Analysis. Facing bankruptcy and stalemate, Haftar’s military objectives include taking control of the central bank in Tripoli and, if possible, circumventing oil blockades.

The Libyan war is fought in banks as much as battlefields

The process of dividing up and looting Libya’s riches has reached a turning point. While neither General Haftar, after visiting Macron in Paris, nor Sarraj in Tripoli are ready for a truce, the Italians find themselves in a very unusual situation as regards Libya.

During the fascist period, Italy fought to unify the major Libyan provinces of Tripolitania and Cyrenaica, at a very high cost in human lives (80,000 dead). Now, however, from 2011 to the present day, they have been helpless spectators to Libya’s disintegration. Italy has had no say at all in this, in spite of the blustering sovereignism of those in its government. In Libya, there are now two opposing governments, two central banks, and two oil industries: an East-West duality that the Libyans are paying for in terms of deaths, refugees, an erratic economy and a very uncertain future. And the African migrants are paying for it as well, abandoned to their fate in a Mediterranean Bermuda Triangle that extends all the way to Lampedusa. Europe is powerless in this drama. Only Trump’s United States, the Gulf monarchies and perhaps France will be the ones to decide—regardless of the common European foreign policy on the matter.

Moving beyond the headline-making rivalry between Haftar and Sarraj, the International Crisis Group (ICG), a Brussels-based think tank, is pointing out that an economic war has begun in Libya. According to the IGC, the April 4 push by General Khalifa Haftar is a direct consequence of the four-year-long separation between the country’s Central Bank, established in Tripoli, and its eastern branch in Cyrenaica. Haftar’s goal of taking control of the Central Bank in Tripoli may have contributed to the timing of his offensive, particularly given the fact that in April, the Central Bank in Tripoli began to impose restrictions on some bank branches in the east which alone account for 30% of the market.

If there were to be a “freeze” on the activities of these branches, this would endanger Haftar’s ability to pay his administration’s employees and his military forces. The government of Cyrenaica is at risk of bankruptcy: the eastern branch of the Central Bank, based in Al Bayda, is in debt to the western branch by 40 billion dinars, around $25 billion. This is why Cyrenaica resorted to Russian help to print 10 billion dinars, and why Haftar has asked for financial support from Saudi Arabia and the Emirates, his two sponsors from the Gulf who, together with Egypt, want to get rid of the Muslim Brotherhood in Tripoli. Most likely, this is also the reason why the general had to accelerate his offensive: otherwise, his coffers would have likely remained empty.

Faced with a military stalemate and a financial crisis, the general also has the option of starting a war for oil. He could get a helping hand in this from the US, with the assent of France and Russia and the contribution of the Gulf monarchies. Haftar’s problem is that at this point, he is unable to do much with the oil. He controls many fields, including the largest in Sharara, run by the Libyan state company NOC together with the Spanish Repsol, France’s Total, Austria’s OMV and Norway’s Equinor, and also the field of El-Feel, where the Italian ENI operates. Haftar has also militarized the ports and the oil export terminals, such as Ras Lanuf and Es Sider.

However, he is unable to export crude oil: the current UN resolutions authorize only NOC, the state company, to sell it, and the income from oil exports is deposited at the Central Bank in Tripoli. In short, Haftar is cut off from the country’s greatest source of wealth. Libya’s production of crude oil currently exceeds one million barrels per day, and oil revenues in 2018 were around $24.4 billion, a number which is set to increase due to the surge of oil prices on the international markets. In an article in Bloomberg, the head of NOC, Mustafa Sanalla, claims to have evidence that Haftar is already illegally exporting the oil he controls, circumventing both the UN resolutions and the state oil company. In reality, the general is working hard to get a green light from the Americans to export oil, especially after the now-infamous telephone call with Trump, in which the latter recognized his important role “in the fight against terrorism.”

To facilitate his relations with Washington, Haftar has hired a US lobbying firm, which was also a countermove to NOC opening an office in Houston, the oil capital of the US. In addition, the European companies have also shown a keen interest in the Libyan oil under Haftar’s control: according to the Financial Times, Total and Siemens are asking for new concessions from the government of Cyrenaica. Beyond the usual sanctimonious official statements, it seems that we are headed for a solution involving the division of Libya’s riches into two. The country’s wealth, between the gas reserves, oil reserves and the bank shares, company shares and current accounts of the Libyan Sovereign Fund (LIA), is estimated as being worth a total of between $130-150 billion. It looks like the looting will finally be able to proceed.

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