A Tale of Two Countries

Anyone interested in learning about how failed states survive might consider the story of Sadiq al-Kabir, the former governor of the Central Bank of Libya.

Libya can pump more than 1.2 million barrels of oil per day, generating significant revenues deposited in the Central Bank. From the bank’s red-and-white striped building topped with two turquoise cupolas in the western capital of Tripoli, al-Kabir controlled around $80 billion worth of foreign reserves from oil sales.

Appointed after the late dictator Muammar Qaddafi was ousted in 2011, al-Kabir survived two civil wars and six prime ministers, using the oil revenues to finance Libya’s two governments – the internationally-recognized Government of National Accord based in Tripoli, and the other one based in the eastern city of Tobruk run by the House of Representatives, wrote the Economist.

Al-Kabir funded warlords throughout the North African country, sometimes paying people to attack cities that he was also paying people to defend. He also ran complicated oil deals that lined the warlords’ pockets – while reducing his influence over them as they grew richer.

In August, al-Kabir blocked payments to the Tripoli government under Prime Minister Abdul Hamid Dbeibah, who then seized control of the Central Bank. Al-Kabir fled to Turkey, the Guardian wrote.

The incident worried Gen. Khalifa Haftar, who runs the Libyan National Army, a fighting force that is essential to the survival of the Tobruk government. He ordered key oil fields in eastern Libya shuttered to end the flow of black gold and the 95 percent of the country’s revenues they represented for everyone involved in Libya’s fragmented state.

That in turn caused the production of oil to fall by 60 percent.

Banks around the world began to refuse transactions with the Central Bank. That led to banks in Libya closing, the Libyan dinar’s value falling and inflation spiking. Civil servants and militias worried about being paid. Others worried about Libya’s ability to pay for imports, such as food.

Analysts worried about Libya plummeting “into economic collapse, resulting in severe food shortages and possibly popular protest and an outbreak of militia violence,” wrote the Crisis Group.

As the threat of violence grew with competing militias clashing in Tripoli, the Libyan National Army began a westward advance, spiking fears of a new civil war breaking out. The United Nations stepped in and struck a deal to calm the situation.

Meanwhile, as the old divided order resumes in Libya, foreign influence is confusing things as alliances begin to shift.

The Americans have long supported the Tripoli government. However, recently, US Africa Command General Michael Langley met with Haftar at an undisclosed location in Libya, for example, in the search for allies, concerned about growing Russian influence, the Middle East Monitor reported. Russia is vying for favor with Haftar, with Russian mercenaries in Libya making inroads, according to the Atlantic Council, with an eye toward receiving a naval port on the Mediterranean.

Turkey attempted to provide significant support to the government in Tripoli, but failed to make much lasting impact or gain diplomatically from its investment, Carnegie Europe concluded. Egypt, on the other hand, is an ally of the Tobruk government and previously supported Haftar during the civil war, which ended in 2020. Europe’s interests, meanwhile, mean greater demand for energy from Libya, especially since Germany and other nations are seeking to dramatically reduce their consumption of Russian oil, reported TRT World, a Turkish government broadcaster.

Still, good news recently emerged from this chaos. The Central Bank has a new leader and a new board of directors following the successful negotiation of a deal between the two governments by the United Nations Support Mission in Libya, the Libyan Express reported. Also, Libya’s National Oil Corporation – another public entity that operates relatively autonomously of the two governments but is also in their service – will begin pumping oil again at full tilt, reported Africa News.

That means everyone will get paid again. The status quo, which the UN calls “unsustainable” is back. Until the next crisis.

“For now, Libya may have avoided a turn for the worst,” wrote World Politics Review. “(Now), unified international efforts will be essential to support (UN) initiatives and pressure Libya’s elites across both rival governments and all major state institutions to engage in a stabilization process.” Otherwise, wrote WPR, “Libya will likely find itself trapped in a cycle of political and economic uncertainty.”