Petroleum profits, control and fragility in Libya
Matt Herbert and Emadeddin Badi
IMPACT OF OIL AND GAS RESOURCES ON STATE FRAGILITY
Libya is often regarded as a textbook case of a rentier state suffering from a resource course due to its overreliance on the export of natural resources – chiefly, oil – as part of its broader political economy.
Indeed, Libya’s economy is heavily dependent on revenues from the petroleum products sector, which represents over 94% of total exports as well nearly 60 % of GDP.2 Until 2011, political control by Muammar Qaddafi’s Jamahiriya (‘State of the masses’) was largely sustained by the regime’s ability to control oil infrastructure, sustain production and profit from oil revenues.
The oil economy gave Qaddafi’s government the financial ability to head-off dissent by providing jobs in an overinflated public sector, offering subsidies on a host of consumer goods, as well as targeted patronage to key notables.
It also allowed for the funding of a wellequipped and large security and intelligence apparatus. The actions of the Qaddafi government in the first days of the 2011 revolution underscored how its oil resources allowed for a dual-track approach to limiting unrest.
Even as security and military forces were ordered to supress unrest in Benghazi and areas in the east of the country, Qaddafi publicly announced that wages and subsidies would be raised, and that financial disbursements would be provided to all families.
The attempt to buy support failed, however. The revolution expanded and overthrew the Jamahiriya, leading to the execution of Qaddafi. It also dislocated the levers of his governance system.
The failure to introduce macro-economic and security reforms to a now-transformed Jamahiriya produced a counterintuitive relationship between the political economy of oil production and the country’s socio-economic and political developments.
With Qaddafi’s demise, the ‘system’ lost its main architect and manager, as well as the monopoly on violence and control over oil rents. The result was an inherently fragile governance system suffering from institutional sclerosis, which paradoxically retained some features of Qaddafi’s system. In practice, the centrality of oil production and Libya’s economic reliance on the resource was perhaps the only constant in post-revolutionary Libya.
Mired by corruption, Qaddafi’s subsidy system collapsed. However, the policy of allocating government jobs, initially designed to create clientelist relations, was abused to appease increasingly disenfranchised communities, leading to massive recruitment in the public sector. This was seen, among others, in the PFG, which became one of the mediums to collect a salary for many of the communities living in the vicinity of oil facilities.
More broadly, the public sector became a burden, with budgets of successive dysfunctional transitional governments ballooning, saddled by hiring sprees and salary hikes. However, throughout the post-revolution period, oil and gas production continued – though exports waxed and waned – bringing tens of billions of Euros in revenue to the state annually.
The sheer wealth that the extraction of oil and gas resources afforded Libya’s centralized authorities had a stabilizing effect on Libya’s macro-economic situation and allowed a feeble government to continue to provide salaries and services even during substantial political and military conflicts.
It also enabled politicians, notably Government of National Unity (GNU) Prime Minister Abd al-Hamid Dabaiba, to pursue political strategies predicated on economic patronage, leveraging state (rather than personal) resources. Crucially to this was the continued functionality of the NOC, which remained largely apolitical and unitary.
A key factor helping to further this unity was the insistence by the international community that only exports from this entity are legal. When other actors, notably in eastern Libya, attempted to export oil on their own, the international community – in particular, the United States – took aggressive steps, including seizing a North Korean tanker, to halt the practice. This approach has been arguably one of the only truly successful international interventions in Libya since 2011 and has been essential in limiting further fragility and fragmentation.
Petroleum product exports have so far allowed Libya to avoid the challenges faced by other states encountering situations of protracted instability and fragility, such as economic collapse, substantial internal and external population displacement, and the supplanting of the government as a service provider by contending nonstate armed groups.
Oil and gas profits have allowed for a remarkably stable instability in Libya, with the situation for stakeholders not becoming catastrophically worse, even as the state remained divided, with largely ineffective institutions and an often-limited ability to address underlying spoilers.
Libyan crude oil production, 2005–2021, in thousands of barrels per day. Source: Organization of the Petroleum Exporting Companies (OPEC) However, even as Libya’s oil and gas resources have allowed for this idiosyncratic stable instability, the central importance of the resources has produced its own challenges.
An under-emphasized effect of the post-revolution loss by the Libyan state of its monopoly on violence, and the later hybridization of the security and defence sectors, is that it also brought to the fore a new challenge for post-revolutionary Libyan authorities: ensuring the protection of Libya’s oil and gas producing infrastructure, much of which was dispersed across large, often remote zones in the southern, central, and eastern areas of the country.
Actors in these areas – including communities, armed groups (some of them nominally incorporated into government structures) and political entrepreneurs – came to perceive oil and gas infrastructure as a target and a tool for achieving personal or political goals.
At the local level, declining government security capacity led communities in oil and gas producing areas to use the disruption of oil production or transport to assert claims for a greater share of the country’s earning from petroleum products, or to demand jobs at the facilities.
The most long-standing example of this is the 2013– 2016 shutdown of oil exports from central Libya’s Oil Crescent, which was justified as the expression of local demands for an equitable division of petroleum product profits.
Despite a resolution to the crisis, involving promises of developmental support and payment to PFG forces, communal frustrations largely remain. ‘There have been no direct military attacks [on the Oil Crescent facilities], but there have been many recent attempts by social and civil groups of tribal notables and youth to impact operation.
The reasons for this were [economic] marginalization and [poor] job opportunities for young people.’ Interview with contact in the Oil Crescent, November 2021 A similar dynamic exists in the Fezzan, where declining living standards, perceptions of marginalization, and frustration over a lack of local employment at the alSharara and El-Feel oilfields drove the emergence of the Fezzan Rage protest movement, which led to a shutdown of the al-Sharara field in 2018.
The shutdown lasted three months, but as with the Oil Crescent, government promises of support had little practical impact on the ground, leading to further threats and several brief disruptions. One survey conducted in the Fezzan in 2021 found continued high levels of frustration in the area, with some 18% of youth surveyed supporting actions against oil and gas export infrastructure in order to capture government attention and response.
Armed groups, primarily hybrid PFG units, have also looked to take control over infrastructure as a means for pressing demands. These primarily have revolved around unpaid salaries or political disputes.
In January 2021, for example, the PFG unit in Tobruk closed the Marsa el-Hariga export terminal, claiming they had not been paid since September 2019. Eleven months later, PFG units in the country’s west, at the al-Sharara, El-Feel, al-Wafa and al-Hamada fields staged a similar protest, shutting down production to demand unpaid salaries and the resolution of other grievances.
The history of protests by PFG units underscores that grievances and blockades are a systemic, national challenge, not linked to just one region or unit. Finally, control of the export infrastructure for petroleum products has been instrumentalized by political entrepreneurs as a means of waging economic warfare.
The 2013–2016 Oil Crescent shutdown had echoes of this, with PFG commander Ibrahim Jadhran leveraging his control over the situation to gain political benefits vis-à-vis the Libyan government. However, if Jadhran pioneered this approach, the Libyan Arab Armed Forces (LAAF) under Khalifa Haftar more fully adopted it as a tool of war, recurrently shutting down oil and gas production and/or exports in order to support both military initiatives and political objectives.
A contact in the Oil Crescent explained that the PFG unit there ‘implements the instructions of the General Command of the army to allow or stop the export based on direct and public instructions from Field Marshal Khalifa Haftar.’
As detailed below, the most long-standing closure attributed to Haftar occurred during the 2019/2020 war for Tripoli; however, LAAF instrumentalization of its control to pressure national and international actors for political goals has been pervasive and, at the time of writing, continues.
It is notable that neither terrorism nor armed clashes figure highly as dynamics threatening Libya’s oil and gas industry. Such incidents have occurred in the past, with the Islamic State staging high-profile attacks on export infrastructure in the Oil Crescent and on the NOC headquarters in Tripoli, while rival armed groups have clashed over control of the El-Feel oilfield in the Fezzan. However, at present, such incidents are rare and are not among the primary drivers of disruptions in the export of petroleum products, with threats of disruption rather emanating from communities, the PFG and political actors.
As one Fezzan contact noted in late 2021: ‘LAAF control on oil facilities in [oil] area[s], including the ElFeel appears very tight, preventing any possible security challenges or disruption. However, the oil sector in these areas remains fragile due to LAAF politicization of [it], therefore enforcing closure on production, and Zintani PFG up in Nafusa mountains turning off the pipeline taps to pressure for delayed salaries.’
As communities and actors in the country’s internal conflict came to view control of oil and natural gas infrastructure as both as a means of self-funding and as a political bargaining chip with the government and the international community, the costs to the NOC and the Libyan government have mounted.
The 2013–2016 shutdown of exports from the Oil Crescent, for example, were reported by the head of the NOC to have ‘cost the country over $120 billion in lost revenues and most of its financial reserves.’ With Libya a rentier state, the losses resulting from disruptions and diversions to the country’s oil exports are not only detrimental to its short-term stability, but also its longterm economic prospects and the ability of its institutions to operate.
In broader terms, the inability of the PFG to protect oil infrastructure, and prevent the active instrumentalization of oil as spoilers, is a hindrance to stability and impedes the solidification of centralized control.
Only by solving the problem of adequate protection of oil infrastructure – alongside the introduction of appropriate economic interventions – can this cycle of self-perpetuating instability be broken. Given the PFG’s mandate, the group’s conceptual and practical centrality to such an effort cannot be understated.
Dr Matt Herbert is a Senior Expert at the Global Initiative Against Transnational Organized Crime (GITOC), managing research activities for the North Africa and Sahel Observatory (NAS-Obs). He specializes in transnational organized crime, fragility, stabilization, and security-sector reform and governance. He holds a PhD in International Relations from The Fletcher School of Law and Diplomacy, Tufts University.
Emadeddin Badi is a Senior Analyst at the GI-TOC, focusing on the Special Projects Portfolio of the NASObs. He specializes in governance, post-conflict stabilization, hybrid security structures, security-sector reform and peacebuilding. He holds an MSc in Violence, Conflict and Development from the School of Oriental and African Studies (SOAS), University of London.