Miral Sabry Al Ashry

Libya sits on the largest known oil reserves in Africa and is heavily dependent on revenues from oil and gas exports. In more recent years, it has been controlled at various points by rebels and the Islamic State (IS) group.

As a result of that, oil and gas declined by 50% in 2022 to 145,000 barrels per day, and oil production fell to 700,000 barrels per day in the second half of June, compared to 1,250 million barrels per day before implementing the closures of oil fields and ports

The average price of regular gasoline has topped $4 a gallon in recent weeks in the US, which is nearly 50% more than last year. Natural gas prices have also risen significantly, which has led to an increase in the cost of electricity and home heating.

Since the 2011 revolution and Moammar Gadhafi was killed by rebel forces in his hometown of Sirte, many armed groups have neglected violence by besieging or destroying oil facilities, and some of them were destroyed under the Haftar regime in 2014, which led to the smuggling of oil to Italy, Tunisia and Switzerland, also Libyan oil sector faces frequent obstacles and disturbances from employees, which are related to the closure of oil facilities as a result of protests, terrorist attacks, or military actions that sabotaged important ports and fields to benefit from the oil money and give it to Muslim Brotherhood.

In fact, Libya has retracted its plans to increase oil production to 1.5 million barrels per day in 2022, and this was confirmed by the head of the Libyan National Oil Corporation, Mustafa Sanalla, that the goals of the Libyan oil sector during this year are to maintain the production rates of one million and 200 thousand barrels recorded by the sector last year 2021 oil got only 11% of the budget allocated to the sector.

And in April 2019 oil production declined by 0.1 million BPD at the end of July 2019 and GDP growth is expected to slow down to around 5.5% with average of 17.3% over 2017, and in 2018 got higher average oil production by 1.05 million BPD vs. 0.96 million BPD and steady domestic demand, but the situation changed in 2020 with minus 0.6% and stabilize around 1.4% , resulting in a GDP per capita at 61% level.

In 2022, inflation will persist at minus 2.8% and the budget deficits will remain high by 10% of GDP, as well, the current account surpluses will steadily decline from 7.3% of GDP to 1.4% and reserves will stabilize around US$ 91 billion.

However, since the oil crisis, the National Oil Corporation had developed a plan to increase production to reach 1.5 million barrels in early May 2022, but found obstacles and difficulties in financing, as the institution obtained 11% of the required budget in relation to the income.

It garnered debts amounting to two billion and 953 million and 941 thousand Libyan dinars. As for the liquidation, it reached about 3 billion and 700 million dinars. With the payment of the deficit for the year 2020, only 746 remained from the allocated budget of a million dinars, equivalent to only 136 million dollars.

Libya needs to increase oil production, but the biggest challenge is that the networks were established 60 years ago and have not been renewed and therefore must be replaced. But this is not possible because the oil and gas companies do not have the budget due to the divisions between the competing forces stationed in Libya East and West which hold the country’s economic activity hostage.

The NOC has largely been able to remain neutral in the face of political bickering. Thus, efforts to rebuild oil and gas infrastructure will need funds ranging from $46-81 billion.

There are other problems in securing investment in infrastructure, electricity, water, and health care. However, in the areas of finance, health, transport, trade, and public services there is a “certain chaos in the activities of the private sector in Libya.”

In financial terms, the Libyan economy is divided into three main sectors that are considered a strong economy: banking (83%), insurance (16%), and investment (1%). Comparing inflation officially stood at 26.3 percent in 2018. In fact, inflation will rise by up to six times in 2022.

This situation mostly comes as a result of smuggling, as businessmen and their activities contribute to its heavy dependence on oil revenues, and the agreements signed between Libya’s International Monetary Fund and the World Bank (WB) allowed Libya to benefit from a positive circumstance.

After the 2011 revolution, public funds were unwisely spent on many state institutions due to the high expectations of the population and the budget deficit widened to tax and customs revenues. As money was spent in 2015, 36 percent of the central bank’s reserves were used to pay for the national budget and try to rebuild the country.

In 2016, 70 percent of the budget was withdrawn from the reserves, and the country’s currency reserves of 120-130 billion dollars burned at a rate of 20 billion dollars annually, which means that only an estimated 20-30 billion dollars are left.

Biden’s and Oil Diplomacy

President Joe Biden focused on “making peace in the Middle East” by persuading Saudi Arabia to sign a normalization agreement with Israel. And pressure on Saudi Arabia to increase oil production. Persuading OPEC to expand production targets by a few hundred thousand barrels per day because Libyan oil production is unreliable.

But stabilizing Libya could quickly return between 500,000 and 1 million barrels per day to the market. It will also deal a strategic blow to Russia, and support Europe during the coming periods. But it is necessary to speed up making peace by holding elections, as the occupation of fields and stations in areas controlled by mercenary forces for revenue, Haftar cost Libya more than 3 billion dollars in lost oil revenues.

Another political attempt by the Prime Minister of the Unity Government, Abdel Hamid Dabaiba, to support the efforts of the Special Adviser to the United Nations Secretary-General on Libya, Stephanie Williams, to get to the elections as soon as possible, and those elections are the only option for Libyans, and that Libya needs the efforts of the United Nations mission in order to come up with the constitutional rule that will be the basis for conducting this national entitlement.

The United States focused on an economic mechanism to push the Central Bank of Libya and the Libyan National Oil Corporation to address the investigation into the unfair distribution of oil revenues, and if the situation continues in this way, chaos may occur due to the demonstrations and people’s demand for electricity, that there is no connection between power cuts and the closure of oil facilities>

The people of the Oil Crescent are working on the fact that the money will not go to corruption or theft, that they will lift the ban on oil exports and that the decrease in production Libya has increased by about 600,000 barrels per day since the beginning of 2022, which is equivalent to a decrease of more than twice the increase of OPEC.

In fact, the United States has a neutral mechanism for distributing oil revenues, first forcing Haftar to lift any closure of oil installations before accepting him in any political process. As a US citizen, his assets can be frozen and a civil lawsuit filed against him in Virginia, where he has been accused of torture since 2014.

Second, Egypt must choose either to defend Haftar, and this will harm American interests. Haftar’s exclusion of Egypt is responsible for resuming Libyan oil production with the help of Turkey. It was President Joe Biden’s goal to see Libya as a stable country after suffering for years under a cruel dictatorship.


Miral Sabry Al Ashry is an Associate Professor at Future University (FUE), Political Mass Media Department.


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