Police stand guard outside Libya's Central Bank headquarters in Tripoli on August 27, 2024. The United States on August 27 backed United Nations efforts to resolve differences between Libya's rival regimes over the management of the country's central bank without cutting off vital oil revenues. (Photo credit: AFP) (Photo credit: -/AFP via Getty Images)
Late last month, UN negotiators announced with great fanfare that Libya's two warring governments had reached an agreement on who would run the central bank.
The agreement eased tensions that had been building for weeks and threatened to spill over into violence.
Since the ouster of Muammar Gaddafi in 2011, Libya has gone from crisis to crisis, fragmenting the country into territories controlled by militias and ushering in a period of instability that seems likely to last forever.
But even amid wave after wave of violence, Libya's fight has always evaded the central bank, where billions of dollars in oil revenue lie dormant.
Oil is the backbone of the North African country's economy, accounting for approximately 90% of Libya's GDP.
That was about to change.
The crisis over who would lead the vital bank had made it a target of rival, well-armed Libyan militias.
A 2020 ceasefire ended Libya's six-year civil war, but the unrest threatened to plunge the country back into violence.
The dispute over the central bank began on August 18, when the Tripoli-based Presidential Council unilaterally appointed a new central bank governor, Mohamed al-Menfi, and told long-time incumbent Sadiq al-Kabir to pack his bags. ordered.
But al-Kabir fled in late August, claiming that he and other bank officials were under threat from militias, which were kidnapping bank workers and their children. .
Legal analysts said al-Kabir's dismissal was illegal because the Presidential Council, an advisory body responsible for appointing ministers and heads of government agencies, does not have the power to fire central bank governors, which falls under parliamentary authority. It is claimed that.
The central bank's facilities are located in the center of Tripoli, near major hotels and a busy market.
Throughout the crisis, it was flanked by militias loyal to the presidential council and Prime Minister Abdul Hamid Dbeibah, who supported al-Kabir's ouster.
There were fears that militias loyal to al-Kabir would storm bank headquarters in an attempt to regain control, resulting in bloody street fighting.
Mohammed al-Jabari, who runs a clothing store in Tripoli's old city, said: “I have never heard of armed militias attacking bank headquarters, because they have strong forces to attack banks.'' This is because they are being protected and are being prevented from passing in front of the bank.” City Market next to the Central Bank.
Like many Libyans, Al-Jabari welcomed the United Nations-mediated nomination of Naji Mohamed Issa Belkasem, the bank's head of banking and financial management, as interim president, followed by the appointment of a board of directors. .
“We feared for our money and lives because there was a possibility that an armed conflict could occur and take control of the bank's headquarters, whether it was the former governor or the newly appointed governor,” al-Jabari said. .
Politically, Libya is divided into east and west, with two competing regimes.
In recent months, al-Kabir has drawn public disapproval from Western-based Dbeibah, who has criticized his lavish spending beyond the country's means.
Dbeibah heads the Tripoli-based Government of National Accord, whose mandate theoretically covers the western part of the country and is internationally recognized.
But Libya is also a labyrinth of militias, with militias in the West also clashing and competing for control of public and private institutions.
Tripoli itself is a patchwork of various armed groups. Some, such as the Islamist-aligned al-Radah militia, support al-Kabir and take on roles such as ensuring cash flows to commercial banks.
Other units like Gnewa and the 44th Brigade coordinate security throughout the city and support Dbeibah.
Mr al-Kabir has the support of Khalifa Haftar, a warlord who controls much of the country's east.
Haftar commands Libya's oil resources from Benghazi, drilling from wells in areas he controls.
Under al-Kabir, the central bank allocated billions of dollars for eastern reconstruction projects, cementing Haftar's power and creating an alliance between the two men.
Haftar and his allies wanted al-Kabir to return.
To apply pressure, they shut down large amounts of oil production. About 60% of Libya's crude oil (about 700,000 barrels per day out of a normal 1.2 million barrels per day) was taken offline.
This led to an 81% drop in exports and an immediate spike in global oil prices.
With oil prices in jeopardy, Western countries sought immediate solutions.
At the height of the crisis, the US embassy in Libya said: “At stake is Libya's economic and financial stability.”
For weeks, the United Nations led negotiations between the Benghazi-based House of Representatives and the High Council of State in Tripoli.
The United Nations mission in Libya warned that a prolonged crisis “risks causing the country's financial and economic collapse.”
And it happened.
Gas stations were closed. Lines for several kilometers were forming at stores that were open.
With few good options, Mr. Dbeibah fired the head of the state fuel distribution company. Banks were similarly paralyzed.
Al-Kabir told Reuters from Istanbul that the central bank had been cut off from the international banking system: “All international banks with which we do business, more than 30 major international institutions, have suspended all transactions.” said.
If this were true, Libya's commercial banks would be unable to issue letters of credit and would be unable to obtain the foreign currency needed to import critical items such as wheat and cooking oil.
Given Libya's heavy dependence on imports, supply shortages are almost certain.
Libyan banks have been facing liquidity shortages for many years, but the liquidity crunch since June has been particularly acute.
Civil servants have not received their salaries since then. Long lines and low withdrawal limits are the norm.
Many families are worried they won't be able to access funds, especially as school starts and winter approaches.
Still, no one can afford to wage a war that hits central banks directly.
Not even the Libyan militias who get money from it like everyone else.
That calculation may have saved this country from another civil war.
This feature is published in collaboration with Egab and was first published. continent, A pan-African weekly newspaper produced in partnership with email and guardian. Designed to be read and shared on WhatsApp. Download your free copy in continent.org
