Faith Nyasuguta
Libya is facing a severe economic crisis as its oil production grinds to a halt following a shutdown imposed by authorities in the country’s east. This move could push the nation, already on a fragile footing, closer to financial disaster.
The shutdown began with the closure of the El-Feel oil field in southwestern Libya, and there are signs production could cease nationwide. This action comes after a decision by the country’s eastern authorities to enforce a “force majeure” on all oil fields, terminals, and facilities.
The shutdown is a reaction to a political standoff between the eastern authorities and the internationally recognized government in the west, following the decision to replace Sadiq Al-Kabir, the long-serving Governor of the Central Bank of Libya (CBL).
The bank manages billions of dollars in oil revenue, a vital resource for the country’s economy. The dispute over who controls the CBL has heightened tensions and threatens to unravel a United Nations-brokered peace agreement aimed at stabilizing Libya.
Libya has been divided between rival factions since the 2011 overthrow of longtime ruler Moammar Al Qaddafi. The country split into two main entities: an internationally recognized government based in the west and an eastern administration. Both sides have vied for control over the country’s oil wealth, particularly since most of the nation’s oil production occurs in the east.
Al-Kabir has been the head of the central bank since 2011 and is a central figure in the ongoing conflict. The western government wants to remove him from his position, accusing him of mishandling oil revenues. However, the eastern authorities support him, arguing they have been historically marginalized and denied a fair share of the country’s oil wealth, despite most of the production occurring in their region.
The situation has escalated with a government delegation entering the CBL headquarters in Tripoli on Monday to appoint new leadership. Al-Kabir, however, has refused to step down, further intensifying the political divide. This power struggle over the central bank, which controls billions in oil revenues, has deepened Libya’s political rifts and threatens the fragile peace maintained since the 2020 UN-backed cease-fire.
Libya, a leading oil producer in Africa, has been producing around 1.2 million barrels of crude per day over the past year. With the shutdown, global oil markets are already feeling the impact. Analysts at Citigroup have suggested that reduced exports could push Brent crude prices into the mid-$80s per barrel. The halt in production threatens to deprive Libya of a crucial income source, further straining an economy already struggling to recover from years of conflict.
The United Nations mission in Libya has warned against unilateral actions that could come at a “high cost for the Libyan people” and potentially lead to economic collapse. The UN is calling for an emergency meeting with all parties to resolve the crisis and urging an immediate restart of oil production to avoid financial disaster.
In a bid to ease tensions, Tripoli authorities have called on the eastern factions to rejoin the UN-backed peace process and focus on holding long-overdue national elections by February 17. The outcome of this crisis remains uncertain, but the stakes for Libya and its people are higher than ever.
RELATED:
