The Sentry
Many Ways to Profit: A Cross-Section
The sum total of kleptocratic activities—in western and eastern Libya alike—has seen a marked acceleration over the last two years. Along with its dollar size, the illicit sector’s sophistication, diversity, and institutional entrenchment have been growing.
A range of illegal business models thrive, with some of the most active individuals exploiting several sectors at once. These trends have manifested in a security environment in which armed violence on Libyan soil has been subdued as a result of the entrenched presence of Russian mercenaries and Turkish forces establishing a balance of power in the aftermath of the 2019-2020 battle for Tripoli.
Since the GNU was formed in 2021 and plans for elections intended for the same year have receded from view, international diplomacy has been fading. Few of the most relevant Libyan kleptocrats’ networks operate in an exclusively criminal or predatory manner. They often grow their illegal endeavors while also fulfilling socially constructive functions, such as day-to-day security and counterterrorism.
This duplicity makes it difficult for external entities to denounce some of the most prominent Libyan decision-makers whose cooperation is needed by the US and other nations. As a result, a stubborn culture of impunity protects Libyan kleptocrats and their activities. This has developed to the extent that there now is no realistic prospect that those who divert public funds for personal gain will face criminal prosecution in Libya.
Subject to almost no checks, Libya’s biggest kleptocrats operate above the law. While arrests of secondary or tertiary actors are sometimes conducted on the basis of corruption charges, even these noncrucial suspects are often released once media attention moves on. The now familiar cycle is a reminder of the weakness of present-day Libya’s court system.
White-collar schemes
While much focus has been trained on the activities of armed groups, their less violent partners in the political and business fields have garnered less attention, yet the damage they have wrought is vast. Abuse within the state’s structures, in the east and west alike, has contributed to the severe deterioration of the country’s infrastructure, including the Derna dams; the collapse of public services; and a situation in which Libyans must pay more for less.
White-collar criminality is dependent upon control of elements of the state or access to officials with the power to make decisions on behalf of state institutions. It includes a range of schemes, from contract fraud to embezzlement and illegal transfer of public goods into private ownership.
Privileged access to state-backed finance
The fortunes of private sector actors in Libya have greatly depended on access to the state’s coffers. Since 2011, the principal routes for this access have come through trade financing and contract fraud. Profiteering from trade financing is less significant today, but connections to the CBL are still important for sustaining any business reliant on imports and for creating liquidity in the black market. Businesses seeking to import goods from overseas need access to LCs in order to secure trade financing, and these must be authorized by the CBL.
Between 2016 and 2018, in particular, the significant difference between the official rate of exchange offered by the CBL and the rate available on the black market allowed those with privileged access to LCs to capture massive profits by selling goods at higher prices, illegally offshoring hard currency, or selling their foreign currency to others. Through profits made on trade financing mechanisms, armed group leaders, politicians, civil servants, and well-connected businessmen became considerably richer.
Armed groups were quick to gain expertise from their partners in the black market. By 2018, most had acquired the knowledge to set up their own front companies and financial channels to launder money overseas. Profits captured via privileged access to trade financing facilitated the rapid rise of several business figures. For instance, some observers suspect that one such individual is Mohamed Taher Issa, who went from being a medium-sized food merchant before 2011 to amassing a significant business empire and fortune. Taher Issa’s newly launched airline company, Medsky Airways, has recently been seeking to expand its fleet of aircraft—another suggestion of privileged access to the CBL’s LC program.
The illicit scheme associated with LCs reached its height in November 2017, when the exchange rate on the black market exceeded 9 LYD to the dollar, while the official exchange rate was about 1.4 LYD to the dollar. And while the spread between the black market and the official rate of exchange has since been significantly reduced,180 the ability to obtain foreign currency still provides a key advantage for any participant in the business sector.
Given the limited checks on the paperwork to determine whether LCs are used for their intended purposes, as well as the many ways of obfuscating the paper trail, part of the liquidity created by the LCs finds its way onto the black market. In turn, that liquidity is often sold on for a range of purposes, some useful—such as to small, innocuous merchants unable to obtain LCs for their legitimate trade—and some more nefarious—such as to actors responsible for offshoring ill-gotten profits or procuring illicit goods.
A Global Witness assessment of the Libyan LCs published in 2021 concluded that the discrepancy between the flow of public money on LCs and historic patterns of imports was most plausibly explained by “ongoing abuse” of the LC system “at significant cost to Libyan public funds,” though the CBL and Bank ABC strongly disputed these claims. Another of the main ways that Libya’s kleptocrats steal from the state is by obtaining sweetheart deals.
This form of abuse happens at almost all levels. On the lower end of the spectrum, armed group leaders have secured contracts for non-security enterprises that they own or control. In just one example among many, the leader of an armed group in control of a prison in Tripoli successfully joined the prison’s procurement committee, along with a relative of the then-minister of justice. A contract that the committee then authorized exhibited blatant price gouging, charging two to three times the market price for basic food commodities and 24 times the market price for a cylinder of gas. In some more extreme cases, contracts are honored by the state, which pays the full amount to the provider, but not honored by the provider, who delivers nothing in return. Through such forms of abuse, Libya’s kleptocrats pocket millions every month.
Large-scale contracting processes have also come under scrutiny, particularly in the electricity sector. The state electricity company, the General Electricity Company of Libya (GECOL), an institution known for its dysfunctional inner workings, has been at the center of these dynamics. In its 2021 report, the Audit Bureau criticized GECOL for discrepancies over its accounting, delays in executing agreements, and an inability to locate items that had been procured.
In 2021, the incoming GNU of Abdelhamid al-Dabaiba granted major contracts to electricity companies as part of its effort to allay a power generation crisis. Among them, a contract for the development of a power station granted to Aksa Power Generation, a Turkish contractor, was criticized because the company specialized in generators rather than power stations. Moreover, Libyan commentators claimed that Ibrahim Dabaiba—the prime minister’s cousin and head of the prime minister’s office—acted as the Libyan representative for Aksa Power Generation.
That same year, Ibrahim Dabaiba imposed himself as a de facto overseer of almost all GECOL’s new contracts, despite not being officially part of its senior management. In 2022, Prime Minister Dabaiba installed as GECOL’s general manager Abdelhamid Ali al-Manfukh, the father of a mid-level figure closely linked to armed leader Mohammed Bahrun of the western city of Zawiyah. Adding personal links to armed groups and politicians alike cannot be conducive to greater transparency in technocratic institutions such as Libya’s problem-ridden
electricity provider.
The control of state contracts remains a significant source of power in Libya. Since the mid-2010s, the Dabaiba family’s business record has been subject to significant scrutiny, including the issuing of unresolved legal proceedings in Scotland at the request of the Libyan state. The prime minister’s uncle, Ali Dabaiba–Ibrahim’s father—is the scion of the Organization for the Development of Administrative Centers (ODAC). Following its formation in 1989 under Qadhafi, ODAC was at the forefront of contracting for construction in Libya, a program that enjoyed a major surge in the 2000s.
While Ali Dabaiba technically left his role at ODAC after 2011, his influence is seen to endure. He has been described as having a “spiritual” relationship with the organization and is considered its greatest influencer. Despite their status as civil servants, the Dabaiba family became oligarchs and acquired assets around the world. Many Libyans suspect that these resources have been pivotal in helping secure Abdelhamid’s accession to the prime ministership in 2021 amid allegations of bribery within the body that appointed Dabaiba’s government.
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The Sentry is an investigative and policy organization that seeks to disable multinational predatory networks that benefit from violent conflict, repression, and kleptocracy.
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