Crisis Group

The long-running feud between Libya’s competing authorities over the Central Bank has flared up again, threatening an economic crisis that could lead to unrest. The parties should press ahead with UN-backed mediation to achieve a resolution.

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2. Second theory: a soured pact

The second hypothesis suggests the Dabaiba and Haftar families were about to forge a pact that went sour at the eleventh hour. According to three people informed of relevant conversations, Ibrahim Dabaiba, the prime minister’s nephew and adviser, as well as others who wanted Elkebir removed, had been discussing the governor’s possible replacement for months with Saddam Haftar.

The two men, who were the architects of the National Oil Corporation deal, are known to regularly consult each other over projects and budgetary issues. These sources believe that Saddam Haftar had greenlighted the appointment of Shukri and a new board of directors, promising to deliver the House’s endorsement, only to backtrack at the last minute due to alleged disagreements over nominations for other key posts.

3. Third theory: external interference

A third possible explanation relates to supposed external interference. A number of Western officials speculate that an unspecified European government sponsored the Presidential Council’s move “to push back on the Libyan National Army and put pressure on Russia”.

Several Western countries are worried about Russia’s footprint in Libya. Moscow has developed good relations with both the Tripoli- and east-based governments, while materially supporting the Libyan National Army. Between 2018 and 2023, the Wagner Group, a Russian private military company, had units covertly stationed in at least three military bases in the country.

Since early 2024, Russian troops have docked in eastern ports while several hundred men believed to be operating under the defence ministry have been engaged in the east. Western officials suspect that east-based authorities are using some of the money transferred to them by the Bank to pay for Moscow’s military assistance.

At least one European diplomat rejected the notion of outside meddling as fanciful, saying, “This sounds like a romantic interpretation that would help the Presidential Council save face”. He added: 

The story is simpler: the Government of National Unity and the Presidential Council understood that, if the alliance among Aghela Saleh, Siddiq Elkebir and Khaled Mishri materialised, it would have destroyed them, so they took the initiative. The truth, for now, remains obscure.

IV. The Battle for the Bank and the

Risks Ahead

While Libya’s competing factions wrangled over who was legitimately entitled to remove or appoint the governor, the Central Bank’s personnel came under threat, as did peace in the capital.

On 18 August, an armed group aligned with Dabaiba and opposed to Elkebir briefly kidnapped the Bank’s IT manager, sparking fears of clashes among Tripoli’s rival militias, some of which support Dabaiba’s move and others of which do not. Simultaneously, armed groups from Misrata, Dabaiba’s hometown in western Libya, marched on Tripoli, although it is not clear what they were looking to do; eventually, they withdrew to the city’s outskirts. 

At first, Elkebir refused to hand over the Central Bank’s headquarters in Tripoli to the officials in charge of ensuring that the newly – if improperly – appointed leadership could take over. Within days, however, these officials gained control of the building and installed new management, prompting Elkebir to leave the country.

Elkebir claimed that some of the Bank’s employees were coerced “gangster style” into cooperation with the new managers, alleging that gunmen threatened the relatives of staff members – an accusation that the new managers deny. Violence in Tripoli was averted mainly because the Deterrence Force (al-Rada), a pro-Elkebir Tripoli-based group that secures the Bank’s premises, stepped aside when the new managers turned up at the building.

The struggle over the country’s main financial institution intensified in the days that followed. On 23 August, Shukri declined his appointment as governor, saying he would accept the job only with the blessing of both assemblies.

In response, on 26 August, the Presidential Council chose one of the two deputies, Abdel Fattah Ghaffar, as interim governor. Alongside a few other board members, he installed himself in the Central Bank headquarters in Tripoli.

The dispute then spread to the oil sector.

On 26 August, the east-based authorities ordered the oil fields under Haftar-led forces’ control to shut down in retaliation for the Presidential Council’s decision to replace the Central Bank governor. Data show that production dropped from 1.4 million to 590,000 barrels per day after three days of closure.

Even though the new board managed to take over the Central Bank’s headquarters and social media accounts, the institution’s operating systems remained out of commission.

Even though the new board managed to take over the Central Bank’s headquarters and social media accounts, the institution’s operating systems remained out of commission. It was unclear if the new leadership would be able to get those systems up and running, as shortly after the dispute erupted Elkebir had instructed the staff not to comply with the new authorities’ orders and to halt all work until further notice.

Libyan bankers say he also directed the foreign correspondent banks – the British Arab Commercial Bank in the UK and ABC Bank in Bahrain – to stop transacting with Libyan commercial banks.

These are the main institutions that Libyan commercial banks use to clear foreign currency transactions. Elkebir confirmed to Crisis Group that these financial institutions and at least two dozen more had suspended dealings with Libya.

He said the U.S. Federal Reserve and the Banca d’Italia, which clear U.S. dollar and euro transactions for the Central Bank, had done the same. Other Libyan sources nevertheless indicate that while dollar transactions have stopped, euro transactions have continued to take place.

The new management, meanwhile, sought to reassure the public that operating systems would be restored and that payment of salaries would resume by 1 September. On 31 August, an official involved in the takeover said work at the Central Bank had returned to normal, with all systems functioning properly.

The Tripoli government also sought to soothe Libyan businesses and the public, saying that replacing Elkebir would yield better governance and transparency in the Central Bank’s management. The reassurances seemed to work, at least at first. Contrary to expectations, the dinar’s exchange rate did not collapse in the first week of the crisis, and cash was still available.

There was no outcry in western Libya about the sacking of Elkebir, whom various political factions had demonised for years as responsible for the country’s economic woes. The new authorities also denied claims that the Bank had been disconnected from international financial markets.

Those claims, however, were soon proven accurate. Local bankers reported that, as of the end of September, none of the foreign currency purchase requests submitted by traders to commercial banks over the previous month have been processed.

They said the requests have been inserted in the Foreign Currency Management System (which banks use to request hard currency from the Central Bank), but the Central Bank has not approved any of them.

Furthermore, for a few days after the crisis broke out the new managers could not get access to any Central Bank foreign account except for those of the Libyan Foreign Bank, an overseas institution owned by the Central Bank through which oil revenues pass before settling in its coffers. According to a Libyan banker, they ordered the Libyan Foreign Bank to keep oil revenues in its accounts.

But even access to these accounts did not last long. A U.S. government official noted that all foreign financial institutions had suspended transactions with Libya’s Central Bank by 5 September, and by then most had also stopped doing business with the Libyan Foreign Bank because it is solely owned by the Central Bank, and as such was affected by the same restrictions stemming from the unresolved leadership dispute.

The official highlighted that some commercial banks in Türkiye and the United Arab Emirates might still be doing business with the Libyan Foreign Bank and its subsidiaries, but risked being cut off by other financial institutions should they be discovered.

Libyan sources, however, suggest that at least two Europe-based commercial banks owned by the Libyan Foreign Bank also continued to process euro transactions during the crisis. Leading traders in the capital voiced concerns that stores of food would run out within three weeks if imports did not resume.

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