Libya is a country located in Northern Africa and suffering from a resource curse outside of the Arabian Peninsula. To understand authoritarianism, civil wars, the wave of democratization, and the relationship between the sustainability of political regime and the existence of natural resources, it is a region that is worth focusing on. As it is known, Libya occupied the agenda of world public opinion for decades due to the Muammar Gaddafi’s ruling with an iron fist and the importance of Libya oil until 2011. During the Arab Spring, Libya was one of the most prominent countries shaken by the demonstrations. As a consequence of this breakpoint, Gaddafi has lost his power, and the country has been dragged on violence between post-revolution armed groups. At this stage, Libya is a battleground of ongoing proxy war, which is conducted by many actors. This essay will shed light on the structure of Libya’s economy, processes that they go through, and the oil-civil war relationship concerning warnings of the governor of Tripoli-based Central Bank.
Likewise, the other OPEC countries, Libya’s economy is primarily based on revenues that come from the petroleum sector. Such that over 90% of the export proceeds and around 60% of the GDP consists of the petroleum sector. Thanks to the low population and high oil revenues, Libya performs quite well compared to other African countries in terms of nominal per capita GDP. When we look at the country’s growth trend from the early 2000s to early 2010s, we see that they have enjoyed favorable growth rates. However, this trend has been interrupted by the civil war, which occurred in 2011. Libya’s economy shrank by 62.1% in 2011. Although they experienced a recovery by 104.5% with the base effect, the Second Libyan Civil War hit the country again. As a consequence, as of 2019, per capita, PPP GDP of the country is around 67% of its pre-2011 level. There is no doubt that the most appropriate sector to observe the dramatic contraction in Libya’s economy is petroleum. Figure 1 shows the change in crude oil production between 2010 and 2015.
Today Libya is a country that hosts two governments (Tripoli and Tobruk) and witnesses a civil war since 2014. After Gaddafi’s fall, no groups could have been managed to control all of the countries, and several obstacles to peace do exist. However, according to experts, oil is one of the most important factors that fuel military conflict. This situation can be explained with two points. Firstly, since Libya is the country that has the highest proven oil reserves in Africa and, thanks to proximity and geopolitical location, they are an important supplier of crude oil to European countries. Naturally, domestic politics and turmoil in the region draw other global actors’ attention and encourage them to interfere. This situation extends both sides, and conflict gets all balled up. Secondly, the trajectory of the military conflict is depended on strategic oil reserves. For example, General Haftar, thanks to their territorial domination, controls the majority of oil extraction camps, he is not able to gain economic advantage. He cannot earn a proportional part of income since oil companies refuse to negotiate with LNA (Libya National Army). On Tuesday, governor of the Tripoli-based Central Bank of Libya Al-Saddiq al-Kabir issued statements and expressed his concerns about Libya’s economy. He says that the shutdown of oil production and exportation had led to a $180 billion loss since 2013. According to him, the country should produce 1.7 million barrels per day to afford today’s spending levels. He also emphasized that Libya’s debt reached 270% of its GDP. In addition to this, the Tripoli-based central bank declared that the burden of Haftar’s blockade on the country’s economy is at least $9 billion. It can be said that the governor’s and institution’s statements are clarifying where we stand now in terms of Libya’s economy.
In conclusion, it can be said that Libya is a case from which other countries (especially developing and undeveloped countries) should take lessons from. These lessons can be classified into four points.
Firstly, an oil-dependent economy is highly vulnerable to international and political conjuncture. A country should not rely on the existence of natural resources in the country because, in the case of foreign intervention or domestic turmoil. In this context, revenue that has been gained from oil exports should be converted to the production of other goods and services and other investments.
Secondly, the promotion of the electoral process and other civil/democratic rights is highly important in the 21st century because the fall of Gaddafi and the following political instability shows that these concepts are vital. Such that democratization process may lead to chaos that threatens the country’s national security, territorial integrity, and economic welfare.
Thirdly, the importance of moderate actors that can contribute to the negotiation process and peacemaking in the solution of disagreements. Since Libya could not manage the crisis within the country, the country became more fragile day by day and opened to foreign intervention.
Finally, the establishment of energy security is as important as the existence of reserves and extraction of the resource. In this context, not only the conflict zone around the world but also other pipelines and reserves should have reliable frameworks.