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Chaos in Libya: It's the oil, stupid
Chaos in Libya: It's the oil, stupid
Averting an Egyptian Military Intervention in Libya
Averting an Egyptian Military Intervention in Libya

Chaos in Libya: It's the oil, stupid

Originally published in Reuters

There seems no end to the bad news coming out of Libya.

UN-led negotiations to unite the divided country — it has two parliaments, two governments, two militia coalitions that have been competing for control of a rapidly failing state since summer 2014 — are stalling. Fighting continues apace in Benghazi, the city that was the first to rebel against the rule of Muammar al-Gaddafi in 2011 and is now a byword for extremism. The Islamic State is growing by the day in the Gulf of Sirte in the center of the country, imposing its cruel dictates and making inroads elsewhere in the country. Criminal gangs – often the same militias that have had the run of the country since Gaddafi’s fall – are doing a brisk trade in people smuggling, sending off desperate migrants and refugees on rickety boats across the Mediterranean.

Oh, and by the way, Libya is also going broke.

That last tidbit should be surprising. Libya has Africa’s largest oil reserves and has long been an important supplier of light sweet crude, the kind made into gasoline and kerosene. It also had tons of money in both hoards of cash reserves and investments across the globe.

But the oil, which used to bring in 96 percent of the country’s income, is not flowing anymore. From a high of at least 1.6 million barrels per day at the beginning of 2011, Libya is lucky to export a fourth of that today. Militias have taken control of oil fields, pipelines and export facilities across the country. At first, they sought to extort the central government to keep the oil flowing. But since the country was divided into two rival governments, they are simply fighting to keep oil revenue from each other: you take over my oilfield, I block your pipeline. Since earlier this year, IS has jumped into the fray, simply destroying facilities to keep any government from getting its revenues — although, in the longer term, it may very well want to control the oil itself.

The little oil that still flows out of the country is worth a lot less than it was a year ago, due to falling international prices. Much less revenue is flowing into state coffers, which have been ransacked by profligate spending, corruption and outright theft over the past three years. From over $110 billion in 2013, hard-currency reserves have gone down to an estimated $60 billion – not that anybody seems to know for sure. The assets of the Libyan Investment Authority, the sovereign wealth fund that owns shares in businesses (including the Italian football club Juventus) and real estate across Europe, are being fought over in courts by the rival governments.

Those two governments – one in Tripoli, Islamist-leaning and supported by Qatar and Turkey; another in Tobruk, backed by Egypt and the United Arab Emirates – are also fighting for control of the remaining cash cows: the Central Bank of Libya, which holds the reserves, and the National Oil Company, which sells the oil and gas that is still being produced. Inasmuch as Libya still has a state, these two institutions are among the few remaining centers of technocratic know-how, and they are being torn apart. They have only survived thus far because they continue to finance both governments — including the salaries of the militiamen holding them hostage — but time is not on their side. Attempts to sell oil outside these official channels have been foiled so far, but the more messy the situation in Libya gets, the more likely these will one day succeed.

There are no easy solutions to this situation. If you stop paying the militias, they will become even more predatory. The international community is not inclined to do so, but if it were simply to seize Libya’s assets or impose an oil embargo in order to impose a peace deal, economic collapse would likely ensue. The only way out is to persuade those fighting for control of Libya’s wealth that their prize is dwindling fast and that they are better off finding a way to share it. On the current trajectory, they risk their country becoming a fully failed state, in which case they will also have to fight the Islamic State and perhaps some of Libya’s neighbors for the rich pickings of its resource wealth.

Many of the thuwwar (rebels) of 2011 have turned out to be gangsters no less brutal and corrupt than the thuggish regime they overthrew. But there are still decent Libyan patriots on both sides who can make peace and lead their fellow citizens out of a certain economic disaster that is likely to be far more deadly than the current conflict. Libya needs cash to import nearly all basic goods. Shortages are already making life difficult for ordinary people, on top of the general insecurity.

The initial step is recognizing that Libya’s civil war is only secondarily about ideology, religion or rival claims of legitimacy. First and foremost, it is about who will control the country’s oil and petrodollars. That is what Libyans and outside actors like the UN that are trying to bring peace need to focus on, so that oil and gas can start flowing again, the economy can be stabilized, and a unity government can turn to the urgent task of restoring security, fighting the Islamic State and other radicals, and building the new Libya so many were hoping for in 2011.

Members of the self-proclaimed eastern Libyan National Army (LNA) special forces gather in the city of Benghazi, on their way to reportedly back up fellow LNA fighters on the frontline west of the city of Sirte. Abdullah DOMA / AFP

Averting an Egyptian Military Intervention in Libya

On 20 July, Egyptian legislators authorised sending combat troops to Libya, where Cairo’s ally Field Marshal Khalifa Haftar is on the defensive. Following Turkey’s intervention on the Tripoli government’s behalf, Egypt’s involvement could escalate the war dramatically. All parties should seek a compromise.

Egypt’s threat to send its army into neighbouring Libya is a predictable and understandable but dangerous response to Turkey’s deepening military involvement that risks embroiling both countries in a costly war. Cairo has warned that it will intervene directly should Turkish-backed forces loyal to the Tripoli-based government try to retake key locations in central Libya and nearby oil installations now under the control of an Egyptian-backed rival coalition led by Field Marshal Khalifa Haftar. As Egypt sees it, a Turkish-backed advance into central Libya would cross a red line, endangering its border and national security. Both Ankara and Cairo should take a step back and seek a settlement on the status of central Libya’s strategic sites, including its prized oil assets. Foreign capitals with close ties to both countries should help them de-escalate tensions and reach such an accommodation. The alternative is to further regionalise what has become an unwinnable war. 

The latest tipping point in the six-year Libyan conflict came on the heels of the pro-Tripoli coalition’s successful counteroffensive in western Libya, made possible by support from the Turkish army and the Syrian fighters on its payroll. Ankara’s deployment came in response to a request for help from the government of Prime Minister Fayez al-Serraj in Tripoli in early 2020. The overt nature of its intervention, sanctioned by a Turkish parliamentary vote, enabled Turkey to dispatch military assets more rapidly and with greater freedom than its regional adversaries.

Fresh from its military win, the Tripoli government is now insisting that Haftar’s troops pull back from the former Qadhafist stronghold of Sirte and the Jufra air base in central Libya, both used by Haftar’s foreign backers as operational hubs. In addition, Tripoli wants Haftar’s forces to withdraw from the nearby “oil crescent” as a precondition for a ceasefire. These requests mark a shift from the Serraj government’s previous demand that Haftar move his troops back to their pre-April 2019 positions, before the Tripoli offensive, when both the oil crescent and Jufra were still under his coalition’s control. The explanation for this change is not hard to discern: Ankara and Tripoli now believe they can not only beat back but defeat Haftar, despite the support he enjoys from Egypt, the United Arab Emirates (UAE), Saudi Arabia, Jordan, Russia and France. Although Tripoli has nominally laid out its conditions for a ceasefire, it continues to reject political negotiations with the Haftar camp, blaming it for waging a year-long offensive that killed at least 3,000 people, both civilians and combatants. By imposing new ceasefire terms that it knows will be hard for the Haftar camp to accept, Tripoli is hoping to legitimise its refusal to negotiate.

A major driver behind a new flare-up in fighting would be the desire to control oil facilities and revenues.

A major driver behind a new flare-up in fighting would be the desire to control oil facilities and revenues. Haftar’s withdrawal from the oil crescent would amount to handing over the country’s main oil facilities to Tripoli. Haftar’s forces imposed a blockade on oil exports in January to protest Tripoli’s alleged misuse of oil revenues, including purportedly to fund Turkish military efforts in Libya. The blockade has almost completely halted oil exports, bringing down daily production from around one million barrels to just 100,000 barrels, and causing revenues (already affected by low international oil prices) to plummet.

For regional actors, Egypt in particular, the stakes transcend Libya and its oil sector. Their main concern is defending their vision of the regional order. Egypt and its Arab allies – Saudi Arabia (which has provided political and financial support), Jordan (under-the-radar military support) and the UAE (financial and military assistance) – oppose the presence of Turkish forces and pro-Ankara Syrian fighters in Libya and see the Syrians, in particular, as militant Islamists. Egypt considers an expanded Turkish military presence in central Libya to be a potential threat to its own national security. It fears that a Turkish-backed offensive could alter the power balance in eastern Libya, allowing pro-Tripoli forces to use this area as a staging ground for attacks inside Egypt. Egypt’s Arab allies share these views, while France is especially concerned with the conflict’s ripple effects in southern Libya, which borders Chad, an important ally.

These preoccupations have pushed Cairo to take the unprecedented step of preparing for an openly declared military intervention, rather than continuing to back Haftar’s forces covertly. Egypt did not consider taking this step even in 2015, when the Islamic State took over Sirte and established a presence in Benghazi. Cairo is now trying to match and counter Ankara, which it sees as a regional sponsor of the Muslim Brotherhood, the Egyptian government’s mortal enemy.

Egypt is relying on eastern Libya’s parallel governing institutions to provide a veneer of legitimacy for its intervention. On 13 July, the Tobruk-based House of Representatives officially asked Cairo to intervene. A few days later, President Abdelfattah al-Sisi met with a delegation of tribal leaders from eastern Libya in Cairo, who likewise called on Egypt to step in. Tripoli slammed both appeals as illegal, pointing out that tribal leaders have no official authority and that the east-based parliament, whose active members number no more than 40 of the 200 nominal parliamentarians, held no vote on its request. Regardless, on 20 July, the Egyptian parliament responded by authorising the deployment of Egyptian troops for combat missions outside the country to defend its national security against “criminal armed militias and foreign terrorist elements”. In escalating rhetoric, the Tripoli government condemned this decision as “a hostile act and direct interference, amounting to a declaration of war”.

Military experts believe that Cairo is likely to limit its intervention to securing the border area inside Libya. It could back up such an operation with airstrikes upon pro-Tripoli forces, should they seek to advance. With Sirte located 1,000km from the Egyptian border, deploying troops to central Libya would pose significant logistical challenges for the Egyptian army, lengthening supply lines and promising only inconsistent air cover to ground troops. A more expansive intervention should not be excluded, however, one that could expose Egyptian troops to a direct confrontation with the Turkish military and affiliated Syrian fighters in central Libya. Private military contractors of the Russian-owned Wagner company are also consolidating a presence in central Libya, reportedly operating fighter jets in Jufra and bringing in reinforcements to Sirte and the oil terminal areas in a bid to bolster the Haftar forces’ positions there.

The repercussions of a resumption of hostilities for the local civilian population would be catastrophic.

The repercussions of a resumption of hostilities for the local civilian population would be catastrophic. The growing involvement of conventional armies raises the spectre of intensified violence, particularly in the residential areas of Sirte. Likewise, Egypt’s rumoured plan to transfer weapons to eastern Libyan tribal groups risks unleashing even more local violence and retaliatory measures against civilians. Renewed fighting in the oil crescent could also result in hard-to-reverse damage to hydrocarbon facilities; while secondary to humanitarian concerns, such damage would be worrying, as it could stanch the flow of financing critical for Libya’s long-term economic viability and standing. Finally, with Turkish and Egyptian troops potentially coming into close contact and pro-Russia private military fighters also in the fray, the risk of a wider regional confrontation looms.

All sides ought to take immediate de-escalatory steps to minimise these risks and save civilian lives. Tripoli should freeze its military advance in central Libya and pursue a negotiated agreement on Sirte and Jufra, both now under the control of pro-Haftar forces aided by Wagner fighters. In Sirte, such an accord could entail Haftar and the forces backing him withdrawing from the area, to be replaced by a limited pro-Tripoli military presence that would leave out Turkish-backed forces and hardware; in Jufra, an agreement could allow for a symbolic presence of Haftar-aligned fighters with guarantees that foreign forces currently operating there move out. This would be one step toward a partial demilitarisation of central Libya rather than the full demilitarisation that Berlin and Washington have advocated but which would be difficult to achieve.

At the same time, the sides should come to a resolution to the oil sector standoff. Egypt should seek to convince Haftar and its other regional allies to drop their demand to see profits redistributed between western, eastern and southern Libya (in the absence of a legal framework that would regulate this arrangement), and instead accept a compromise agreement put forward by the U.S., UN and Libya’s National Oil Corporation (NOC). This proposal envisages reopening oil production and exports in exchange for placing future oil revenues in a NOC-held account for 120 days rather than in the Tripoli-based central bank, as a means of reassuring Haftar as to how such funds would be used. Supporters of this plan believe that the timeframe would allow for negotiating a new line-up of the central bank’s top management as a possible precursor to reunification of the bank, which split into two parallel and competing institutions after 2014. This deal would also mean that, for now, Haftar-led forces remain in charge of the sites.

Such arrangements would fall short of what each side wants, but they could pave the way for a negotiated way forward. Moreover, acceptance of these arrangements would help build much-needed confidence between the two coalitions and their respective backers. From Cairo’s perspective, conceding on Sirte and Jufra and persuading the Haftar camp to accept an oil deal would also spare Egypt and its Libyan allies from the many unknowns that a military adventure would entail. For Ankara and Tripoli, a symbolic return to Sirte and acceptance of a semi-demilitarised Jufra would guarantee that these sites would not be used for military offensives aimed at taking Tripoli or Misrata, while an oil deal would provide much-needed revenues to sustain public-sector salary payments.

As for Turkey, it should be wary of overreach. Its authorities have made clear that they will not consider Haftar, or anybody else in his camp, as negotiating partners. Instead, they say they want to restore the Tripoli government’s control over all of Libyan territory. Their strategy is wearily familiar: reestablishing their proxy’s military superiority with the aim of going back to the negotiating table from a position of strength. The problem with this approach is that the other side and its foreign backers are unlikely to accept a lopsided negotiation, as the past years of conflict and diplomacy in Libya have shown. Eventually, a new cycle of violence almost certainly will emerge, as the opposing side tries to level the playing field by counter-escalating. Turkey should avoid falling into this trap and instead push its allies in Tripoli to accept a compromise solution on central Libya’s security arrangements and oil revenues that could lead, at a later stage, to a comprehensive military and political agreement to reunify the country.

With each new intensification of the conflict, the opportunity for compromise seems ever more remote, while the risk of a larger regional war looks ever greater. If there still is a chance to reverse course, regional actors should jointly take it – now – or find themselves mired in an endless regional confrontation.