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The Prize: Fighting for Libya’s Energy Wealth
The Prize: Fighting for Libya’s Energy Wealth
Table of Contents
  1. Executive Summary
What Prospects for a Ceasefire in Libya?
What Prospects for a Ceasefire in Libya?
El-Sharara oil field, Libya, 24 March 2015. CRISIS GROUP/Claudia Gazzini
Report 165 / Middle East & North Africa

The Prize: Fighting for Libya’s Energy Wealth

The imminent collapse of Libya’s economy could impoverish millions, foster chaos and more radicalisation. At the heart of Libya’s misery is frenzied competition for control over the country’s oil resources. Ongoing UN-led talks should urgently prioritise economic governance, local ceasefires and armed defence of oil facilities.

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Executive Summary

Libya’s economic conditions could turn sharply for the worse, as rival authorities vie to control rapidly shrinking national wealth. The struggle affects oil fields, pipelines and export terminals, as well as the boardrooms of national financial institutions. Combined with runaway spending due to corruption and dwindling revenue because of falling exports and energy prices, the financial situation – and with it citizen welfare – faces collapse in the context of a deep political crisis, militia battles and the spread of radical groups, including the Islamic State (IS). If living conditions plunge and militia members’ government salaries are not paid, the two governments competing for legitimacy will both lose support, and mutiny, mob rule and chaos will take over. Rather than wait for creation of a unity government, political and military actors, backed by internationals supporting a political solution, must urgently tackle economic governance in the UN-led talks.

The Prize: Libya's Hydrocarbon Wealth

In this video, our Senior Libya Analyst, Claudia Gazzini, explains the complex overlapping issues around the fight for Libya's energy wealth and how we went about researching the topic. CRISIS GROUP

Since the Qadhafi regime fell in 2011, Libya has been beset by attacks on, labour strikes at and armed takeovers of oil and gas facilities, mostly by militias seeking rents from the fledging central government. Initially brief and usually resolved by government concessions, the incidents gradually took on a life of their own, in an alarming sign of the fragmentation of political, economic and military power. They show the power accrued by militias during and since the 2011 uprising and the failure of efforts to integrate them into the national security sector. The dysfunctional security system for oil and gas infrastructure presents a tempting target for IS militants, as attacks in 2015 have shown.

One aspect of the hydrocarbon dispute is a challenge to the centralised model of political and economic governance developed around oil and gas resources that was crucial to the old regime’s power. But corruption that greased patronage networks was at that model’s centre, and corrupt energy sector practices have increased. A federalist movement some consider secessionist controls a number of the most important crude-oil export terminals. It exploits the situation by pursuing its own sale channels, adding to the centrifugal forces tearing Libya apart.

This complicates efforts to resolve a political conflict that in July 2014 triggered a split between rival parliaments, governments and military coalitions – one based in the capital, Tripoli, the other in the east, and both with support from competing regional players. Convinced of its legitimacy, each fights to control key institutions. As the most important, the Central Bank of Libya (CBL) and the National Oil Company (NOC), are under Tripoli’s control, the internationally recognised parliament in Tobruk and its government in al-Bayda are trying to set up parallel institutions. The sides also contest the assets of the Libyan Investment Authority (LIA, the sovereign wealth fund), in international courts. In anticipation of a unity government, most regional and all other international actors with a stake remain committed to the established CBL, NOC and LIA. They understand that these institutions jointly represent upwards of $130 billion and have senior technocratic expertise critical to rebuilding the state.

The longer negotiations stall, however, the greater the risk the Tobruk/Bayda authorities (which consider the Tripoli-based CBL and NOC biased against them) will be able to create rival institutions or weaken the existing ones. At the same time, Libya’s once-significant wealth (derived almost entirely from oil and gas sales) is haemorrhaging, due to corruption and mismanagement. Combined with reduced crude-oil exports because of damage to production and export sites, pipeline and other infrastructure blockades and the sharp decline in international oil prices, this makes remedial action urgent. Poor economic management already causes some shortages of fuel and basic goods; a wider economic crisis like a sudden, uncontrolled devaluation of the dinar, would severely harm millions. This would likely cause new security crises, encouraging more predatory behaviour by militias whose salaries the state pays, increasing the importance of the parallel economy (notably smuggling) and spurring new refugee flows.

Even as UN-led negotiations for a Government of National Accord (GNA) continue, several steps should be taken, including at a minimum:

  • reiterating international determination that there can be only one CBL, NOC and LIA, with a GNA to appoint their senior managers; and oil sales or related contracts outside official channels will not be tolerated;
     
  • prioritising economic governance in the UN-led talks so as to secure agreement on short-term economic policy and interim management of key institutions. This should be done in a separate negotiating track, including representatives of both authorities and with the support of international financial institutions such as the IMF and the World Bank;
     
  • brokering of local ceasefires in the UN-led talks’ security track, or other channels where relevant, to increase revenues in the short term by allowing reopening of blockaded oil fields, pipelines and export facilities. Security arrangements for repair and reopening of damaged facilities should be negotiated in the longer term; and
     
  • making the question of the armed groups guarding oil facilities another priority security-track topic. Some of these have considerable arsenals and allies across Libya and are largely autonomous, so cannot be ignored. Including these armed groups could also help improve the protection of oil and gas infrastructure against attacks by IS affiliates.

The slow progress of the UN-led talks on political questions should dissuade neither the belligerents nor the internationals from encouraging such interim steps. That Libya has kept, against all odds, a minimum level of economic governance and even briefly increased oil exports shows that interim economic arrangements are possible; they could even deliver political gains by building confidence and demonstrating that compromise can be mutually beneficial. But this needs a push from outside, the resolve of both local and international actors – notably regional powers that have oscillated between backing a political solution and supporting one side or another – to maintain the integrity of the financial institutions and perseverance from negotiators. Above all, it entails convincing the two sides they are fighting over a rapidly diminishing prize and would be better off agreeing to these steps so as to share a bigger pot.

Tripoli/Brussels, 3 December 2015

Russian President Vladimir Putin (L) and Turkish President Recep Tayyip Erdogan (R) speak as they attend an inauguration ceremony of a new gas pipeline "TurkStream" on 8 January 2020 in Istanbul. AFP/Ozan KOSE

What Prospects for a Ceasefire in Libya?

On 19 January, Berlin will convene the main parties in Libya’s conflict. This comes in the wake of the Moscow meeting between Libya’s two main rival leaders that failed to produce a ceasefire. Libya expert Claudia Gazzini discusses where the peace process may go next.

What happened in Moscow? 

On Monday, Russian government officials hosted Libya’s two rival leaders, whose respective military forces have been at war for nine months, in a bid to usher them toward a ceasefire agreement. One is Faiez Serraj, who heads the internationally recognised Government of National Accord (GNA) in Tripoli; the other is Field Marshall Khalifa Haftar, who leads a coalition called the Arab Libyan Armed Forces (ALAF), previously known as the Libyan National Army (LNA). Haftar’s coalition does not recognise the Serraj government, and in April launched an offensive to take control of the Libyan capital. Fighting has killed over 2,000 people, put Tripoli under siege by Haftar’s forces and sucked in several foreign powers.

The Russian initiative came on the heels of a sudden joint Turkish-Russian call for a ceasefire that Russian President Vladimir Putin and his Turkish counterpart, President Recep Tayyip Erdoğan, issued on the margins of their 8 January meeting in Istanbul. The two leaders invited Libyan factions to stop military operations starting on 12 January and return to political negotiations. They made the call without first consulting with the factions they respectively support – Ankara backs Serraj, and Moscow, Haftar – but in subsequent days, both the ALAF and the Tripoli-based authorities publicly expressed support. When next they appeared to respect the de facto ceasefire, this raised hopes that they would also agree to formalise a ceasefire agreement in Moscow. 

Events did not go as planned. On the government side, Serraj, as well as his political ally Khaled Mishri, head of the Tripoli-based High Council of State, signed the seven-point ceasefire agreement Turkish and Russian officials had prepared. But Haftar and his political ally, Aghila Saleh, who heads the Tobruk-based parliament that backs Haftar’s military campaign, refused. The Libyan delegations left Moscow Monday evening without meeting each other, and so the attempt to reach a ceasefire agreement fell apart. Yet the tenuous ceasefire in Tripoli appears mostly to be holding. Both sides have refrained from aerial strikes and have only exchanged minor artillery fire.

Did the Moscow meeting come as a surprise?

It is unclear what prompted this sudden move. Moscow and Ankara may have struck a mutually advantageous deal, sparing them (and their proxies) the need to fight, and potentially putting them in the driver’s seat to resolve a conflict from which Europe and the U.S. increasingly are absent. The surprise invitation came after two major developments in early January that, far from signalling opportunities for peace, suggested further escalation. The first was Turkey’s announcement it would send forces to Libya, and the second, Haftar’s takeover of Sirte, a coastal city in the centre of the country. 

On 2 January, Turkey’s parliament authorised the deployment of troops and naval assets to prevent the collapse of the beleaguered Serraj government at the hands of Haftar-led forces. The latter had made gradual advances in Tripoli’s periphery in previous months, in large part thanks to Russian armed private contractors and aerial support from the United Arab Emirates (UAE). To date, Turkey reportedly has sent a few hundred allied Syrian fighters to Libya, as well as several dozen military experts from its own armed forces, and numbers are expected to increase. Turkish officials stated these deployments aimed to create conditions for a ceasefire by rebalancing power on the ground. Many feared, however, that direct Turkish involvement would trigger further escalation. Indeed, several pro-GNA officials suggested Turkish support would allow them to launch a counter-offensive and even strike Haftar’s forces in their rear bases in eastern Libya. On the opposite side, several Arab tribes across Libya called for a jihad against what they termed Turkey’s “colonial ambitions”. 

Turkey reportedly has sent a few hundred allied Syrian fighters to Libya as well as several dozen military experts from its own armed forces

Notably, Ankara’s decision to intervene on Serraj’s behalf was preceded by, and to a large degree conditioned on, the Tripoli government’s agreement to sign a controversial maritime deal that Turkey has long sought. Ankara views the deal as key to blocking the development of an eastern Mediterranean gas hub from which it is excluded. The “delimitation of maritime jurisdiction areas” agreement, which Erdoğan and Serraj signed in late November and the Turkish parliament ratified on 5 December, establishes an 18.6 nautical mile (35 kilometre) line between Turkey and Libya that would form the outer boundary of an Exclusive Economic Zone. By transecting an area claimed by Greece and Cyprus, this line could jeopardise plans to build a gas pipeline from the eastern Mediterranean to Europe. Governments other than Ankara and Tripoli dispute the deal’s legality. The EU opposes it, and it has angered Tripoli’s opponents, not least Egypt, heightening geopolitical competition in the region.

The second event, Haftar’s sudden takeover of Sirte on 7 January – his first significant military advance in months – suggests he may want to use the town’s airbase to launch an offensive against Misrata, a key city whose fighters form the backbone of Serraj’s military coalition.

Overall, the fact that Moscow and Ankara took this initiative underscores what has been evident for months – that peace in Libya hinges as much on foreign actors’ willingness to exert leverage on their Libyan allies as on Libyan factions’ actual support for a political alternative to war. That Haftar so far has refused to sign a ceasefire agreement that one of his principal foreign backers put on the table moreover suggests he does not feel dependent on Russia alone, and that his other backers – the UAE most prominently – give him room for manoeuvre.

What were the terms of the ceasefire agreement and why did Haftar refuse to sign it?

The agreement contained seven points, most importantly the need for the two sides to “determine a line of battle contact to ensure a sustainable ceasefire”, appoint five representatives each to a military ceasefire monitoring commission, and appoint representatives to future economic, military and political negotiations under UN aegis. These last two points already form the backbone of a roadmap that foreign states agreed to support in the UN-backed Berlin process late last year, and will endorse again at the conference Germany will host this weekend. In other words, while the choreography of the Moscow meeting suggested Russia and Turkey were trying to carve out a deal bypassing or even undermining ongoing UN and German-led efforts, what Moscow and Ankara put on the table ultimately seems a tacit endorsement of these ongoing diplomatic initiatives. 

Haftar may have refused to sign because the ceasefire terms were too vague, and could have been interpreted as requiring him to withdraw his forces from Tripoli and environs at a moment when he feels the balance of power is in his favour. This vagueness possibly suited Serraj: even though the ceasefire agreement did not make explicit the government’s request for a withdrawal of Haftar’s forces to their pre-April 2019 positions (i.e. a full retreat from western Libya), it gave him enough flexibility to persuade his home supporters that the withdrawal was still on the cards. Serraj also supported the other two key points – the joint ceasefire monitoring commission and the launch of UN-backed economic, political and military talks. Indeed, his government designated its representatives to the commission weeks ago. 

In contrast, it would have been a u-turn for Haftar to accept these terms, which fly in the face of his perception that his forces have made significant gains and his insistence that the ALAF is Libya’s sole legitimate military force. He has been telling foreign leaders for some time that he refuses to appoint five representatives to the joint military commission because he does not consider the Serraj government, which depends on militia support, as a legitimate negotiating partner. Moreover, Haftar opposed the notion – implicit in the agreement – that Turkish forces would be allowed to remain in Tripoli, and that Turkish officers could join Russian colleagues in forming an international ceasefire monitoring team. 

Haftar reportedly demanded that the agreement include explicit mention of the need for the Serraj government to disarm militias and hand over their weapons to the ALAF, and for elections to follow the formation of a unity government. Haftar’s emissaries had frequently raised these with diplomats. 

The fact that Russia and Turkey agreed to work together suggests Libya’s conflict can no longer be seen strictly through a binary pro-Haftar or pro-Tripoli lens.

In light of this failed Russia-Turkey attempt to mediate, what does the map of international alignments in Libya now look like?

The fact that Russia and Turkey agreed to work together suggests Libya’s conflict can no longer be seen strictly through a binary pro-Haftar or pro-Tripoli lens. Indeed, whereas Ankara firmly backs Serraj’s side militarily, strategically and ideologically, Moscow does not. Instead, it has provided Haftar’s camp with weapons and reportedly – despite Moscow’s denials – private military contractors, even as it has maintained relations with the Serraj government. 

What exactly drives this new, apparent convergence between the two countries is still unclear. It could reflect their multiple overlapping geostrategic interests over which they value continued cooperation, despite being on opposite sides of the war. Both may be looking to model their dealings in Libya on their existing cooperation in Syria, where their positions are also misaligned. Moscow and Ankara also have congruent energy interests, with high hopes for the TurkStream gas pipeline that carries Russian gas to Turkey and neighbouring countries. Both may therefore want to limit development of any eastern Mediterranean gas hub, of which neither Ankara nor Moscow would be a part. To date, their growing partnership has manifested in military cooperation, most notably Ankara’s recent acquisition of the Russian S-400 missile system, a move that seriously damaged Turkey’s relationship with the U.S. 

Their interests may also implicitly converge with regards to Libya: despite flexing its muscles, Moscow likely does not want to be dragged into the conflict too deeply, hoping Ankara can prevail on Serraj to soften his stance toward Haftar, in return for Haftar respecting Turkey’s claims on eastern Mediterranean gas. Should that be the case, however, it would be a tall order: Haftar and his Arab allies adamantly oppose both Turkey’s claims on the Mediterranean and Ankara’s military involvement in Libya. 

For their part, Egypt, the UAE and Saudi Arabia continue to support Haftar, although each state has a different level of involvement and exposure. Egypt, as a neighbouring country, is more concerned about potential fallout from the Libyan crisis and also directly affected by the maritime deal by virtue of being a key member of the eastern Mediterranean gas hub; it also is viscerally opposed to the Muslim Brotherhood, which it accuses Serraj (and Turkey) of favouring. This last factor is the main driving force behind the UAE’s and, to a lesser extent, Saudi Arabia’s stance. While officially recognising the Tripoli government, all three countries deal with it only infrequently and have repeatedly opened their doors to Haftar and Aghila Saleh, allowing them to use the high-level platforms their capitals provide to lash out against Serraj. 

Qatar, while allied with Turkey and Serraj, has adopted a relatively low profile in Libya since its Gulf neighbours imposed a land, sea and air blockade in 2017. It has said it would seek to help the Serraj government and Turkey were Haftar to threaten to take over Tripoli, but its support is financial rather than military.

Libya’s western neighbours Tunisia and Algeria largely stand behind Tripoli. They fear the prospect of a Haftar victory, which they view as a vehicle for increased Egyptian influence along their border with Libya. That said, they are not in a position to markedly alter the course of the war, if only because of their fragile domestic situations.

The EU and members states form another group that takes the middle ground, maintaining contact with both Libyan factions and strongly supporting UN efforts for a political solution. Their ability to influence the course of events in Libya declined as others stepped in with significant military assistance to the warring sides. Still, they enjoy leverage over some of the Libyan factions’ outside backers. Germany has proved most willing to deal with them: Chancellor Angela Merkel reached out to Egyptian President Abdel Fattah al-Sisi to ensure he supported the Berlin process, and to President Putin to ensure that the draft ceasefire agreement reflected steps discussed in Berlin. 

Although belonging to this European group, France remains something of an outlier. Its relatively more pro-Haftar stance stems from its belief that the political process must better reflect the current balance of power, which favours Haftar (in part, of course, thanks to French support over the years). France’s approach also is informed by its close security ties with the UAE and Egypt, a Sahel policy strongly centred on supporting Chad (whose president is a Haftar ally), and its hostility to Turkey’s attempts to encroach on the eastern Mediterranean gas plans. Greece is also emerging as an EU outlier. While previously not a key player in the crisis, it became one almost overnight once Ankara and Tripoli signed their maritime deal. In early January, Greece responded by signing a deal with Israel and Cyprus to build an eastern Mediterranean gas pipeline, which Turkey said it would block. It also received Haftar on the eve of the Berlin conference, signalling it would support him in any EU deliberations.  

In the wake of the failed Moscow meeting, what are the prospects for the Berlin Conference? 

To an extent, the failure of Moscow does not necessarily affect the Berlin conference (scheduled for this Sunday), since its success does not hinge on a pre-existing ceasefire. Its final conclusions have already been drafted and revised during five preparatory meetings over the past months. Although last minute edits might still come (partly due to the late addition of new participants), if all goes according to plan, representatives of the U.S., EU, UK, France, Russia, China, Italy, Germany, Turkey, Egypt, the UAE, Algeria and Congo-Brazzaville, as well as the UN, Arab League and African Union, will sign a 55-point declaration. Key items include support for a ceasefire, a commitment not to violate the UN arms embargo on Libya, and a pledge to support a UN “operational” plan for political, security and economic consultations aimed at unifying the country. On the eve of the conference, diplomats inserted wording calling for “credible steps” toward dismantling armed groups and militias following the demand Haftar made to this effect in Moscow.

If the conference only included high-level representatives of foreign states, as originally planned, its outcome would have been predictable. Even those backing opposing Libyan factions almost certainly would have signed the conference’s pre-drafted final declaration.  But the last-minute invitation of Serraj and Haftar – while understandable insofar as it gives the meeting more Libyan buy-in – adds a new level of unpredictability and, potentially, drama to the event. Furthermore, the alleged shipment of additional weapons to both Tripoli and Benghazi in recent days, and renewed calls among pro-Haftar tribesmen to close oil export terminals in their areas, make the situation inside Libya particularly tense. This, in turn, makes the conference’s outcome more uncertain. 

In a best-case scenario, the Berlin conference could be a modest step forward in efforts to end the war and stabilise the country. Yet the risk remains that some participants will merely pay lip service to the diplomatic initiative, even as they continue to fuel a war from which they benefit.