The Fuel Import Racket
Libya’s soaring fuel import bill is a central piece of the new political setup. Available data indicate that, since 2022, Libya has nearly doubled its annual spending on imported diesel and gasoline. Most of it comes from Europe, around 50 per cent of it from EU member states and 25 per cent from Russia (though imports from Moscow have reportedly declined significantly in 2026 to date).
The Libyan state pays for the fuel in full, before selling it at a heavily subsidised price on the domestic market. These imports far exceed the needs of a country with a small population and minimal industrial activity, especially one that has refineries of its own. According to official Libyan sources, including from the Audit Bureau, between 2022 and 2024 roughly 40 per cent of the imported fuel was eventually smuggled abroad, primarily across the Mediterranean.
Subsidies sustain this trade: gasoline costs about $0.02 per litre in Libya, compared to roughly $2 per litre in Europe, creating enormous profit margins for traffickers. Foreign analysts and Libyan sources believe that most of the trafficked fuel departs from Benghazi with coordination by people tied to the Haftars. Most is sold in international waters in ship-to-ship transfers, but cargo is known to have reached Italy, Albania, Türkiye and Greece.
Estimates of the racket’s total cost to Libya vary enormously. According to the Audit Bureau, in 2024 fuel import costs exceeded $9 billion, equivalent to roughly 30 per cent of the country’s gross hydrocarbon revenues, or about the same proportion of total annual state expenditure.
Other sources point to lower figures. As for fuel trafficking, some Libyan and foreign analysts suggest that it generated $6-7 billion annually between 2022 and 2024, while the public prosecutor has offered a more conservative estimate of $1.5 billion per year.
These multi-billion-dollar sums suggest that fuel smuggling has become a vital component of the arrangement between eastern and western authorities. Libya’s leaders tolerate and, in some cases, encourage these illicit financial schemes because they are a means of cultivating patronage networks and funding off-budget expenses, especially in the east.
Foreign capitals are aware of this racket and other parallel funding schemes that cost the state billions of dollars, but they have so far preferred to keep quiet about the matter. Their belief is that this money will ensure that Libya’s peace does not unravel and that crude oil exports from areas under Haftar’s control will continue.
What is at Stake for the EU
Libya is strategically important to the EU. Its location in the centre of the Mediterranean basin, just across the water from Italy and Greece, make it a potential security liability. A number of countries at odds with various European states, including Russia and Türkiye, have forces stationed in the country, at at least half a dozen bases and airfields, under the umbrella of one Libyan military coalition or the other.
Libya also remains the main transit point for migrants seeking to enter Europe via the central Mediterranean route. Lastly, the country is still a major hydrocarbon supplier. Though the EU’s dependence on Libyan oil and gas has diminished in recent years, imports from Libya still help offset the fall in imports from Russia after its all-out invasion of Ukraine.
The EU has certainly not been inactive. In March 2025, it expanded the mandate of its Common Security and Defence Policy naval mission EUNAVFOR MED IRINI (hereafter, Irini) to address illicit trafficking of items other than arms, including monitoring, surveillance and information gathering related to illegal exports of oil and refined fuel products from Libya.
Both Irini and the EU’s border assistance mission in Libya, EUBAM, have trained Libyan border control agencies, including the coast guard, and they are considering stepping up joint training of law enforcement personnel from Libya’s east and west, in the hope that an integrated, nationwide security apparatus might foster a greater spirit of political compromise.
But the EU and its member states have otherwise struggled to translate their priorities into tangible results. Libya’s persistent institutional divides and the Europeans’ limited leverage vis-à-vis other, more assertive players, such as Egypt, Türkiye and the UAE, have reduced the impact of EU policy in Libya.
Tackling migration flows has been especially complex, not least because of domestic political considerations in EU member states and because Libyan authorities have exploited migrants as a form of coercive diplomacy, leveraging control of routes to extract bilateral concessions.
As a result, EU member states have had to make difficult policy compromises. They have generally found it easier to focus on bilateral relations with Libyan authorities rather than work together through Brussels. For example, they were forced to seek the cooperation of Khalifa Haftar and his sons after 2024, when it became apparent that a growing number of migrants heading to Italy were coming from the east. Following demands from the Haftar camp, Italy began offering military training in Italy to his security personnel, breaking with previous policy under which they would only train forces affiliated with Tripoli.
Europe’s struggles to establish an effective policy toward Libya continue. As it reconsiders its priorities, it should consider turning its focus to stopping fuel smuggling and the haemorrhaging of Libyan public funds, which pose long-term risks of political instability and rising public discontent. Compared with the U.S. Treasury, which plays a central role in overseeing dollar-denominated transactions in the oil sector, the EU has limited leverage over financial decision-making in Libya.
But the EU and its member states have repeatedly reaffirmed that they are committed to stopping fuel smuggling in Libya: the 2017 Memorandum of Understanding between Italy and Libya on fighting illegal migration puts cooperation against fuel smuggling among its objectives, while the Irini naval mission lists countering fuel smuggling as its secondary mandate.
Until now, however, the conditions under which the mission works have militated against efforts to combat fuel smuggling. In particular, its mandate does not allow for interception of vessels on mere suspicion of smuggling fuel.
Additional Security Council sanctions measures do permit interdiction if the designated Libyan government contact signals that the cargo is suspect. But no such signal has arrived in recent years, despite the massive smuggling of subsidised fuel, largely because of the complicity of government agencies and their political bosses.
At the same time, the bloc and its member states should act only when they are prepared for the likely consequences of trying to stymie the racket. One possible type of backlash could be a resurgence of migration flows under the watch of eastern Libyan authorities aggrieved by Europe’s interference in its funding streams. Eastern authorities might also be provoked into reigniting hostilities with Tripoli.
For these reasons, any stronger EU push to curb fuel trafficking should be part of a comprehensive and internationally coordinated approach that would ideally bring together UN- and U.S.-led mediation efforts to put Libya’s state finances in order.
Simultaneously, the EU could also seek to coax both rival Libyan governments into cooperating by helping improve the country’s paltry maritime security infrastructure, complementing U.S.-backed efforts to promote joint military training of Libyan forces from the east and west of the country. This assistance would also be in line with the EU’s view that the Mediterranean is a strategic maritime domain that requires sustained European attention.
The EU and its member states should:
Increase policy coherence. The EU and its member states should work more consistently through EU structures in Brussels and in coordination with the UN to push for progress in the governance, economy, security and reconciliation/human rights tracks of any UN-led initiative, be it the Structured Dialogue or other future talks.
Holding nationwide elections should not be the immediate goal of these initiatives. Instead, the priority should be to achieve incremental successes, especially in matters of financial governance and security cooperation, so as to create the conditions for a future political transition.
Work with others to encourage economic governance reform. In coordination with regional powers like Egypt, Türkiye and the UAE, and relevant international financial institutions, such as the IMF and the World Bank, the EU and its member states should ask the UN mission in Libya to work more proactively on improving Libya’s public financial management with the aim of curbing the haemorrhaging of state funds and bolstering economic governance.
They should also encourage the U.S., which is already playing a role in overseeing and convening discussions on Libyan finance-related matters, to coordinate more with the above countries and institutions, including the EU.
Counter fuel smuggling. As part of these coordinated efforts to improve Libya’s economic governance, the EU and its member states should also advocate for changing the UN Security Council resolution on Libya to permit interception of vessels suspected of smuggling fuel in international waters, even in the absence of notification by Libyan officials.
With such licence from the Council, the EU could take a more proactive role in countering fuel smuggling across the Mediterranean by expanding Irini’s mandate and placing greater resources at its disposal.
____________________
