Previous Quarterly Editions
Expropriation Risk: 78 78 78 79 ►Political Violence Risk:68 68 74 74 ►Terrorism Risk:55 55 55 53 ►Exchange Transfer and Trade Sanction Risk: 64 64 64 64 ►Sovereign Default Risk:75 75 75 83 ▲
TREND ▲
Geopolitical alignmentEast 1 2 3 4 5 West
Alignment five years agoEast 1 2 3 4 5 West
Degree of contestationSettled 1 2 3 Contested
Russia and China’s engagement with Libya over the past decade has been shaped by both abstaining in the 2011 UN Security Council vote authorising the NATO-led military intervention in Libya, which ultimately helped rebel forces overthrow premier Muammar Gaddafi.
The post-Gaddafi authorities initially gave preferential treatment to countries, most of them Western, that had supported the 2011 uprising. That has changed over the past five years, with Russia developing a significant military presence in eastern Libya in support of its ally General Khalifa Haftar, and China making tentative inroads after Libya signed up to the Belt and Road Initiative (BRI) in 2018. Nevertheless, the current internationally recognised government in Tripoli, the Government of National Unity (GNU), retains a pro-Western tilt. Libya was the only Arab state to vote in favour of suspending Russia from the UN Human Rights Council as a result of the escalating conflict in Ukraine.
The Russian footprint in eastern Libya began during the country’s 2014-20 civil conflict, with Moscow sending military personnel to Haftar’s stronghold in eastern Libya, along with thousands of mercenaries including Wagner Group personnel and Syrian fighters. Russian mercenaries played a key role in Haftar’s failed attempt to capture Tripoli from the UN-backed government in 2019-20. According to Africom, Russia has deployed several fighter aircraft to the Haftar-controlled Jufra airbase in south-central Libya. Russian officials have stated that Haftar offered them the opportunity to build a military/naval base in eastern Libya. Some European officials describe that as the “worst case scenario” for the country.
The new chairman of the National Oil Corporation (NOC) Ferhat Bengdara is close to Haftar and has been reaching out to Russian state oil firms since his appointment in July 2022. His predecessor, Mustafa Sanalla, also engaged with Russian and Chinese state oil firms but was considered more Western-friendly. Russia has courted the ‘Greens’ – supporters of the former regime – including Gaddafi’s son, Saif al-Islam Gaddafi, who has presidential ambitions.
Libyan attitudes to China generally fall into two categories: some officials hold Libya up as a potential gateway for the expansion of Chinese businesses into Africa, while others tell Europeans Libya can help counter Beijing’s influence in the continent.
Beijing is keen to reopen its embassy in Tripoli, which has been closed since the mission evacuated in 2014, and facilitate the return of Chinese companies which had operated in the energy and construction sectors until 2011. China’s focus is not just on resuming Gaddafi-era contracts but expanding its economic presence in a country with the potential to be key to the BRI. Investment in Libya’s oil and gas sector is a priority for Beijing. The Chinese are also interested in securing contracts related to Libya’s massive reconstruction and redevelopment needs after years of civil war.
Diplomatically, Beijing has maintained a cautious approach, focusing on long-term interests. Officially, China has supported the various UN-backed transitional governments and called for a political resolution to the national power struggle, but it has engaged with all sides, including Haftar.
Libya’s alignment is contested because power centres within the country have been heavily contested since 2014, with rival governments a frequent occurrence. Foreign intervention in the 2014-20 civil conflict exacerbated these dynamics, particularly given Russia’s overt diplomatic and military support for Haftar. In the longer term, Libyans are aware that China is one of the few nations that can provide financial and technical support to rebuild their country. This is likely to lead to a scenario where Libya attempts a balancing act in retaining strong relations with the West, particularly in Europe where Libyan diaspora populations are concentrated, while courting Chinese investment.
TREND ►
Significant obstacles to investment remain. The brittle security situation poses a substantial threat to all sectors, particularly oil and gas. After years of conflict, key energy infrastructure is in a state of disrepair and requires considerable investment. Other critical infrastructure including the Great Man-Made River, which supplies most of the population with potable water, also needs urgent repair, prompting UN agencies to warn of a complete collapse of water supplies.
The oil and gas sector, shaken for more than a year by feuding between long-standing NOC chairman Sanalla and the GNU’s oil minister Mohamed Aoun, experienced further turmoil when Sanalla was replaced in July 2022. His successor Bengdara, who comes from a banking background and is close to Haftar’s circle, has tried to assuage the concerns of international oil companies who had a good working relationship with Sanalla. Shortly after Bengdara was appointed, Haftar loyalists ended their blockade of oil facilities, allowing production to increase, but the sector remains vulnerable to unpredictable political and security dynamics.
Since March 2022, the GNU has been challenged by the Government of National Stability (GNS), appointed in a contested vote at the House of Representatives. In the absence of a reinvigorated and robust UN process, the stalemate between the governments could last into 2023 and risks tipping into a wider armed conflict beyond the episodic clashes, the most serious recent example of which was fighting in Tripoli in August 2022 that saw dozens killed.
Haftar’s role in attempts to replace the GNU with the GNS – the composition of which is heavily tilted in Haftar’s favour – raises the possibility he may resort to previous tactics, including military escalation and oil blockades to assert himself. The ceasefire agreed between Haftar and his opponents in October 2020 remains fragile and confidence-building measures between the two sides have been piecemeal.
Nationwide protests in July 2022 were a reminder that popular discontent can easily boil over. The grievances that drove those demonstrations remain unaddressed and the GNU, or whatever might replace it in 2023, is likely to face further protests if living conditions are not improved.
Households struggle with chronic power outages, poverty, and poor public service delivery. Given Libya relies on Ukraine for more than 40% of its wheat stocks, the fallout from the Russia/Ukraine crisis has already driven up prices and could lead to more serious food insecurity and possible social unrest.
The presence of numerous militias, mercenaries and foreign forces continues to pose a considerable threat to stability.
Islamic State (IS) and Al-Qaeda in the Islamic Maghreb (AQIM) remain present in Libya, with their networks concentrated mostly in southern and central regions. Forces aligned with the Tripoli government and their rivals under Haftar’s command continue to target high profile individuals in both groups and disrupt terrorist cells in several parts of the country, contributing to a decrease in attacks.
The threat from IS remains moderate, with the group maintaining sleeper cells in Tripoli and other coastal cities. AQIM is considered largely dormant. Several attacks in 2022 were attributed to IS, most of them in the Fezzan region of south-western Libya.
TREND ▼
Over the coming months, there is a significant risk the political and security situation will deteriorate given continuing tensions resulting from the GNS’s challenge to the GNU. This would undermine the economic recovery recorded to date.
After episodic dips due to blockades by Haftar loyalists, oil production recovered to 1.2 million barrels per day in August 2022. There was some progress in efforts to reunify competing public institutions in the country’s east and west, but challenges remain, not least the risk posed by the prospect of parallel governments.
The central bank, divided since 2014 due to the wider national power struggle, has taken steps to reunify but tensions remain, particularly regarding the role of Sadiq al-Kabir, the long-serving governor. Disputes over central bank management will hamper the implementation of wider economic reforms.
Sanctions imposed in 2011 remain in force against several Libyan individuals and entities, most of them related to the Gaddafi regime. In recent years, sanctions have also been imposed on individuals accused of undermining Libya's political transition and individuals linked to human trafficking.
An increase in oil production has improved public accounts, but revenue streams remain vulnerable to domestic volatility and global oil price shocks. Libya’s external debt is one of the lowest in the world, but domestic debt has increased significantly in recent years. Most of Libya’s sovereign wealth fund has been frozen under UN sanctions since Gaddafi’s fall, with assets were valued at USD67 billion in 2012. Requests by the Libyan authorities to lift the sanctions have been refused because the United Nations wants to see a stable government in place before doing so.
Return to contents Next Chapter
