28 August 2024: The crisis over the CBL leadership escalates as PC-appointed board takes the HQ
This week we look at the developments in the CBL crisis as Kabir is evicted, as well as the security agreement in Tripoli that facilitated this and the eastern oil blockade in protest at his removal.
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The crisis over the CBL leadership escalates as PC-appointed board takes the HQ and Kabir flees to Turkey with the codes; UNSMIL seeks to mediate
Incident: Following the Presidential Council’s (PC) decision on 20 August that it was appointing Muhammed al-Shukri as Central Bank of Libya (CBL) governor alongside a technocratic board, the political and institutional battle for control of the CBL has intensified.
On 23 August, Shukri issued a statement in which he said that he will only assume the position if there is consensus between the Presidential Council (PC), the House of Representatives (HoR) and the High State Council (HSC) over his appointment. Shukri emphasised that he will not assume the role amidst ongoing political disputes and refuses to be part of any chaos that could lead to conflict or loss of life.
The lay of the land then shifted following an agreement with the Ministry of Interior (MoI) on 23 August whereby Rada (which secures the CBL HQ) essentially agreed not to fight to protect Governor al-Sadiq al-Kabir, forcing Kabir to flee and allowing the PC-led committee to enter the CBL.
On 25 August, in the morning, the PC handover committee arrived at the CBL HQ to find the employees had left, key operations had been shut down, and the doors were closed. However, they forced entry (though it is important to note there were no clashes) and later the same day, the new PC-appointed board of directors – notably not including Shukri but led by PC-appointed Deputy Governor Abdul Fattah Ghafar – were in the building.
In response, later the same day Kabir submitted a report to the Attorney General’s Office over the storming of the CBL HQ, noting the decision to replace the CBL leadership was issued by an unauthorised party. The HoR also issued a statement condemning and denouncing ‘in the strongest terms’ the attempts to ‘forcefully storm’ the CBL HQ in Tripoli by parties that lack legitimacy, calling on the Attorney General to investigate the incident and hold those involved responsible. Likewise, the HSC under Khalid al-Mishri issued a statement reiterated its rejection of the PC’s ‘encroachment’ and urged local and international bodies to treat the PC as an ‘illegitimate and usurping’ power.
In the wake of the PC-appointed CBL board issuing their first statement, Kabir, HoR Speaker Aqeela Saleh and PC head Muhammed al-Menfi doubled down on their positions.
On 26 August, the PC-appointed CBL Board of Directors issued their first statement via the official CBL Facebook page, confirming ‘that the process of taking over the management of the bank has been fully completed’ and the board has ‘committed all necessary measures to ensure a smooth transition, bypassing any attempts to disrupt by the previous administration.’
On 27 August, Menfi issued a statement reiterating its position that it sees its decision to replace Kabir with a temporary board as legitimate and urging the HoR and HSC to agree on a new governor and board of directors. Menfi said the PC’s priority ‘is the independence of the central bank, the application of the principles of governance and collective leadership, and the reduction of the inflation that has burdened citizens.’ He said the PC had managed to take security and economic measures that maintained the stability of the capital and the CBL’, adding that ‘the time of an individual's control over the financial institution and what led to collective punishment has come to an end.’
On 27 August, Kabir issued an urgent statement (claiming to be issued from Tripoli) saying that the CBL HQ is witnessing another raid with the aim of ‘implementing the PC’s illegal decision’. He warned the move exposes the CBL, its assets, accounts, systems external relations and reputation to danger, adding it would prevent the CBL from paying the salaries for August as well as disrupting letters of credit and personal transfers.
On 27 August, Saleh issued a statement reiterating that it views the PC decision as illegitimate, instructing Kabir and his deputy Marei al-Barassi to continue their duties and adding a new board of directors would be ratified in the coming days. He said the HoR holds the PC ‘fully responsible for the state of confusion in the banking sector internally and externally, and for its violation of security and stability, which led to the extortion, kidnapping and threats of Central Bank employees’ and called for criminal proceedings to be initiated by the Attorney General. He also warned the oil blockade would continue until Kabir was reinstated.
On 27 August, the PC-appointed Deputy Governor of the CBL, Abdul Fattah Ghafar, gave a press conference in which he asked the outgoing leadership of the CBL for the codes to access the financial systems.
The UN and other internationals are attempting to mediate the situation.
Late on 26 August, UNSMIL issued a statement expressing ‘deep concern over the deteriorating situation in Libya resulting from unilateral decisions. The Mission believes that continuing with unilateral actions will come at a high cost for the Libyan people to resolve the protracted crisis, and risks precipitating the country's financial and economic collapse.’ It called for an emergency meeting for all parties involved in the CBL crisis to find a consensus, citing UNSC Resolution 2702 (2023) and stressing the principles of consensus, protecting the CBL’s independence, and ensuring the continuity of public services. UNSMIL also called for the suspension of all unilateral decisions related to the CBL, the immediate lifting of force majeure over the oil fields, the cessation of any escalation, and ensuring the safety of Central Bank staff and protecting them from threats and arbitrary arrest. It concluded that this process will also aim to agree a unified government and put Libya ack on the path to elections.
Comment: The conflict over the CBL and Kabir’s position as governor has been brewing for months, since Kabir cut off PM Abdul Hameed Dabaiba’s access to development funds as well as some operational funds over concerns about the levels of corruption and overspend that was occurring – primarily orchestrated by PM Dabaiba’s nephew Ibrahim Dabaiba. These hostilities led Saleh to improve relations with East, notably with Aqeela Saleh and Haftar (despite the former trying to remove Kabir for years previously).
Dabaiba’s political survival depends on having the financial resources to ‘serve’ his supporters, so regaining access to the CBL funds became a matter of survival. It seems Dabaiba was able to convince Menfi and his close advisors that Kabir was compromised by his new alliance with the eastern actors, and that a legislative means to replace him was required. Against this backdrop, the PC decided on 18 August to implement issue HoR Resolution No. 3 of 2018 appointing Shukri as the governor. However, the HoR had pre-empted this by suspending that decision days before and voting to end the term of the Government of National Unity (GNU) and PC. Since then, there have been a flurry of competing statements and moves by supporters on both sides.
Although the UN, US and others have not explicitly stated that they continue to support Kabir, they have condemned in strong terms the attempts to unilaterally remove him and take control of the CBL by force. For most internationals, despite his many flaws, Kabir is seen as a stable, competent economic actor whose removal could precipitate complete economic collapse.
Significance: While the situation around the CBL remains highly volatile and unpredictable, it is clear that this crisis has already created significant economic and political instability, with a negative impact on the Libyan economy, Libya’s international standing and access to financial systems, and importantly the lives of normal Libyans. As it stands, the incoming board of directors has control over the physical CBL building in central Tripoli, but they do not currently have access to the financial systems. Meanwhile, Kabir and his team retain access to the all important SWIFT codes, but are no longer at the CBL or even in the country. Ghafar’s public request for the codes and Kabir’s warning that this situation will result in salaries and letters of credit not being paid indicate that Kabir cannot carry out these operations in exile, while the new board will not be able to do so without the codes and access which Kabir and his team hold. As it stands, any number of scenarios could play out in the coming days, with the potential for destabilising actions and the collapse of the Libyan economic system.
As such, if efforts to mediate a solution fail, or if it takes some time, Libya’s financial systems are likely to ground to a halt internally, while the uncertainty and lack of clarity of who is legally running the CBL means that Libya is likely to be frozen out of international systems and markets, which will be devastating for the economy more widely. On a more local level, Libyans will likely find it hard to live their day to day lives in these conditions, meaning anger will rise and along with it the pressure for actors to do something about it. Even if the new board gains full access to the CBL and Kabir is unable to return, the GNU and the PC are likely to face considerable political (and legal) difficulties, especially given the clear international stance against their moves. They may also face basic administrative and financial challenges.
The UNSMIL statement denouncing unilateral actions and calling for an emergency meeting is notable for the strength of its language and its clear denunciation of the PC/GNU attempts to forcibly take control of the CBL. This clearly highlights the high levels of concern about the negative fallout of prolonged instability around the CBL leadership, both economically and more widely. Sustained efforts will no doubt being made to bring the actors together to work out a solution.
Although no scenario can be ruled out given the high levels of volatility, it seems unlikely that Kabir would be able to return as the governor, or if he did, it would be with a ‘unified’ board of directors and with additional curbs on his powers. A more likely outcome would be to bring in Shukri as governor leading a unified board – meaning key actors will get to put a certain number of their people on the board. It is also likely that the UN will attempt to use this crisis to push forward efforts to facilitate a new unified government to replace the GNU and possibly the PC – especially in light of the destabilising efforts to take over the CBL. However, bringing Libya’s status quo actors together and hammering out a solution remains a difficult task to achieve. Dabaiba in particular will be reluctant to do so if he thinks it will hasten the end of his government. The partial oil blockade, and threats of a complete shutdown by the East, will further complicate this.
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Tensions in Tripoli have temporarily dialled down after MoI, Rada and others agree to security plan whereby MoI will secure key buildings, including CBL HQ
Incident: As the political and legislative tussle for control over the governorship of the CBL gained pace throughout the last week, so did the power struggle and manoeuvring among key armed actors in and around Tripoli.
On 20 August, the Special Deterrence Force (Rada) commander Abdurraouf Kara declared that the PC's decision to replace Sadiq al-Kabir as CBL Governor was worthless. He stressed that the protection of the CBL is one of Rada’s main tasks and they will not allow their sovereignty to be violated by force. Rada secures the CBL HQ and are key allies of Kabir.
On 21 August, militias were gathering near the CBL and Rada reinforced its positions. The situation around the CBL was very tense, but the bank was not attacked.
GNS announces force majeure on oilfields it controls over CBL struggle; partial shutdown of oilfields in east and southwest follows
In the wake of CBL Governor Sadiq al-Kabir leaving Libya, CBL staff leaving the HQ in Tripoli and closing down the country’s financial systems, and following the subsequent take-over of the CBL HQ by a PM Dabaiba-aligned committee and new CBL board, actors supporting Kabir in the East are using their control over Libya’s oilfields to try to influence the situation.
On 26 August, Government of National Stability (GNS) PM Osama Hammad declared a state of force majeure and instructed the halting of all oil production and exports in all fields and ports until further notice. Hammad said this was due to the need to protects and preserve Libyan funds at the Central Bank of Libya (CBL) and prevent them from falling into the hands of an ‘illegal group that aims to seize them and waste them.’
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Tensions in Tripoli have temporarily dialled down after MoI, Rada and others agree to security plan whereby MoI will secure key buildings, including CBL HQ
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