How central is the central bank to Libya's politics? | Inside Story

a feud over the leadership of Libya's Central Bank has led to the suspension of oil production the two rival governments are trading blame for the standoff which has the upper hand and what does it mean for Libya's economy and security this is Inside Story [Music] hello there I'm James Baye Libya's Central Bank which controls billions of dollars in oil revenue is at the center of the latest political dispute the governor has fled the country fearing for his life staff say they've been threatened by armed groups and banking services are interrupted Libya has two rival governments which have fought for power influence and control of its vast oil reserves for more than a decade this week the internationally recognized government in the West replaced the Central Bank Governor the administration in the East which operates most of the oil fields objected and halted production the national Oil Corporation reported losses of more than $120 million in just three days so how will this latest Feud affect the economy and is it taking Libya closer to Civil War once again we'll explore all these issues with our panel of guests who join us in a moment but first this report from Kata Lopez hodan Security Forces stand guard outside Libya Central Bank in Tripoli rival factions are locked in a power struggle over who controls the institution and the country's oil Revenue banks have suspended operations and people can't access their cash we demand that all banking procedures return to normal as far as the political problems and the competition over the leadership of the central bank they should resolve these among themselves citizens should be able to go about their banking as usual it's the latest Fallout in a divided nation back in 2011 longtime leader muamar Gaddafi was overthrown during the Arab Spring political disputes followed leading to the formation of two rival governments one is based in Tripoli in the west internationally recognized and led by prime minister Abdul Hamid Alaba the other is based in Benghazi in the East and supports warlord Khalifa haar who controls most of Libya's oil fields and for years both sides have depended on the central bank for survival in a country where oil is the lifeblood we should think of the Central Bank as being the heart that pumps that wealth through the system and if whoever controls that Central Bank is going to control which of those two rival factions is going to thrive and which one of them is going to wither the two administrations compete for power shifting alliances with armed groups unrest has surged recently fueling political instability and disputes over resources the status quo is not sustainable in the absence of renewed political talks leading to unified government elections you see where this is heading in the Fallout Central Bank Governor sadik Al Kabir has fled the country the Tripoli based presidential Council accused him of mismanaging funds and forced him out now the Rival government in the East has promised to Halt oil production until Kabir is reinstated so far the country's output has dropped more than 50% to around 700,000 barrels per day they've shut down the central bank and left people in a terrible State just look around the shops are empty there are no Services nothing at all now a divided Libya is bracing for what could be yet another Power struggle which could work an already fragile situation celan Al jazer for insight story well let's discuss the situation in Libya further now as we're joined by today's panel of guests and in Benghazi we have faraj naam a historian and political researcher he's the author of tribe Islam and the state in Libya in palmo Italy is Claudia gazini she's a senior Libya analyst at the international crisis group her research focuses on Libyan security politics and economic governance and in Tripoli Mustafa furi an independent Libyan academic and awardwinning journalist thank you all of you for joining us on today's program so a row about the head of the Central Bank when when you say it like that faraj it doesn't sound particularly serious but it is isn't it it's it's a crisis well it is a crisis it's one of those um number of catalog of Crisis if you like that we've been um suffering Since U the revolution but also the institutional and political uh split since 2014 um this is a a problem that has been going on uh as I said since 2014 with the central bank it's been dominated by one man and and apparently now he has been overthrown by his former allies and backers so this is just another to libyans this is just another crisis that we have to live with Claudia let me ask you do you think this is something that could potentially even bring Libya to Fresh conflict well so far we've seen our mobilization not lead to conflict I mean there's been confrontation there's been tension but we haven't seen an outright war in large part because for the past year or more there's very little appetite to to bring the country back to War I think the major risk in this current moment is to see a major repercussion of this Feud over the Central Bank on the Libyan economy and that means uh more difficult living conditions for libyans and possibly a paralysis of of the Libyan economy Mustafa I read an article that you wrote recently on the Middle East Monitor website um and you looked at the events uh at this time in August 13 years ago that was when Gaddafi was toppled I was in Tripoli at the time and I was actually in Tripoli as well when he was killed in the October you say there are striking similarities with today explain yeah sure James thank you for having me first of all and uh the the big similarities I see actually have to do with the economy because of the sanctions at the time back in 2011 uh making living conditions for most lians are quite different the shortages of basics in the capital especially in the capital at the time as well as the long cues around the petrol and gas stations for people to fill their cars and the other similarity was the a little bit difficulty of the with with the cash money getting them from the banks you know uh it wasn't despite the war and everything it wasn't back in 2011 it was wasn't as bad as we have seen later years like in 2015 2017 and even this year you know a couple of months ago and the other similarity is the loss of control over the over the uh the government or the state institutions despite the fact that the Central Bank itself back in 2011 was firmly under control of the government and even when B Governor at the time chose to flee the country early on actually in February when trouble started a new replacement was immediately appointed and everything went smoothly until the end of the war in October well of course not smoothly but as whatever happened after that I mean after March 2011 uh was due to the war itself it's nothing to do with the policies the government I mean except with the situation that have to do with the demonstrations and the NATO intervention of course which destroyed much of the country and uh you know Hollywood if you like most of the government uh the state institutions getting them to the point where they are today yeah well let's let's look at where we are today let's back up a little bit uh for those that are watching us today faraj because you are in Benghazi we have Mustafa in Tripoli and you're in the Second City he's in the capital but you have different governments you have different people running those two halves of the country in Tripoli you have the UN recognized government prime minister Abdul Hamed dubba in Benghazi you have an Eastern Administration and the main person there is the warlord General Khalifa haa it's not one country really is at the moment the way it's being run is it faraj no it is one nation it's one country but it's two states and two Capitals in like and two governments one government is is unelected which is chosen by the International Community the other the other government which is in Benghazi it's picked and backed by the parliament by the the latest or the last elected Parliament still in in in the country eled a very long elected a very long time ago though faraj this is the problem isn't it there are all these left over institutions from different International efforts to try and rebuild the country and the latest elections that the International Community planned never even happened well you can interpret the way you want it but it has been elected was elected by the people of Libya when they had up when they had the the opportunity to go for elections they have not had since and that's why they have this government here and they have this Parliament here uh do I agree with it that's another question uh but again um this is where you are you have as I said two states you have two uh parallel institutions Central Bank over there Central Bank over here you have an army here in the east in Benghazi uh which is um under the umbrella of the parliament whereas you have a collection of militias running U the triber and we've seen the latest uh evicting uh the the the the governor the the bank governor and and and here you are this is where you have this is a if you look at the country look at the country and its national natural resources this is a relatively small population under 7 million people it's a very big country much of it desert but most of them live on at the very north of the country on the Mediterranean coast and it has or should have vast wealth should it not uh Libya is a very Libya is a very wealthy country and has been because it produces 1.4 million barrels of oil uh a day uh you know the reserves of the Libyan uh Central Bank of the Libyan state are over $80 billion do uh it generates about 20 between 20 and 25 billion dollar of oil revenues a year so these are big numbers compared to other neighboring states and as you said they're it's a it's a very small population the problem is that over the years there have been repeated accusations of mismanagement of funds embezzlement and what uh a former un Envoy called outright predation of State resources so you have state officials that are actually using their positions of power to tap into these oil revenues things have Claudia then given all that um what is interesting to me is that given you've got these two rival institutions two rival governments there is only one Central Bank that seems to be the only institution that is common and that seems to be why we have this really big problem right now well the let's say the the central bank is nominally Unified even though de facto it isn't uh only for the past year year and a half it has been divided into two rival branches since 2014 when the country first split politically so the political divisions brought with it a split of the Central Bank One was internationally recognized the headquarters in Tripoli governed by sadik Al Kabir who's being the governor officially recognized Governor since 2011 and another rival Branch based in Benghazi who had his own which had its own Governor but was not internationally recognized so the central bank has been divided in the past two years there's been an agreement in part because of um rekindled ties between authorities in eastern Libya and the governor sadik Kabir there has been an agreement that the East appointed Deputy Governor a gentleman by the name of maray barasi would be recognized as such by sidik Kabir so only in the past year and a half has there been a sort of a newfound friendship uh over the management a centralized management of the Central Bank of course this is also because funds have increasingly been being uh directed also to the Eastern authorities which for years have been sort of starved of State funds and have accused the governor in Tripoli of not giving them the money the parliament was not receiving the money nor rival authorities in the East so this new this Feud that is erupting today is actually a change of the uh of the alliance structure in Libya for many years for almost a decade it was those in the East who were accusing the governor in Tripoli of starving them off they wanted him changed and now because there's a refound friendship they are the ones defending uh the governor and actually opposing the decision of the triple base authorities to sack him so it's actually we've come full circle in the feudo with the Central Bank Mustafa then there was this understanding um all all very tense um but it's broken down and it seems the dispute at the end was between the governor Al cabir and the triply government uh the Govern Governor I think was unhappy with the spending levels of the trip government concerned about corruption uh de Baba's government felt the governor had a mass too much power is is that the sort of tension we're talking about who was who was in the right who was in the wrong in your view Mustafa well that's part of it the way you put it James that's part of the reasons of the tensions between the two sides Mr Kabir in the one side and the prime minister in the other side I the prime minister in triple of course Mr baba but there's also the changing uh alliances political alliances as the previous speaker have mentioned which are shifting all the time and we have seen uh some kind of shift lately when it comes to the alliances that support Mr Kabir as well as Mr Baba at the same time for example in terms of you know uh armed groups in Tri you know Mr Mr Kabir was always protected by the deterrent forces or Arabic and the same people are aligned to to to to to the Prime Minister Mr Baba and unlike in previous years but the issue here is actually also have to do with two things I think first of all the legitimacy of all institutions including uh Mr kabir's position as a governor and two the legality for they are doing and these are big question marks and when you look at what happened with the governor over the last two weeks I mean this is a man who was dismissed from his job twice before by the same Authority that appointed him which is the parliament first first time in 2014 and the second time in 2018 and we have to remember he has been in that position since October 2011 that's a very long time plus completely failed in managing the financial policy of the country managing the value of the din which is which has been plummeting for the whole uh decade or so managing the funds available to him and above all for the ordinary people in the streets here in the capital or somewhere else in tribol uh somewhere else in the country the main problem is he has been failing them in terms of availability of cash and wide widely available banking services the banking services in the country are terrible there are no ATM machines enough of them at least I think in the whole cap where I am there's only probably 10 to 15 such machines and most of them on every uh the the average day they don't work at all and okay those those are what you say are are his shortcomings faraj though the way he was got rid of he had to flee the country was very very ugly wasn't it there were sieges of the of the headquarters of the Central Bank there was the head of the IT department was kidnapped there were threats made there were uh children of staff threatened with be being kidnapped and then in the end he had to flee the country well the way that he he was kicked out um to say the least was unconstitutional according to the Libyan constitutional declaration and it was not the procedure that normally in a civil country you would do it however um I'm happy to see the back of of him and and to see him out of the country but uh I wouldn't like to do the way they have done it it's it it has um given the the this institution a bad name uh and it has caused even bigger friction between the rivals in Libya and as the colleagues has have explained now we are trenched in in in both banks of the of the arguments this to what's happened now is that the Eastern government which is where most of the oil feeds fields are based have shut down the oil ports they've shut down the production um tell us is this something you think could go on for some considerable time and what are the effects already on the Libyan economy how worrying is it yeah I mean first of all let me say for somebody who's been following Libya for over 10 years just the idea that the Eastern based authorities uh and the haar based forces hled forces shut the oil uh installations to protest against the sacking of the governor who was their Arch Enemy for for many many years is somewhat uh you know surprising but the repercussions uh are going to be the repercussions will be there uh I expect this um disclosure to to last to go on until there is a a settlement of this dispute of course the East based authorities want to see the presidential Council so the Triple E based authorities Backtrack on their DEC de ision and reinstitute or at least have some kind of Faith saving declaration that reinstituted sadik kir as as the governor so I expect the closure to go on for some time we're not seeing any signs of this finding a common ground despite the fact that this the UN acting Envoy Stephanie KY asked for a meeting to take place in recent days we saw the state department issue a very strong statement uh just earlier today condemning the fact that the these moves on the Central Bank were done without consensus so the risk going forward is not only the stopping of oil flows and therefore the shortage of revenues I mean oil has gone down from a 1.4 million barrels a day to around 500,000 uh barrels of production a day so the the relative income is also a lost but there's also the risk that if this confusion as the US uh authorities referred to it goes on there might be some decision on an international level to close off transactions which have been have been temporarily suspended with the Central Bank of Libya so there's very little appetite of the international counterparts uh to deal with a central bank uh that is uh contested so I think the risks are the closing of financial transactions uh until this dispute is uh is resolved most ster tell us how it feels right now in Tripoli how worried are people about the situation is it affecting ordinary people's lives at this stage how worried are they about the value of the Libyan din how worried are they that for example um salaries for people who work uh on the public payroll are going to get paid I'm told that the figures are 2.4 million libyans out of about 7 million are actually state employees well let uh yeah that's that's that's very true unfortunately most people get paid from the government and actually they don't do it any any any kind of work but the situation in Tripoli I haven't really noticed too much a change with the exception of two things one is the one is the uh one is the uh the problems with the with the gas you know around the gas stations which you know the Distribution Company the government old Distribution Company has been uh trying to reassure people that everything is fine and it has enough supplies uh in stocks and much more is coming into the country which is another I the Libya despite being a big oil producer embor most of the refined products it doesn't have enough refining capacity that's one thing the other thing is when it comes to banking you know I know it's in in in in the shops I was at one of the big supermarkets yesterday in in the city and they have already announced suspension of using payments you know by you know any any kind of bank cards which is not why the available anyway but but wherever they used to be they are stopped using them uh I also strangely enough notes that the din's value has not uh you know Fallen much more when comparing to other other times of Crisis you know like uh two years ago or something and uh the other thing I no is the prices have gone up but the general mve of the population and in the capital at least is very people are very worried and they are confused okay CL can I just bring you on people being worried do you think the intern AAL Community is worried you used to work as an advisor to the then head of the UN Mission um it seems to me I mean back in 2020 we had world leaders having Summits in Berlin talking about Libya but there doesn't seem to be quite the same focus on Libya now has the world lost interest in Libya and is that worrying in itself well for the past two years uh has to be said the world has taken a step back on Libya mainly because there was a comfortable status quo there was no war the two rival authorities even though each had its own government and Military Coalition in the East and the west of the country these two rival sort of entities were talking to each other behind closed doors there were Arrangements there was a sort of a a a peaceful coexistence and people thought and many foreign capitals thought that well you know it's Libya's not in such a bad place now at least there's no war and this is what cause people to uh and institutions to to to follow less Libya also because the region is a flame with with with other conflicts so there was this idea that this this peaceful status quo despite being dysfunctional and despite being precarious it would continue now with this recent crisis over the central bank which I should repeat was rather unexpected because there was always this assumption that the DEA uh government in Tripoli was talking to the ha Dom ated authorities in the East and that there were deals uh taking place there was always this idea that this coexistent will continue so this this this crisis over the uh leadership of the Central Bank came a bit of as a shock and people are very concerned very very concerned very concerned farage last word with you very briefly do you think further conflict can be avoided how worried are you about the prospect of further conflict briefly if you may I don't think uh there stamina or um um you know hunger for another um conflict I think the the current state of Confederacy will carry on uh the bank in one way or another I think will be sorted out uh but I didn't think there will be a war okay thank you very much farash thank you to all our guests today farash najim Claudia gazini and Mustafa furi if you missed any of this program or joined us late you can always watch it again on our website al.com what issues should get the in-depth insid story treatment next time let us know on Facebook facebook.com/ AJ Inside Story or unless you're in Brazil you can find us on X at AJ insid story from me James Bay and the production team here in Doha bye-bye for [Music] now make sure to subscribe to our channel to get the latest news from aler