Salah El Houni
There is need for a domestic political conviction that the cost of continuing to use oil to fuel conflict has come to outweigh any gains reaped by all parties involved.
There is a stark paradox that encapsulates the entire Libyan predicament: this is a country that possesses the largest proven oil reserves in Africa while being unable to finance its regular budget. Its national oil company has even accumulated a debt exceeding 31 billion dinars in just three years. These figures, revealed in official documents submitted by the National Oil Corporation as part of its 2026 financial report, do not merely point to a budget crisis. They are rather a symptom of a deeper malaise that has plagued the Libyan state for over a decade, and which consists in the misuse of oil resources to fuel division.
At first glance there may seem there is reason to hope. After years of repeated shutdowns and losses exceeding $100 billion since 2011, Libya recorded its highest oil production level in a decade in 2025, averaging nearly 1.4 million barrels per day.
In February 2026, the National Oil Corporation announced its first bidding round in nearly two decades, which was won by companies like Chevron, Eni, Qatar Energy, and Repsol—an undeniable sign of renewed international confidence in Libya’s oil wealth.
But behind this statistical veneer lies a harsher reality: the relative stability which the sector enjoys today is not the fruit of institutional reform, but rather a fragile equilibrium born of a temporary convergence of interests among competing powers—a equilibrium that could collapse after a single decision or a single security incident.
The true nature of the crisis is now documented in international testimonies with undeniable credibility. A report by the UN Security Council’s Panel of Experts revealed a systematic looting activity taking pace through Libyan ports, where the Arkenu Oil Company was, for instance, used as a front to divert more than three billion dollars outside official channels between January 2024 and November 2025 alone. The report explicitly states that both Tripoli and Benghazi rely on smuggling networks as a strategic means to finance arms purchases, in blatant violation of an international embargo that has found no effective enforcement.
What makes the situation even more painful is that Libya does possess adequate technical oil knowhow. The National Oil Corporation (NOC) boasts genuine engineering and management expertise, its international partners believe in its production capacity, and figures prove that operational efficiency is not the problem. The problem lies in who controls the revenues and where the oil income goes. When oil revenues are systematically diverted to armed groups and militias instead of the national treasury, the NOC is transformed from a backbone of national development into an instrument of division.
As part of this paradox, the very same enormous oil revenues that are supposed to finance reconstruction and modernisation of infrastructure are now helping each side cling to its political position hence perpetuating chronic division. In other words, oil is not funding stability; it is funding instability.
The impact of this odd situation is not confined to within Libya’s borders. The rise and volatility of Libyan production directly impact global oil markets, particularly Europe, which imports a significant portion of its light, low-sulfur crude from Libya. In the context of the current energy crisis gripping Europe due to disruptions in the Strait of Hormuz, the strategic importance of Libyan oil is greater than ever. This means that the interest of European partners in ensuring the institutional stability of the Libyan oil sector has never been clearer. However, this interest does not appear to have translated into genuine political pressure beyond the usual diplomatic pronouncements.
A fundamental solution does hinge on new investments or more advanced technology. What Libya needs is what it has lacked so far: a unified governance institution to oversee oil revenues and their distribution transparently while transcending political divisions. It needs a joint account into which revenues flow away from existing regional alignments. This is not a new idea. This notion was floated in numerous negotiations and was included in successive roadmaps, but was never implemented because those who control the oil do not want to be held accountable.
There are a few indications, however, showing that change is possible. Drawing major international companies like Chevron and BP to Libya brings to the table international stakeholders with direct interest in institutional stability, and wielding the type of influence that Arab governments and the international community involved in the negotiations have lacked. When Chevron invests billions of dollars it does not do so without genuine institutional guarantees.
However, this optimistic scenario remains contingent on one fundamental condition: that the will of local actors shifts from exploiting division to investing in oil. This condition cannot be met by external pressure or foreign investment alone; rather, it requires a domestic political conviction that the cost of continuing to use oil to fuel conflict has come to outweigh any gains reaped by all parties involved. All indications suggest that this conviction has not yet matured. Until it does, Libyan oil will remain a squandered resource instead of a tool for construction.
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