4 September 2024: International concerns mount over CBL crisis
This week we look at the developments in the CBL crisis as HSC and HoR try to reach agreement, as well as tensions around Ras Ajdir and the ongoing oil blockade.
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International concerns mount over CBL crisis; HSC and HoR close to agreement on interim committee to take over CBL
Incident: The UN, US and other Western actors have expressed concerns about the Central Bank of Libya (CBL) crisis and its economic impact (as well as wider deterioration of stability) and urged talks to resolve the situation.
On 28 August, the UN Security Council issued a statement expressing concern at the situation and calling on ‘Libyan actors and institutions to urgently refrain from any unilateral actions which increase tensions, undermine trust, and further entrench institutional divisions and discord amongst Libyans.’ It further called on ‘all Libyan political, economic, and security leaders and institutions to de-escalate tensions, refrain from use of force or threat of use of force or any economic measures designed to exert pressure, and to reach a consensus-based solution to the current crisis regarding the Central Bank.’ They also urged the Libyan parties to avoid any military actions that might jeopardise Libya’s fragile stability and the security of civilians. The UNSC called on Libyan parties to ‘engage fully, in good faith and without preconditions’ in order to move ahead with the Libyan-led, UN facilitated political process.
On 30 August, the EU delegation and the diplomatic missions of EU Member States in Libya issued a statement saying they were ‘gravely concerned’ about the deterioration of the situation in Libya and urged all parties to ‘engage constructively in good faith and seek a negotiated solution.’
On 31 August, the US State Department called on Libyans actors to ‘take steps to maintain the credibility of the CBL and find a solution that does not further damage its reputation and engagement with the international financial system.’ It warned that ‘the uncertainty created by recent unilateral actions has led U.S. and international banks to reassess their relationships with the CBL and, in some cases, pause financial transactions until there is more clarity on the legitimate governance of the CBL.’
On 1 September, the UK Minister for the MENA region Hamish Falconer warned that the CBL crisis is ‘severely complicating Libya’s relations with international banks’ urging actors to work with UNSMIL to agree a resolution.
UNSMIL succeeded in holding talks on 2 September between the House of Representatives (HoR), HSC and Presidential Council (PC), with the HoR and HSC making progress on a draft agreement for a temporary committee to run the CBL immediately, with the HSC and HoR to agree a new governor within a month.
On 2 September, UNSMIL said it hosted separate talks at its headquarters in Tripoli, with representatives from the HoR and HSC [under Khalid al-Mishri] on one side, and the PC on the other. It said the lengthy consultations were ‘marked by open and candid dialogue’ and concluded with ‘significant understandings between HoR and HSC representatives on ways to address the CBL crisis and restore the confidence of Libyans and international partners in this vital institution.’ They further agreed to submit the draft agreement to their respective Chambers for review, with the aim of finalizing and signing the agreement on 3 September.
The agreement is understood to revolve around a temporary committee to lead the bank until a new governor and board is agreed within 30 days of the interim committee being appointed, in accordance with Article 15 of the LPA.
Further meetings occurred on 3 September at the UNSMIL HQ in Tripoli, concluding with the HSC and HoR members affirming their full commitment to the understanding regarding the CBL, but requesting an additional 5-day extension until 9 September to complete the consultations.
Comment: It is important to note that there has not been an active CBL Board for many years, while failure to agree on a new Governor has seen Kabir outstay his tenure by several years as well. This saw significant power and influence concentrated directly in Kabir as a person, due to his role as Governor. This is a key part of the reason why competition for tacit control over Kabir and the resources he controls, as well as efforts to replace him through legislative means, have been so intense as Libya’s various stakeholders want to control Libya’s coffers via the governor. However, until the last few weeks, there had not been unilateral moves to remove him or take over the systems directly. This is distinct from the oil sector for example, where shutdowns of oil facilities to cut off the central government’s revenue sources are frequent.
Significance: It seems a deal between the Mishri-led HSC and HoR over the CBL board is close to being signed. However, there are likely to be several potential challenges and snags in the process, even if a deal is reached. A key question will be whether the PC and Dabaiba accept the deal and revoke the PC decisions which saw the new board appointed and created such chaos. Given the PC-appointed board (and therefore its backers) have so far failed to gain access to the all-important international systems and funds, it is possible that they will be willing to agree to a deal as they have little choice. In this scenario, they will likely push for key allies to be included on the interim committee and certainly on any new board. If a deal is agreed and signed off, the next question will be whether the armed groups currently backing the PC-appointed board allow any new committee or board to take control of the physical CBL HQ.
If an interim committee can take over the CBL, the next challenge will be reaching agreement over a new board and governor. It is unlikely that Kabir can stay in this role now as it would be too divisive. However, reaching agreement on a governor and board members that satisfy players in both the East (notably the Haftar family) and the West is likely to remain a challenge, despite the alignment between Mishri and Saleh. On the positive side, the reintroduction of a board should help to diminish the importance of the governor position and provide greater oversight to the running of the CBL. The risk is that the events of the last few weeks will set a precedent (as occurred in the oil sector) whereby a deal may last for a few weeks or months, but then could be undone through unilateral action (including force) if a certain party is no longer satisfied with the situation or if the broader political situation changes. This risk is also likely to impact international banking relationships with the CBL – any deal may come too late to repair the damage that has been done so far and the fear that such instability could persist in one form or another.
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Libyan Army forces dismantle blockade to reopen Ras Ajdir; Tensions with Amazigh forces remain high
Incident: On 27 August, Western Coast Military District Commander and Libyan Army Deputy CoS Salaheddin al-Namroush threatened to forcibly clear the roadblock at Abu Kammash (close to Ras Ajdir border crossing) using Libyan Army forces supported by combat drones. Subsequently, the Libyan Army forcibly cleared the blockade. Namroush announced that the Ras Ajdir border crossing is open, saying Abu Kammash is fully controlled by the Libyan Army. There were minor skirmishes between Libyan Army units from Zawiyya and militias from Zuwara near Abu Kammash.
Partial oil blockades continue even after some of AGOCO’s production resumes to supply local needs; NOC declares force majeure on al-Feel
Incident: The partial shutdown of oil and gas facilities, which began on 26 August as a result of the ongoing battle for control over the CBL, has continued throughout the week.
On 29 August, the National Oil Corporation (NOC) made its first public acknowledgement of the blockades, publishing some useful infographics highlighting the losses overall as well as by each main subsidiary. It said that prior to the shutdowns, average daily production was 1.28 million bpd. As of 26 August (when Sharara was offline plus some other cuts were starting), production was 959,000 bpd; on 27 August it was 783,000bpd and on 28 August, it had dropped to 591,000 bpd. The NOC estimated over 1.5 million barrels had been lost over the previous three days, equating to 120 million USD.
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From our Blog..
On 30 August, The Middle East Institute published an analysis article by former US envoy to Libya Jonathan M. Winer, titled ‘Brokering a solution to the Libyan Central Bank crisis’. Winer looks at the recent battle for control over the Central Bank of Libya (CBL), which has already resulted in...read more
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Libyan Army forces dismantle blockade to reopen Ras Ajdir; Tensions with Amazigh forces remain high
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