Tim Eaton
I- Introduction
Libya’s conflict and its intersection with economic governance
Negotiations to resolve Libya’s political and security crisis, and to end the disruptive co-existence of parallel governments, have largely separated political issues from economic ones. That approach is not working.
Libya’s ongoing political and security crisis is exacerbating – and exacerbated by – weak economic governance. A stable peace remains elusive. Following the civil war in 2011, two further outbreaks of nationwide violence occurred in 2014 and 2019, while concentrated local fighting took place in Benghazi between 2013 and 2019.
A number of local conflicts have also continued sporadically. Although a nationwide ceasefire has been in place since October 2020, and a unified government – the Tripoli-based Government of National Unity (GNU) – was appointed in March 2021, attempts to hold national elections in December 2021 fell through.
Libya’s governance split re-emerged in February 2022 when a new, rival entity – the Government of National Stability (GNS) – was set up in Benghazi. As such, Libya’s conflict cannot be said to have been resolved.
The result is that Libya remains in a state of ‘no war, no peace’, with a fragile status quo supported by a fundamentally flawed system of mediation among an increasingly limited set of elites. Real power increasingly resides with these elites rather than with institutions of the state, whose legitimacy and effectiveness are undermined by (among other factors) the division of administrative powers between the west and east of the country.
In this context, describing Libya as in a state of conflict remains apt, even if large-scale armed violence is not currently taking place. The fact that no formal agreement underpins the country’s political governance was illustrated in May 2025, when the killing in Tripoli of Abdelghani al-Kikli – a prominent armed group commander known popularly as ‘Ghneiwa’ – triggered a violent reordering of the capital’s security sector. The fallout from the killing heightened tensions between the GNU and the Special Deterrence Forces (known locally as ‘al-Radaa’), and drew in forces from outside Tripoli, threatening to drive an expansion of conflict.
The essential feature of the incident was that both armed groups involved in the dispute were affiliated in one way or another with the state – which in effect was thus fighting itself.
At the forefront of mediating the Libyan conflict has been the UN Support Mission in Libya (UNSMIL), particularly following the breakdown of Libya’s post-Gaddafi political transition in 2014. UNSMIL’s mandate requires it not only to mediate among rival parties via an inclusive political process, but also to support the provision of humanitarian aid and public services.
This means that UNSMIL is simultaneously tasked with brokering a sustainable settlement among rival parties and supporting day-to-day governance. At times, these responsibilities conflict with each other: on the one hand, UNSMIL is engaging with competing political actors in a way that challenges their hold on state power; on the other, it is responsible for supporting their administration of the state.
This duality runs through debates over what could and should be done in the UNSMIL-led political process. A similar conflict between short-term imperatives and structural reform is reflected in the challenges of economic governance.
How short- and long-term imperatives collide
At the heart of the economic governance debate is the question of whether a so-called ‘economic track’ in negotiations between Libya’s factions should (a) principally serve efforts to reach a formal political settlement, (b) should address management of the economy on an ongoing basis, or (c) ideally combine the two.
Consequently, while there is a broad consensus among Libyan experts and international policymakers that structural failings in economic governance in Libya contribute to ongoing conflict, opinions diverge on how best to address this issue.
It is no surprise, therefore, that the policy approaches adopted to date have been in tension with one another.
International mediation has largely focused on resolving immediate security crises or settling disputes among rival factions, with the primary objective of achieving sufficient consensus to facilitate the restoration of unified government. This type of approach assumes, in effect, that political stabilization necessarily precedes economic governance reforms, and that implementation of the latter must therefore be left to a future government.
However, crisis-driven interventions have often been poorly aligned with broader international assistance aimed at supporting development programming and state-building. For instance, significant international support has been provided for reconstruction and development in Libya, yet development spending through formal state processes has remained in gridlock since 2011.
Similar outcomes have been observed in other countries and contexts, where elites have effectively ‘bought the peace’ by capturing foreign aid and development assistance, resulting in a deterioration in state capacity as a result.
Conversely, many Libyan experts have argued instead that reform of economic governance must be a key element of any political settlement – and built into negotiations from the outset – to prevent a relapse into conflict.
They contend that any political agreement that leaves the current economic governance system intact will simply enable the ‘victors’ in a post-conflict settlement to distribute resources through patron–client networks, perpetuating instability and economic decline.
While this logic is widely held to be sound in principle, many policymakers still consider integration of an economic track into political negotiations to be unrealistic. As such, the need for pragmatism often leads to more limited approaches – the argument being that no critical mass of Libyans exists to call for systemic economic reform in the face of elite intransigence. The author’s discussions with Western policymakers underline the prevalence of this thinking.
The above differences in perspectives have created a significant gap in understanding of the economic track and its potential scope, and this presents a policy dilemma: on the one hand, striking limited economic deals among elites to achieve short-term economic and political progress risks further undermining the administration of the state and weakening its institutions, thereby limiting accountability and transparency; on the other, if discussions around ambitious reforms that could entirely restructure the state take place purely among technocrats – without sufficient regard for the agendas and capacities of those wielding political and military power, and without adequate public buy-in – there is little chance of the status quo changing.
About this paper
In response to the reform dilemmas outlined above, this paper makes the case for an enhanced, internationally mediated ‘economic track’ within political negotiations on stabilizing Libya.
The paper draws together the findings of a three-year, UK government-funded project that has sought to identify and address drivers of conflict as they manifest in the economic and financial institutions of the Libyan state. As part of these efforts, Chatham House has sought to identify means of strengthening accountability and transparency in the management of Libyan resources, including via internationally mediated processes.
The project has sought to understand how Libyan policymakers can improve state performance despite ongoing political disputes among rival authorities; the project has also explored how the state could better expose and clamp down on corruption in relation to the management of financial and physical resources.
The paper seeks to draw these themes together by presenting a series of options that Libyan and international policymakers can consider in order to achieve both objectives.
The paper reflects conversations with Libyan and international experts over a number of years.
It builds on a body of work, published by the author, that has assessed the nature of Libya’s conflict economy, how state institutions have found themselves at the heart of conflict, how networks of elites have sought to control institutions, and how armed groups have controlled economic and financial interests.
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Tim Eaton is a senior research fellow in the Middle East and North Africa Programme at Chatham House. His research focuses on the political economy of conflict in the Middle East and North Africa (MENA) region, and on the political economy of the Libyan conflict in particular.
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