Mission & Name
US Foreign Policy (Dr. El-Najjar's Articles)
Before We Reach an Oil-for-Food Moment in Libya
By Hafed Al-Ghwell
Al-Jazeerah, CCUN, February 20, 2015
Workers work at a mill for Libyan grains in Tripoli February 11, 2015. Libya
will exhaust its wheat reserves in two or three months unless a state fund
tasked with ensuring supplies receives money held up as a result of the
political turmoil gripping the country and a slump in oil revenues, a top
official said. (Photo: REUTERS/Ismail Zitouny)
Almost four years to the day of the start of Libya's civil war, February 17,
2011, the country remains in turmoil. The failure of Libya's "transition"
into some sort of stable democracy along with the ensuing civil war has not
only qualified it as the worst in the Arab Spring so far, but also as a
symbol of the international community's impotence and inability to manage a
small, relatively easy, post-conflict country—even when it unites to that
What makes Libya a spectacular failure
is that, in 2011, not only did the international community unanimously
deicide to intervene against Muammar Qaddafi, it did so in a relatively
wealthy country—with $130 billion in reserves, $65 billion in foreign
investments, and a 1.6 million barrel of oil production per day. It was also
a debt-free country with a small population of around 6 million people, the
majority Arab Sunni Muslims, with little ethnic diversity.
Libya now faces the real prospect of
undermining stability in the Mediterranean, North Africa, and African Sahel
regions as hundreds of armed militias engage in territorial infighting,
financial corruption, arms and drug sales, human trafficking, terrorism, and
fanaticism. Given Libya’s governance by gangs of all sorts with significant
financial capacity, the possibility of this failed state exporting its
mayhem to neighboring countries is very real.
The latest figures on financial reserves
published by Libya's Central Bank (CBL) on January 15 showed that they now
stand at $85 billion, down from $130 a year ago. Additionally, oil
production, which represents more than 95 percent of Libya's revenues,
stands at around 350,000 barrels per day—far lower than the country’s own
domestic energy requirements. The price of oil has dropped to its lowest
point in years—lower than what Libya's needs to balance its budget—and
points to an imminent decisive moment for Libya and the international
community as a whole.
Libya moves faster than ever to become the newest member of the Failed
States club, the world faces a challenging question: what can be done to
mitigate the potential damage Libya could inflict upon its neighbors,
regional peace, and international security?
about the money
economists know that countries become failed states because of an economic
collapse, rather than a political collapse. If the macroeconomic structure
can survive conflict and political partisanship, the country can remain
afloat for a while and afford to see politics play out over a longer period.
Lebanon, during its civil war in the 70s and 80s, is a good example of that.
International organizations, like the
IMF and World Bank, and international economic experts have now publicly
warned Libya that it faces financial collapse: the depletion of all its
foreign currency reserves along with a total loss of control over its energy
resources in a matter of a couple years, a very short timeframe in economic
The fragmentation of
Libya's political, military, and tribal structures occupy most of the
international headlines. But the collapse of oil prices, Libya's plummeting
production levels, and the split of its central banking authority (between a
Tripoli based central bank and a newly established and completely separate
Tobruk based central bank—each with its own governor and allied to opposing
factions) has resulted in deep uncertainty surrounding who controls Libya's
finances and energy facilities. Together, these problems have created the
most urgent threat facing the international community with respect to Libya.
Beyond the impact on its citizens who
rely overwhelmingly on government salaries and subsidies (to the tune of 80
percent of the labor force), Libya's financial and energy assets could fall
into the hands of extremist groups and criminal gangs. Such groups could
redirect Libya’s wealth to fund arms, drug, and human trafficking or support
terrorist organizations like the Islamic State (ISIS or ISIL) and al-Qaeda.
The threat represents a grave and fast-approaching danger to the
international community, including the US-led efforts in fighting these
organizations elsewhere in the larger Middle East and North Africa.
should be done?
is high time for Libya’s international partners to think seriously of a plan
to turn off the taps on Libya's massive potential banking services for
criminal organizations and terrorism in the region and around the globe.
They should also consider the potential catastrophic impact on Libya's
population should its financial system collapse.
To maintain the total independence of
Libya's central banking authority and ensure that its resources do not end
up in the wrong hands, the internationalization of Libya's macroeconomic
management is required:
Set up a new central banking and investment authority by the internationally
recognized parliament. This should include naming a new, independent
governor, deputy governor, and board of directors—who are not allied to any
group in the conflict—and a strong advisory board with international
figures, not just Libyan members.
Form an IMF team tasked with working hand in hand with the new central bank
and investment authorities in Libya to provide technical support and
international supervision of Libya's reserves, assets, and allocation of oil
and gas revenues.
A UN mandate will ensure that Libya's financial resources remain out of the
hands of militias, criminals, and terrorist organizations and instead
allocated to meeting the basic needs of Libyans for food, medicine,
salaries, and other services, preserving as many assets as possible for a
The above suggestions can also empower
Libya and the international political and diplomatic processes in the
It can aid in the disarmament process, in which the armed groups with good
behavior will be rewarded and a refusal to disarm and stop fighting will
result in denial of financial resources and decreased salaries.
It can help Libya sort out its wasteful subsidy programs, duplicate
salaries, and ghost workers, which have plagued the government for years.
It will ensure proper payments are made in a timely and transparent manner
to fulfill the country and civilian population’s pressing needs (medical
services, food, and payments for students abroad on scholarships, among
other outstanding public finance obligations).
Ensuring that the appropriate measures
are taken now to address these most urgent issues will benefit both Libya
and the international community without having to freeze Libya's assets,
blockade its oil terminals, and repeat Iraq’s messy oil-for-food program
that ended in scandal.
Al-Ghwell is a Senior Non-Resident Fellow with the
Rafik Hariri Center at the Atlantic Council in Washington DC and former
Advisor to the Dean of the Board of Executive Directors of the World Bank
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