Jason Pack & Stefano Marcuzzi
Part 2) Enter Hifter, Trump, and Twitter: The Struggle for Reunification and Transparency
Due to its semi-sovereignty, opacity, and critical importance to the post-Gadhafi economy, the CBL has become central to the narrative wars waged by various conflict actors, especially Turkey, France, the Gulf states, and Russia.
In this section, we examine the steps taken toward reunification and greater transparency, the key role and proposals of the U.S. and the broader international community, and how the whole process got bogged down by competing conflict narratives and dynamics emanating from the Enduring Disorder.
The role of the CBL in Libya’s economic and political life was a key — though often overlooked — driver of the April 2019-June 2020 war for Tripoli.
Much of Hifter’s rhetoric involved claims that he would take over the CBL and change how Libya’s wealth was distributed. Even though he lost the war, the post-war settlement, hashed out through the U.N. and various mediated east-west meetings, such as the Ras Lanuf summit, required the CBL to
1) assume the debt of the eastern commercial banks, but also to
2) reunify and reform itself. It is unclear if the first point has happened. Yet even agreeing to it in principle sets quite a precedent — arguably a first in world history, where the winning side of a civil war has agreed to pay off the debts of the losing side, considering the rebels’ military expenses as legitimate government expenditure.
The second point rests in an even more ambiguous state. Rather, 2021 and 2022 have witnessed the veneer of reforms, audits, and reunification with various vague pronouncements.
A range of conflict actors have presented the international community with a fig leaf of banking reforms, just as the 2021 electoral process was a complex act of multifaceted window dressing — designed by multiple conflict actors to mask that the underlying power realities were not in fact changing.
During the Tripoli war, the CBL had paid the salaries of armed groups on both sides — considering them legitimate government expenditures, just as it had during the 2014-15 civil war. But this time — in the absence of an approved national budget — the bank directly funded the GNA above and beyond its prior spending commitments via a vague reference in the Skhirat Agreement about extraordinary “financial arrangements.”
In addition to its close government ties, the CBL was allegedly connected to three other entities:
1) Certain global PR and lobbying firms hired by the GNA but paid for, and utilized, by the CBL (Mercury LLC and others);
2) Tripolitanian armed groups like the Nawasi or Rada that at different times have controlled the territory that the CBL building is located on and intimidated CBL staff, leading to accommodation of their demands;
3) Islamist-aligned political figures in Misrata and Khums, which, according to myriad rumors in the anti-Islamist milieu, were closely tied to the Central Bank governor.
Given the preexistence of these networks connecting CBL staff to compromised actors and the widespread belief that access to country’s wealth was being distributed via preferential access to letters of credit, removing Kabir and taking control of the CBL in Tripoli was a key propaganda driver and possibly even a genuine motivating factor for Hifter’s failed assault on Tripoli in 2019-20.
The underlying causes of the war are rooted in Russian, Emirati, Saudi, and Trumpian desires to see the ascendence of anti-Islamist strongman and the inability of Western democracies to coordinate consensus solutions.
Although CBL reform was merely a faux casus belli for pro-Libyan National Army (LNA) social media, previous oil blockades in 2018 had actually been resolved via U.N. mediation with the promise of a CBL audit.
Therefore, in the wake of the Tripoli war, when a new roadmap to national elections and constitutional transition was discussed in the Libyan Political Dialogue Forum (LPDF) in autumn 2020, the reunification and reform of the western and eastern central banks was presented in the Economic Working Group, which is a follow-up committee from the Berlin process, as a necessary condition for sustained peacemaking. However, progress on this front has been glacial.
Much of the politics of our current era is a battle over narrative. In Libya, the battle over the CBL is no different. In late 2021, as a condition for the ceasefire to hold, Kabir and Ali al-Hibri, then head of the CBL’s eastern branch, agreed on a four-stage plan to move forward with the unification of the two central banks, detailing the plan during a subsequent meeting in Tunis on Jan. 20, 2022.
Western players, particularly the U.S. and the U.K., gave strong support to the initiative, as evidenced by a number of official contacts between the U.S. Ambassador to Libya Richard Norland, the U.S. Deputy Assistant Secretary of the Treasury Eric Meyer, the U.K. Ambassador to Libya Caroline Hurndall, and Kabir and Hibri throughout February.
However, the plan was largely part of an attempt to control the narrative rather than unify the bank. Connected to this process was the Deloitte audit of the CBL and the separately contracted and paid for Deloitte reunification project.
The big four auditing firms had all previously declined the opportunity to audit the bank and according to knowledgeable sources Deloitte’s efforts have been based entirely on figures that the CBL has provided.
In short, the audit has not been forensic but rather about narrative making. An expert we spoke to postulated that “the U.N. calculated that the audit was best utilized as a route to reunification rather than accountability.”
By putting the cart before the horse, it has delivered neither. However, by the end of March, even the narrative making process had slowed down. Kabir came under pressure from actors in Tripolitania who opposed the unification of the banking sector because it would cause the western CBL to shoulder significant debts incurred by the eastern branch during Hifter’s Tripoli campaign.
On Feb. 21, Abd al-Salam al-Safrani, the leader of the Muslim Brotherhood-aligned Justice and Construction Party collective within the HSC, generally considered to be allies of the CBL, even called for Kabir’s removal.
At the same time, Kabir overtly supported the new Government of National Unity (GNU) Prime Minister Abdul Hamid Dbeibah and devised ways around the 1/12th budget agreement to fund numerous of Dbeibah’s populist policies (like marriage grants and the restarting of construction projects) designed to channel financial incentives to his supporters.
Cyrenaican players once again lamented Kabir’s “partisan attitude,” and a desire for a change in the leadership of the CBL was central in the negotiations and agreements between Libyan and foreign actors challenging the legitimacy of Dbeibah’s government after the failed December 2021 elections and supporting the formation of the Government of National Stability (GNS), to be led by former GNA Interior Minister Fathi Bashagha.
Bashagha has been an outspoken critic of Kabir, although, interestingly, he and Kabir had worked together quite seamlessly when Bashagha was interior minister during the GNA.
To prevent the CBL reunification process from entirely losing momentum, Amb. Norland proposed a mechanism to stop Libya’s political crisis from spilling over into economic warfare that would deprive Libyans of salaries, subsidized goods, and state investment — as well as hitting global energy markets.
Norland dubbed it the Mechanism for Short Term Financial, Economic and Energy Dependability, or Mustafeed — which in Arabic means “beneficiary” and “breadwinner.”
On June 6, 2022, the U.S. ambassador detailed his plan at the Economic Working Group on Libya. He envisaged a so-called “Libya Special Committee for Oversight” (LSCO) that would provide oversight of Libyan finances and ensure NOC revenues are distributed transparently and that critical public needs were prioritized (salaries, critical infrastructure maintenance, medical services, etc.).
LSCO would be managed by a private independent audit firm and a selection of representatives of Libyan authorities.2 However, the Mustafeed concept was opposed by U.S. allies, especially Egypt, and the lack of unanimity in the international community allowed Libyan actors to waylay the idea.
Norland acknowledged that it would be up to Libyan stakeholders to decide whether this mechanism should be implemented, but insisted that there were compelling reasons for leaders in Libya to ensure that oil revenues benefit the Libyan people — and do so in a transparent fashion that builds social trust.
This view was indirectly supported by then Special Advisor to the Secretary-General Stephanie Williams. However, just as with previous proposals for an international financial commission, many key Libyan stakeholders — the status quo parties — felt that a lack of transparency and the overall conditions of the Global Enduring Disorder allow them to continue in their roles indefinitely and with their patronage networks intact, while too much transparency would likely damage their sinecures.
Grasping that transparency is the key to solving the intertwined Libyan financial and political conflicts, to complement this proposed financial mechanism the U.S. also pushed to increase transparency within the CBL at a more operational and technical level, and assisted in refining the Annual Monetary Plan for 2022.
Over the course of 2022, more meetings followed between Kabir and Hibri, often under the auspices of the U.S. embassy, which fostered the transferring of cash funds to the eastern CBL to be disbursed to all the commercial banks in Cyrenaica, and the release of the first CBL Extraordinary Annual Report — a document produced jointly by the Tripoliand eastern-based branches of the CBL. This unsurprisingly contained little useful information and is available only in Arabic.
Despite the U.S.’s best intentions to craft an inclusive process, Dbeibah’s opponents flat out refused to work with Mustafeed because the process involved dealing with the GNU. The U.S. remains committed to pushing the Mustafeed mechanism or related economic approaches.
Jason Pack is a former non-resident scholar at MEI, author of Libya and the Global Enduring Disorder, and the president of LibyaAnalysis LLC. He is the Director of the NATO & THE GLOBAL ENDURING DISORDER Project and a Senior Analyst for Emerging Challenges at the NATO Defense College Foundation.
Stefano Marcuzzi is a Research Fellow at the Center for Higher Defense Studies (CASD), Rome, a Senior Analyst at Libya Analysis LLC, an Adjunct Fellow at University College Dublin (UCD) and Boston University (BU), and an Emerging Challenges Analyst at the NATO Defense College Foundation (NDFC), Rome. He is the author of The EU, NATO and the Libya Conflict. Anatomy of a Failure.