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In recent weeks, Libya has been engulfed by rising tensions and confrontations. The situation escalated further in late August after the Tripoli-based Presidential Council (PC) attempted to replace the Central Bank of Libya (CBL) Governor, Sadiq al-Kabir, with their preferred candidate, Mohammed Shukri.

Since then, the situation has remained volatile. Last Friday, Governor al-Kabir fled the country, citing threats and attacks from militias. In a telephone interview, al-Kabir said “militias are threatening and terrifying bank staff, sometimes abducting their children and relatives to force them to go to work”.

The incident marks another fracture in Libya’s already divided political landscape, particularly given the presence of rival governments in Libya’s west and east competing over influence in the oil-rich country.

The eastern administration, aligned with the leader of the self-styled Libyan National Army (LNA), Khalifa Haftar, rejected the leadership change at the CBL, deeming it an illegitimate power grab by the Tripoli-based Government of National Unity (GNU), which is aligned with the Presidential Council.

In response, Haftar's forces halted all oil production and exports under their control - comprising most of Libya’s oil fields and terminals - to pressure the GNU.

That move significantly reduced the country's oil output, leading to a spike in global oil prices, with Brent crude prices subsequently rising above $80 per barrel.

The crisis “has already created significant economic and political instability, with a negative impact on the Libyan economy, Libya’s international standing and access to financial systems, and importantly, the lives of normal Libyans,” Jason Pack, President of Libya-Analysis LLC, told TNA.

He warned that at the local level, “Libyans will likely find it hard to live their day-to-day lives in these conditions, meaning anger will rise, along with pressure for actors to do something about it”.

The situation over the central bank is still volatile. Amid fears that his appointment could lead to conflict or threats to his life, Mohammed Shukri stated on 23 August that he would only assume the position and replace al-Kabir if there is a consensus between the rival governments.

A fragile peace

These developments have increasingly sabotaged the fragile peace that has held since the UN-brokered October 2020 ceasefire, which ended the 2019-2020 Tripoli war and paved the way for UN-backed peace initiatives aimed at holding nationwide elections for a unified government.

However, Libya’s now-frozen conflict and waning international attention - with a focus instead on tensions in the Middle East and the war in Ukraine - have provided the country’s rival elites with an opportunity to exploit the crisis and strengthen their positions.

Such infighting has gripped Libya since the 2011 ousting of Muammar Gaddafi, namely after the 2014 split and the emergence of rival governments, including two central banks - an internationally recognised one in Tripoli (the CBL) and a rival bank in the east.

Upon his emergence onto Libya’s political scene in 2014, Haftar opposed al-Kabir’s leadership at the bank, as he sought to build up his LNA forces in Libya’s East.

Yet their relationship has altered amid post-war efforts to unify Libya’s institutions, including both banks, and al-Kabir’s disputes with the Tripoli administration since February.

“The latest crisis illustrates that Libyan power struggles are entirely transactional, with yesterday's foes transformed into today's allies,” Stephanie Williams, former special adviser on Libya to the UN Secretary-General and non-resident senior fellow at Brookings, told ������.  

“There are no real allegiances in Libya, only the pursuit of personal interests in what can be described as a redistributive kleptocracy.”

She added that “it's time for these stale figures to withdraw from the scene and for Libyans to have the opportunity to choose their representatives through a free and fair franchise".

Rising domestic volatility

The current crisis did not arise in a vacuum. GNU Prime Minister Abdul Hamid Dbeibah has been trying to strengthen his position amid a row with al-Kabir over government spending, having cut Dbeibah’s access to development and operational funds.

To be sure, al-Kabir has been criticised over his management of the CBL and for amassing too much power over the country’s fiscal policy. Yet there are criticisms over Dbeibah’s overspending, including from family members like his nephew Ibrahim Dbeibah.

Ultimately, Dbeibah, a businessman under Gaddafi and PM since 2021, relies on access to CBL funds for his own political survival.

“Dbeibah's need for financial resources is not just about governance - it’s about survival, as he uses funds to bribe militias and secure loyalty," explained Karim Mezran, senior fellow at the Atlantic Council, in an interview with ������.

“Without this, his influence in Libya will massively deteriorate.”

Meanwhile, Haftar’s forces remain influential in the east despite his failed military campaign in the war in Tripoli. Prior to the current shutdown, Haftar’s forces and his sons blockaded oil facilities to pressure Tripoli’s authorities, further compounding Libya’s economic instability.

And although three oil facilities reportedly received instructions to reopen on 31 August, the oil sector remains vulnerable to the actions of rival actors. Oil is the backbone of Libya’s economy, making up 98 percent of government revenues and 60 percent of its GDP.

Moreover, Libya’s oil output has fluctuated wildly since 2011, from below 300,000 barrels per day in 2015 to around an average of 1.3 million in 2023.

While Libya's fractured politics enables competition over the country’s petrodollars, this very competition threatens the recovery of the oil sector on which the nation heavily depends.

Such threats may persist, following clashes between two rival militias on Tripoli's outskirts in early August, while Haftar’s forces separately mobilised in the south - marking the most significant rise in tensions since October 2020.

Role of foreign powers

Despite the recently waning focus on Libya, recent unfolding events have triggered international alarm. The European Union and the United States have expressed “grave concern” over the developments and have supported UN efforts from last week to resolve the CBL dispute.

While the US’ own engagement has been limited, Europe has had two major objectives in Libya: stemming the migration flow from the country across the Mediterranean Sea and, more recently, seeking more oil contracts as they seek to reduce dependency on Russian gas.

However, European states like France and Italy have often been divided, engaging with Libya bilaterally and even competing with one another. Recent developments, however, highlight the costs of failing to address Libya’s domestic challenges, especially since instability threatens European states’ own gas contracts.

International efforts have typically involved talks and relied on local actors to sort out their differences, effectively enabling the status quo to persist.

Yet with the alarming ongoing economic shocks, international actors seem more inclined to act now that the situation is growing more volatile.

Jason Pack suggested that the UN might use this crisis to push for a unified government in Libya, potentially removing the GNU and PC.

He added, however, “bringing Libya’s status quo actors together and hammering out a solution remains a difficult task to achieve".

Karim Mezran noted that even if the latest crisis is resolved, similar issues may arise in the coming months, with militias and rival elites seeking to profit.

He also stated that Turkey and Egypt are in a better position to broker a compromise between rival factions, given Ankara’s influence in the West and Cairo’s in the East.

In the absence of a solution, Russian mercenaries have operated alongside Haftar’s forces, while the UAE has previously supported Haftar.

Ultimately, this shows that foreign powers hold the keys to being either powerbrokers or conflict drivers in Libya.

Jonathan Fenton-Harvey is a journalist and researcher who focuses on conflict, geopolitics, and humanitarian issues in the Middle East and North Africa.

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