Vijay Pathak discusses Libya's oil crisis and calls for global action to resolve its Central Bank deadlock and avoid regional instability.

Libya, a nation once poised for economic growth thanks to its vast oil reserves, is now grappling with deep-rooted instability that appears to be perpetually exacerbated by the involvement of foreign powers.

The ongoing crisis – highlighted by the recent oil blockade and the crippling deadlock over the Central Bank of Libya (CBL) – serves as a stark reminder of the dangers of external interference in a nation already fragmented by internal divisions. As Turkey and Russia continue to back opposing factions, Libya's path to stability seems increasingly uncertain, with dire consequences not just for the nation but for the entire region.

At the heart of Libya’s current turmoil is the power struggle over its Central Bank, a vital institution responsible for managing the country’s oil revenues and state salaries. This crisis came to a head in August 2024 when the Tripoli-based government, supported by Turkey, attempted to replace long-serving CBL Governor Sadiq al-Kabir.

This move was met with fierce resistance from the eastern factions, backed by Russia, who responded by shutting down oil production. The result was catastrophic for Libya’s economy, with oil output plummeting from 1.28 million barrels per day in July to just over 591,000 barrels per day by the end of August.

However, in a significant development, Libya’s rival factions agreed on September 3, 2024, to appoint a new Central Bank Governor in an effort to ease the crisis. The move has been seen as a critical step toward resolving the deadlock that has crippled the country’s finances and oil production.

While this breakthrough is encouraging, it is only a first step. The success of this agreement hinges on whether it can be implemented without further interference from foreign actors or internal factions seeking to protect their own interests.

The United Nations has been actively mediating the conflict. By facilitating emergency talks between the rival factions in Tripoli, the UN Support Mission in Libya (UNSMIL) played a crucial role in brokering this recent agreement. These discussions, described as “open and candid,” resulted in the draft accord on the Central Bank Governor, which could potentially stabilize the situation.

However, the UN has warned that any further use of force or unilateral actions could lead to the total collapse of Libya’s financial system.

This crisis is not an isolated incident but part of a broader pattern of fragmentation fueled by foreign powers. Turkey’s military and political support for the Government of National Accord (GNA) in Tripoli and Russia’s backing of General Khalifa Haftar’s Libyan National Army (LNA) in the east have entrenched divisions that make any prospect of national unity increasingly remote.

These external actors are not merely supporting their respective allies; they are actively shaping Libya’s future to serve their strategic interests, often at the expense of the Libyan people.

The implications of Libya’s instability extend far beyond its borders. Europe, heavily reliant on Libyan oil and gas, is particularly vulnerable to disruptions in production. The recent shutdown of Libya’s El-Feel oil field in August 2024, which cut the country’s oil output by more than half, has already sent ripples through global markets, raising concerns about energy security at a time when Europe is grappling with the fallout from the Ukraine conflict.

The international community, particularly the European Union, must reassess its approach to Libya. Rather than perpetuating divisions by backing rival factions, there should be a concerted effort to support the unification of Libya’s critical institutions, such as the central bank.

This requires diplomatic pressure on foreign actors like Turkey and Russia to step back and allow Libya to chart its own course. The focus must shift from power plays to fostering dialogue and reconciliation that can lead to the establishment of a unified, functional government.

Libya’s current crisis starkly illustrates the dangers of unchecked foreign interference in fragile states. The consequences of failing to address Libya’s deep-seated divisions are already reverberating across Europe, from energy insecurity to increased migration pressures. The time for half-measures is over – what Libya needs is a robust, coordinated international strategy that prioritizes political reconciliation and the stabilization of its vital institutions, particularly in the energy sector.

Without decisive and unified global action, Libya risks becoming a permanently fractured state, leading to even greater instability across the Mediterranean and beyond. The international community must step up its efforts to help Libya navigate this critical juncture and secure a peaceful, prosperous future for its people and the broader region.

Vijay Pathak, is based in Luxembourg and is a graduate of Yale University, PDLI Fellow, and Brady-Johnson Program scholar in Grand Strategy, as well as a recipient of the 2024 NATO Youth Award and writes on EU foreign policy and global affairs.

 
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