MinbarLibya – International

Federica Saini Fasanotti

Libya is a state without a functioning political or social structure. The risk of terrorist attacks and kidnappings is very high, as criminals become increasingly well-organized and the state police system is reduced to tatters.

In a country of 6 million people, there are an estimated 20 million weapons in circulation. The armed forces no longer exist as any sort of coherent entity, in spite of efforts by some Western countries to help train security forces.

Not surprisingly, all this has hit Libya’s economy pretty hard. Before the 2011 revolution, Libya exported large amounts of oil, trading principally with China, Italy, Germany, Spain, Turkey, and others. Libya’s economy used to be a pretty stable trading platform, even if it was ruled by the tyrannical Moammar Gadhafi. That changed: In 2010, Libya had a GDP of $74.76 billion (compared to neighboring Tunisia’s $44.43 billion, for example); in 2011, it fell to less than half that, at $34.7 billion.

Behind this dramatic decline are effects of the post-revolution security situation, on the one hand, and decades of policy failure on the other. Can the historic drivers of Libya’s economy be revived? And what can the international community do to help Libya rebuild it?

Bad news on oil

Oil has long been the key driver of Libya’s economy. Yes, there is a limited agriculture industry—dates, olives, fruits, vegetables, grains, and livestock—as well as an industrial base in steel, cement, construction materials, and chemical agents (and other petrochemical supplies). But oil incomes represent 97 percent of Libya’s total exports.

Oil deposits are distributed both in Cyrenaica and in Tripolitania, plus offshore. Oil wells are mainly managed by Italian ENI, Russian Gazprom, German Wintershall, French Total, and Spanish Repsol. At the end of 2014, Libya’s active refineries were in Ras Lanuf, Zawiya, Tobruk, Sarir, and Marsa Brega.

Before Libya’s revolution in 2010, the country exported 1.6 million barrels of oil per day; in August 2016, it exported just over 200,000 barrels per day. The dramatic fall was due to intense fighting during and after the revolution, when rival factions and militias caused considerable damaged to oil infrastructure, as well as all but blocked oil production and export. Libyan natural gas facilities suffered the same fate: The country is quite rich in natural gas, with onshore and offshore fields, but few facilities function today due to continuous clashes between opposing factions. Finally, it doesn’t help that, particularly since 2014, some of Libya’s armed groups have tried to sell crude oil independently—and illegally, given the U.N. Security Council Resolution prohibiting illicit crude oil sales.

As a result of all this, the current account swung from balanced in 2013 to a massive deficit (estimated at around 76 percent of GDP) in 2015. To finance this deficit, net foreign reserves are being rapidly depleted.

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