The feud between Libya’s two governments for control of its central bank intensified on Wednesday as more oil fields shut down and the eastern government demanded the return of ousted bank governor Sadiq al-Kabir.
Libya has been divided between two bickering, and occasionally warring, governments ever since the disastrous U.S. invasion engineered by President Barack Obama and Secretary of State Hillary Clinton in 2011.
The overthrow of eccentric dictator Muammar Qaddafi unleashed numerous warlords and terrorist gangs to fight over Libyan territory, killing thousands of people and creating a massive humanitarian crisis. Freedom House currently rates Libya as one of the most unfree countries in the world, since neither its governments, gangsters, nor terrorists cares very much about human rights.
The two biggest power players in Libya are the “Government of National Unity” (GNU), based in the western city of Tripoli, and the “House of Representatives” (HoR), which used to operate out of Tobruk in the east, but is currently based in Benghazi – site of the Obama Administration’s bloodiest scandal.
The HoR moved to Benghazi after its military leader and would-be national ruler, Khalifa Haftar, conquered the city in 2017. Haftar’s forces style themselves as the Libyan National Army (LNA), and that name is often used to refer to the entire eastern government.
The GNU is the internationally recognized government of Libya but Haftar and his LNA control more of the country, including most of its onshore oil fields. Libya occasionally tries to hold elections for a national unified government, most recently in 2021, but they always collapse before anyone gets to cast a vote.
The prospective candidates for president with the most popular support are invariably disqualified for violating U.N. resolutions or Libyan law, including Haftar, who tried to run in 2021 after laying siege to Tripoli. After the 2021 election attempt collapsed, the prime minister sitting in Tripoli, Abdul Hamid Dbeibah, decided to remain in power indefinitely.
The United Nations warned two weeks ago that the security situation in Libya deteriorated “quite rapidly” over the summer, with all factions mobilizing troops instead of negotiating another unity election.
Dbeibah is currently embroiled in a scandal over allegedly seeking to normalize relations with Israel. On Wednesday, he sacked his foreign minister Najla al-Mangoush after a story broke about her holding secret meetings with Israeli Foreign Minister Eli Cohen in Rome. The story triggered angry protests across Libya, and some controversy in Israel as well, as Cohen was criticized for irresponsibly allowing reports of the meeting to leak.
On August 13, the HoR held a vote to declare the GNU illegitimate and declare itself “the only legitimate executive” in Libya. The western government unsurprisingly refused to recognize this judgment.
The flashpoint in what could become another Libyan civil war is the Central Bank of Libya (CBL). The bank is not quite as “central” as it used to be – since it was split up in 2014 and a branch office was established in Benghazi, to give the eastern government a sense of ownership – but the bank’s primary headquarters and governor remain in Tripoli.
The Tripoli government sacked governor Sadiq al-Kabir, who has held the post since 2011, on August 19 and replaced him with economist and former deputy governor Mohamed Abdul Salam al-Shukri.
Al-Kabir was criticized from all sides over the years for his handling of Libya’s billions of dollars in oil money, but the eastern government denounced his termination as the western government attempting to grab control over Libya’s wealth.
Critics of the replacement also pointed out that the Libyan Presidential Council in Tripoli, which wrote the decree replacing al-Kabir with al-Shukri, lacked the constitutional authority to remove the CBL governor.
Oddly enough, or perhaps oddly for anywhere except Libya, this was actually the third time al-Kabir has been sacked. On the previous two occasions in 2014 and 2018, he simply ignored the orders and kept showing up for work.
Supporters of the ousted governor accused the Tripoli government of sacking him because he became critical of its profligate and inflationary spending policies. The GNU responded by saying it wanted to strengthen the rule of law, and give the CBL more credibility, by appointing a full board of directors. Al-Kabir has been essentially running the operation by himself since 2011.
The HoR struck back on August 17 by voting to keep al-Kabir as CBL governor, in defiance of the decree from Tripoli. Strictly speaking, what the HoR did was vote to nullify the resolution it passed in 2018 to fire al-Kabir, back when they were mad at him for allegedly mishandling Libya’s oil billions.
Al-Kabir also had support from the United States and United Kingdom, both of which warned that replacing him in a naked power play might get the CBL locked out of international markets. Some Libyans did not consider it a point in Al-Kabir’s favor that the U.S. government wanted him to stay put.
For his part, designated replacement governor Muhammad al-Shukri said he would not accept the job unless the HoR votes to accept his appointment – in part because he fears a civil war could break out.
“My professional and career history and my ethics absolutely do not allow me to be part of this chaos. By God, a single drop of our children’s blood is more precious to me than all the spoils of the world and the jobs of the Libyan state,” al-Shukri said in a Facebook post last week.
The eastern government threatened on Monday to suspend oil production unless al-Kabir was restored as CBL governor. The oil fields are technically owned by the National Oil Corporation (NOC) in Tripoli, but the eastern government and its LNA physically control most of them.
The NOC has already declared force majeure for the Sharara oil field, one of Libya’s largest, due to protesters making operations difficult.
By Wednesday, five more oil fields had been shut down, most recently including Sarir, which is normally good for 209,000 barrels per day of production. Almost half of Libya’s production was offline as of Thursday and tense standoffs were reported at oil shipping ports. Industry analysts said Libya’s production could be reduced by up to one million barrels per day for the next few weeks.
Oil prices rose a little on Thursday, although the increase was less than one percent thanks to generally weak global demand. Industry experts said much of the modest price increase was due to apprehension that the situation in Libya could get much worse.
Some traders optimistically noted that OPEC was planning to reduce production to boost prices anyway, and might compensate for losses from Libya by simply cutting production by less than originally planned.
The U.S. and U.N. pleaded with all factions in Libya on Thursday to hold talks and work out their differences peacefully. U.S. Ambassador to Libya Richard Norland repeated his warning that the CBL crisis “undermines confidence in Libya’s economic and financial stability in the eyes of Libyan citizens and the international community, and increases the likelihood of harmful confrontation.”
“Reports of arbitrary arrest and intimidation of central bank employees are particularly concerning – those responsible must be held strictly accountable,” Norland added.
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