fellow in the Middle East and North Africa Programme at Chatham House. His research focuses on the political economy of conflict in Libya.





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