Libya has avoided another civil war – but only just
Libya has avoided another civil war – but only just
A bitter dispute over the central bank laid bare the country’s fragilities
Hendia Alashepy in Tripoli
Late last month, United Nations negotiators announced – with much fanfare – that Libya’s two warring governments had reached an agreement on who would run the central bank. The accord defused tensions that had been rising for weeks, threatening to spill over into outright violence.
Libya has heaved from bloody crisis to crisis since the ousting of Muammar Gaddafi in 2011, which fractured the country into militia-ruled fiefdoms and ushered in an era of seemingly-permanent instability.
But even amid wave after wave of violence, Libya’s battles have always avoided the central bank, where billions of dollars in oil revenues are stashed. Oil is the backbone of the North African country’s economy, making up about 90% of Libya’s GDP.
That was about to change. A crisis over who would lead the all-important bank had put it in the crosshairs of Libya’s competing – and well-armed – militias. A ceasefire in 2020 ended six years of civil war in Libya, and this row risked plunging the country back into violence.
The dispute over the central bank began on 18 August, when the Tripoli-based Presidential Council unilaterally appointed a new central bank governor, Mohamed Al-Menfi, and ordered the long-standing incumbent, Sadiq Al-Kabir, to pack his bags.
But Al-Kabir fled in late August, claiming he and other bank officials were under threat by militias, which he said were abducting bank staff and their children. Legal analysts say Al-Kabir’s removal was illegal because the Presidential Council, an advisory body responsible for appointing ministers and heads of agencies, does not have the authority to remove the central bank governor, which is the domain of Parliament.
The central bank’s facilities are wedged in the heart of Tripoli, beside major hotels and crowded marketplaces. Throughout the crisis, it was flanked by swarms of militiamen loyal to the Presidential Council and Prime Minister Abdul Hamid Dbeibah, who backed AlKabir’s ouster. The fear was that militias loyal to Al-Kabir would storm the bank’s headquarters to regain control, resulting in a bloody street battle and a heavy toll.
“We’ve never heard before of armed militias storming the bank’s headquarters because it has a strong force protecting it, and they even prevent us from passing in front of it,” said Mohamed Al-Jabali, 63, who owns a clothing shop in Tripoli’s Old City market, beside the central bank.
Al-Jabali, like many Libyans, welcomed the UN-brokered nomination of Naji Mohamed Issa Belqasem, the bank’s director of banking and monetary control, as an interim governor who would then appoint his board of directors.
“We feared for our money and our lives because of the potential armed clashes that could’ve taken control of the bank headquarters, whether by the former governor or the newly-appointed one,” said Al-Jabali.
A volatile patchwork of militias
Politically, Libya is divided east-west into two competing administrations. In recent months Al-Kabir fell out of favour very publicly with western-based Dbeibah, whom Al-Kabir had criticised for lavishly spending beyond the country’s means. Dbeibah is head of the Tripoli-based Government of National Unity, whose remit theoretically covers the west of the country, and is internationally recognised.
But Libya is also a labyrinth of militias, and even within the west, they clash and compete for control of public and private institutions. Tripoli is itself a patchwork of different armed groups. Some, like the Islamist-affiliated Al-Radaa militia, support Al-Kabir and have functions like securing cash deliveries to commercial banks. Others, like Ghnewa and the 44th Brigade, coordinate city-wide security and support Dbeibah.
But Libya is also a labyrinth of militias, and even within the west, they clash and compete for control of public and private institutions.
Al-Kabir is favoured by Khalifa Haftar, the warlord who runs much of the east of the country. From Benghazi, Haftar commands Libya’s oil wealth, drilled from wells in areas under his control. Under Al-Kabir’s administration, the central bank allocated billions of dollars for eastern reconstruction projects, which have entrenched Haftar’s power and created an alliance between the two men.
Naturally, Haftar and his allies wanted Al-Kabir to return. To apply pressure, they shut down vast quantities of oil production. About 60% of Libyan oil went offline, or about 700,000 barrels per day of the usual 1.2-million barrels per day.
That reduced exports by 81%, instantly shooting up global oil prices.
With the price of oil at stake, Western countries urgently sought a resolution. “At stake is the economic and financial stability of Libya,” said the United States embassy in Libya at the height of the crisis.
For weeks, the UN-led negotiations between the Benghazi-based House of Representatives and Tripoli’s High State Council. The organisation’s mission in Libya warned that a protracted crisis “risks precipitating the country’s financial and economic collapse”.
And it did. Gas stations were shut. The ones that were open had lines that ran for several miles. With few good options, Dbeibah fired the head of the state fuel distribution company. Banks were similarly paralysed.
Speaking to Reuters from Istanbul, Al-Kabir said that the central bank had been cut off from the international banking system: “All international banks that we deal with, more than 30 major international institutions, have suspended all transactions,” said Al-Kabir.
If true, that would mean commercial banks in Libya could not issue letters of credit or obtain the foreign currency needed to import critical items like wheat and cooking oil. It would make shortages a near certainty given that Libya is highly dependent on imports.
Libya’s banks have faced liquidity shortages for years, but since June the crunch has been particularly severe. Since then, public sector employees have not received their salaries. Long queues and low caps on withdrawals have been the norm. Many families worry they won’t be able to access funds, especially with the school starting and winter approaching.
Still, no one can afford a war that directly hits the central bank. Not even Libya’s militias, which – like everyone else – get their money from it. That calculation may be all that saved the country from another civil war.