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Statement on a Political Deal for Libya
Statement on a Political Deal for Libya
Libya: Amid Political Limbo, Time to Rescue the Economy
Libya: Amid Political Limbo, Time to Rescue the Economy

Statement on a Political Deal for Libya

The International Crisis Group considers the international conference on 13 December in Rome an opportunity to bring together a divided Libya through an inclusive political process. Under the co-chairmanship of Italian Foreign Minister Paolo Gentiloni and U.S. Secretary of State John Kerry, it will bring together the "P5+5" group that has backed the talks – the five permanent members of the UN Security Council (China, France, Russia, the United Kingdom and the United States) and Germany, Italy, Spain, the European Union and the UN, as well as Libya’s neighbours.

Intense diplomatic efforts to resolve the crisis in Libya are of course welcome, but there are risks associated with a precipitous rush to anoint a government without consolidating domestic support or addressing urgent security concerns.  Ending negotiations will strengthen hardliners; granting recognition to a government that has insufficient backing will condemn it to irrelevance.
Establishing a sound basis for stabilising the country entails giving Libyan, regional and other international actors and Martin Kobler, the UN Secretary General's Special Representative, the necessary support and time to rebuild trust in the UN - which was damaged by the premature announcement of the composition of a government of national accord in October and the allegations of impropriety by the Secretary General's former Special Representative, Bernardino León - and to secure as wide a consensus as possible through the following steps:

  • acknowledging that a government of national accord is likely to be stillborn if prematurely recognised. It would not be able to be seated in Tripoli due to security concerns and might trigger renewed fighting for control of the capital;
     
  • giving time before announcing a government to revise the Tripoli security plan proposed by the UN and to conduct a broader, nationwide security dialogue between military coalitions  – including militias from Jebel Nefusa, Misrata, Tripoli and Zintan in the west, the Libyan National Army, the Shura Council of Benghazi and the Petroleum Facilities Guards in the east, and Tebu, Tuareg and Arab groups in the south– to buttress the political dialogue. This would allow these actors to devise a coordinated approach to combat the Islamic State and other extremists;
     
  • prioritising urgent economic questions, via a separate track of the UN-led negotiations with international financial institution support. These talks should build agreement for steps that the incoming government of national accord will have to take quickly, while determining interim economic policy and managing key Libyan financial institutions; and
     
  • seeking to win over Libyan stakeholders who are supportive of an agreement in principle but demand clarification or modification of details, notably some members of the General National Congress (GNC) and the House of Representatives (HoR), both of whose endorsements are needed for an agreement’s implementation (which calls for extension of the HoR’s mandate and creation of a State Council of former GNC members). At present, however, the leaders of both parliaments oppose the deal.

There is, rightly, concern that more negotiations, especially if in bad faith, would allow further deterioration on the ground. But security and economic talks must happen in any event. Their prospect will be threatened should a hard push on the political track lead to polarisation or fragmentation. Pursuing the security and economic tracks even as the political track regains its footing, however, should be seen as an opportunity to begin to correct the increasingly alarming economic, humanitarian and security situation and help build momentum toward a more inclusive agreement and buy-in for a government of national accord. Crisis Group recognises that there is strong pressure to give the proposed government of national accord international recognition. In the event of such a decision, it urges participants to:

  • state clearly that actors who do not initially sign onto the agreement will have the opportunity to do so at a later date without sanctions, which should not be imposed on the sole criteria of rejecting a UN agreement or refusing to recognise the government of national accord. Given the likelihood that an agreement will be contested (including in Libya’s Supreme Court), room must be created for future concessions, even if limited;
     
  • leave the leadership and membership of the government of national accord's presidency council, which will have key decision-making powers, open to future modification. This is crucial for eventually drawing in those whose support is conditional on other factors;
     
  • encourage Libyans who support the UN deal to do more to change perceptions of it. Prime Minister-designate Serraj, whose success depends on broadening his support base, and politicians from the western city of Misrata, who were key to efforts to reach an initial agreement last summer, should reach out to the east of the country and assuage fears that the western Libyans seek to dominate the new political institutions; and
     
  • pursue the security and economic tracks described above with key stakeholders. Even if the broad outlines and formation of a government of national accord are fixed, there should be flexibility to negotiate its policies.

Many countries gathered in Rome intervened militarily in Libya in 2011 without a plan for the aftermath; they should not repeat that mistake now on the diplomatic front. This conference is an occasion to chart a realistic way forward. It should not gamble with Libya’s future.

Brussels

Libya: Amid Political Limbo, Time to Rescue the Economy

As the UN-backed effort to form a unity government is yet to bear fruit, the conflict in Libya could face further escalation in 2017. In this excerpt from our Watch List 2017 annual early-warning report for European policy makers, Crisis Group urges the European Union and its member states to first focus on supporting a political settlement, which will contribute to solving the wider issues of uncontrolled migration flows and instability in the region.

This commentary is part of our annual early-warning report Watch List 2017.

The Libyan conflict will most likely continue without a decisive political and military settlement in 2017. Various political actors contest the legitimacy of the Government of National Accord, but a lack of consensus – among Libyans, neighbouring states and international stakeholders – on what should replace it suggests it will remain in place even as its effectiveness deteriorates and its opponents consolidate their positions. In this state of suspended animation, the European Union (EU) and its member states should make it their top priority to help stabilise Libya’s economic situation. The country’s financial collapse would cripple its few functioning and critically important institutions, precipitate a humanitarian crisis, fuel the war economy, complicate efforts to tackle migrant and refugee flows and, more broadly, further hinder international attempts to put the country on a more stable political footing.

Stalemate, But For How Long?

The interim government created by the Libyan Political Agreement on 17 December 2015 has had limited success in imposing its authority since its arrival in Tripoli in April 2016 and is unlikely to survive in its current form. But what will replace it? And how?

A best-case scenario would see its composition, organisation and responsibilities renegotiated – and Prime Minister Fayez Serraj and other core Presidency Council members replaced – to meet the approval of the Tobruk-based House of Representatives, whose endorsement is required to implement the agreement in both letter and spirit. This is not a silver bullet; it would need to be accompanied by a bottom-up process based on local governance where possible, with the aim of linking the urgent need to rebuild the central state with the reality of diffuse local power. At the very least, stabilising the centre offers opportunities to build institutional capacity and improve service delivery until solutions to thornier issues, such as demobilising militias and restructuring the security sector, can be found.

In the absence of concerted international pressure on Libyan factions to negotiate a new political deal, a breakthrough is unlikely.

The worst-case scenario is that forces under General Khalifa Haftar, bolstered by recent military successes in Benghazi, the Gulf of Sirte “oil crescent” and southern Libya, make good on his pledge to try to retake Tripoli. This would lead them into a major military confrontation with Tripoli-based Islamist militias and forces from Misrata that have been fighting the Islamic State.

The more likely scenario is that Libya remains in limbo. This is because Haftar’s forces are unlikely to advance significantly toward Tripoli, even with Egyptian, Emirati and perhaps Russian backing, as they lack sufficient support in western Libya. At the same time, in the absence of concerted international pressure on Libyan factions to negotiate a new political deal, a breakthrough is unlikely. The question then becomes how to stop the economic situation from deteriorating further until an opportunity for a political breakthrough arises.

Map of Libya. International Crisis Group.

The Oil Must Flow

Whatever its ideological and geopolitical dimensions, the conflict is largely about control of hydrocarbon resources and access to state funds. According to the National Oil Corporation (NOC), oil sector closures have cumulatively cost over $100 billion in lost revenues from oil exports since 2013, resulting, according to the Central Bank of Libya, in a fiscal deficit of 56 per cent of GDP for both 2015 and 2016. The Bank’s foreign-currency reserves are estimated to have fallen below $40 billion, compared to $75 billion in March 2015. Oil production has increased since September 2016 – when Haftar-aligned forces seized most oil facilities in the Gulf of Sirte – from around 250,000 barrels per day (b/d) to 700,000 (still far below the 1.8 million b/d of 2010). Even if production reaches 1 million b/d by the end of March 2017, as the NOC projects, the economic outlook remains bleak. With crude oil prices at $50 a barrel, production increases will not cover expected government expenditure of around $40 billion in 2017. Libya could be bankrupt by the end of the year.

Even before then, without careful economic stewardship and proactive government measures, the economy is likely to worsen and hardships increase for a population mainly dependent on government salaries. The liquidity crisis (with banks unable to dispense much cash) could worsen, the dinar could come under further pressure, and basic services such as electricity could face severe constraints due to poor management and cash-flow problems.

Political factors make the outlook even grimmer. Rifts and rival claims for control of the NOC, Central Bank and Libyan Investment Authority (LIA, the sovereign wealth fund, with over $60 billion of assets) could limit the activities of these key institutions, constraining public spending. Moreover, the Central Bank appears unwilling to authorise transfers to the government because the latter lacks parliamentary recognition. The government’s consequent inability to access and use state funds could undermine the loyalty of security forces, whose salaries it pays, and stimulate the illegal economy, including trafficking of migrants and subsidised goods.

Focus on the Economy (and Security Forces)

Europe has two strategic priorities in Libya: ensuring that the country is not a source of regional instability and finding a partner able to reduce the migrant flow. For both objectives, a political settlement is key. It may seem elusive now but will be far more difficult to accomplish in a collapsing economy, as warlordism and zero-sum calculations intensify. Such deterioration would not only increase the flow of migrants from sub-Saharan Africa but also see the number of Libyans trying to cross the Mediterranean continue to rise, a trend that started in 2016.

Economic troubles are negatively affecting the security forces, including those tasked with countering illegal migration. Some units are suspected of taking bribes to look the other way or even becoming party to the people-smuggling. This in part enabled over 160,000 migrants to cross the Mediterranean from Libya in 2016 – a record high, alongside a record number of deaths. Seeking agreements from the government on migration control, as the EU and its member states are doing, is a fool’s errand as long as it has no effective control over the security forces (even leaving aside human rights concerns). The government will not be able to exercise that control without a peace settlement based on a political process accompanied by a security track that involves key military actors and addresses disputes on security forces’ structure and chain of command.

The EU and its member states should [...] channel their energy toward addressing the economy.

While the EU and its member states should not walk away from the overarching goal of a comprehensive solution to the conflict, they should at the same time, and urgently, channel their energy toward addressing the economy. In particular, they should intensify efforts to broker an agreement on the disbursement of the 2017 budget between the government, House of Representatives and Central Bank. To resolve the internal rifts within the Central Bank and NOC, they should urge Prime Minister Serraj to promote talks between the rival chains of command in these institutions, as he did in 2016.

The EU and its member states should continue to make clear that they will not tolerate oil sales or related contracts outside official channels and ensure, through more careful vetting and improved monitoring, that Libyan security forces participating in EU anti-migration efforts are not involved in, or profiting from, people-smuggling or maritime trade of subsidised fuels. They should also ensure that any greater reliance on Libyan authorities for anti-migration measures does not result in migrants being denied the protection to which they are entitled under both international and European law.