Libya's crisis worsens

Libya's crisis worsens
6 min read
03 Sep, 2015
Comment: Libya's political deadlock is taking its toll on the country's economic prospects, with falling oil prices adding insult to injury, writes George Joffe.
The Libyan economy is still struggling with the repercussions of a devastating war [Getty]

At the end of August, Libya's central bank reported the country had experienced a budget deficit of LD 4.5 billion ($3.3 billion) in the first seven months of 2015. 

That was undoubtedly better than a year earlier, when the deficit over the same period was LD 14.6 billion ($10.7bn) - but it was a depressing measure, nonetheless, of the collapse in Libya's public finances since the uprising.

Although the current weakness in oil prices has contributed to the deficit, the real culprit is the dramatic decline in Libya's oil production, down from 1.6 million barrels a day in 2012 to around 400,000 a day currently.   

The production collapse dates from mid-2013, when militias began to interfere in production to coerce Libya's then unitary government into making financial concessions. Then Libya earned $50 billion in the first six months of that year, compared with only$7.8 billion in the same period this year.

Since the country only has oil and gas to provide the essential foreign currency it needs to pay for vital imports - worth $12.4 billion in the first seven months of the year against revenues of $9.1bn - the seriousness of the collapse in oil and gas production is critical. 

   What's been going on in Libya?

The General National Congress was the Islamist-led elected body ruling Libya for two years following Gaddafi's ousting and death. After its 18-month deadline to form a new constitution passed in January 2014, the body resolved to extend its mandate.

General Khalifa Haftar, a senior figure in the forces that toppled Gaddafi, called on the GNC to disband. In May, Haftar led troops against Islamist militias in Benghazi and the GNC in Tripoli in an offensive named Operation Dignity.

Amid the chaos, an election was held to form the House of Representatives, which took power from the GNC in August. With rival militias ruling Libya's streets, the election turnout was just 18 percent. Islamist militias then launched Operation Libya Dawn to fight Haftar's troops.

With the lack of security in the capital, the House of Representatives hired a Greek car ferry harboured in the eastern city of Tobruk as a temporary legislature.

In late August, a group of GNC members reconvened in Tripoli and claimed legislative authority over the country, effectively replacing the House of Representatives as Libya's parliament. The Tobruk-based House of Representatives remains the internationally recognised government, though its actual authority on the ground in Libya is limited.

Libya's Supreme Court, based in Islamist-held Tripoli, ruled in November that the formation of the House of Representatives was unconstitutional, legally dissolving the Tobruk-based legislature and nullifying its decisions.

The Tobruk-based parliament refused to accept the court's ruling, saying it was made "at gunpoint".

Libya remains torn between the rival parliaments and the heavily armed militias that support each. Allegiances between the militias change frequently, which only adds to the instability, violence and danger faced by ordinary Libyan citizens.



Last year during the same period, it had to supplement foreign currency earnings with $24.8 billion from its reserves, a figure which fell to $11 billion this year. 

Before the war, Libya had foreign currency reserves of $321 billion; today they have fallen to $98 billion - and nobody knows how much longer they will last. 

In mid-2013, when the crisis in oil outputs began, the IMF estimated that reserves might last for five years - but no more.

Government confusion

The bleak financial outlook that these figures imply is compounded by an accompanying governmental crisis, given the country's two parliaments, one in Tripoli - the unrecognised rump of Libya's first post-revolutionary elected assembly, the General National Congress (GNC) - and the other in Tobruk, the House of Representatives (HoR) which has international recognition. 

Each has its own armed forces which are currently waging an interminable war with each other in a vain attempt to establish the authority of its parent government over what remains of the Libyan state. 

The struggle began in mid-2014 and shows no signs of ending soon.

The fact the state has not already split into two separate entities is simply due to the fact that neither parliament actually controls the National Oil Company which runs the oil and gas sector - the sole driver of the Libyan economy - or the institution which handles the collection of the country's external earnings and pays for the all-important imports upon which all Libyans depend, the country's Central Bank. 

Yet both institutions are located in Tripoli, ostensibly under the control of the GNC and its National Salvation Government (NSG). 

And both have been able to continue to operate independently of both the GNC and the NSG and to distribute revenues even-handedly to both sides in the ongoing conflict. 

One reason for this, no doubt, is that both sides depend on the Central Bank to pay their respective militia coalitions on which the parliaments depend.

Even more bizarrely, despite its international recognition, the Tobruk parliament's government, which is actually based in Bayda, has been unable to persuade oil traders to deal with an alternative central bank that it has created and which it has based in Dubai.  

Read more: Libya slips further into chaos as impasse drags on 



At the end of August 2015,  the Tripoli-based chairman of the National Oil Company and the Central Bank made a quick trip to London to meet with 26 oil producers and traders that handle Libyan oil and gas, in order to confirm that they would continue to deal only with their institutions. 

Later this month, the Bayda-based government of Abdullah al-Thinni is to host the same companies at a conference in Dubai to try to change their minds - but it is unlikely to succeed for legal reasons.

Solutions

The United Nations, through its special representative, Bernardino León, has been vainly trying to resolve the governmental crisis - but has run into irredentist opposition from the GNC leadership in Tripoli. Such entrenched positions centre around the GNC president, Nouri Abusahmain, the leader of the Soumoud Front militia coalition, Salah Badi, and the head of the Wafd party, Abdulhakim Bilhajj, who was the founder, in the 1990s, of the Libyan Islamic Fighting Group. 

They object to the idea of a unitary interim government, until new elections due this October, which would be headed by the HoR and in which the GNC would only play a subordinate role.

Undaunted, the ever-optimistic León has called all sides to yet another meeting in Geneva this week, in which he hopes to persuade all sides to agree to his plan for a unitary government. His chances of success seem, however, somewhat limited, since all sides in the Libyan conflict can still pay their way, given the role of the Central Bank. 

Outside the very limited areas that they control, however, alternative spectres threaten Libya's future, with the Islamic State group, in central Libya's Sirte, heading the list, although it faces growing local opposition as well.

The militias, too, are taking over the migrant trade into Europe, together with its rising tide of deaths at sea, provoking popular outrage in Zuwara in return. 

Libyans themselves, in short, are realising that they will have to solve the crises they face, given the incompetence of the governments that claim to rule over them.

George Joffe is a research fellow at the Department of Politics and International Studies at the University of Cambridge and visiting professor of geography at Kings College, London, specialising in the Middle East.


Opinions expressed in this article remain those of the author and do not necessarily represent those of al-Araby al-Jadeed, its editorial board or staff.