Tripoli, 3 September 2024 (TDI): The United Nations Support Mission in Libya (UNSMIL) facilitated crucial talks in Tripoli on Monday aimed at addressing a central bank crisis that has led to a blockade of oil production and threatens to plunge the major energy exporter into a severe economic crisis.
The standoff began when Western factions attempted to remove veteran Central Bank of Libya (CBL) Governor Sadiq Al-Kabir last month, replacing him with a rival board. In response, Eastern factions shut down oil production.
UNSMIL reported that the discussions, which involved representatives from Libya’s House of Representatives and High Council of State on one side and the Presidential Council on the other, concluded with a “significant” understanding.
Both parties agreed to submit a draft deal for review by their respective chambers, with the aim of finalizing and inking the agreement on Tuesday.
Oil prices saw a slight increase on Monday, recovering some losses from late last week as concerns about halted Libyan oil exports and higher OPEC+ production eased.
Libya’s CBL, the sole legal custodian of Libyan oil revenues, is crucial for paying state salaries and maintaining economic stability.
The ongoing crisis jeopardizes these functions, potentially leading to widespread economic disruptions if the deadlock continues.
A prolonged struggle for control could freeze state salaries, bank transfers, and letters of credit for imports, further destabilizing Libya’s economy and international trade.
The Eastern factions, including the House of Representatives led by Speaker Aguila Saleh and the Libyan National Army (LNA) under Khalifa Haftar, oppose the Tripoli-based Presidency Council’s move to oust CBL Governor Al-Kabir.
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The oil blockade by Eastern factions is expected to deplete CBL funds and reduce condensate for power plants, potentially causing prolonged electricity blackouts.
Oil Production Drops
The National Oil Corporation (NOC) reported that oil production had dropped to just over 591,000 barrels per day (bpd) by August 28, down from nearly 959,000 bpd on August 26. It resulted in losses exceeding $120 million over three days. Production had been around 1.28 million bpd on July 20.
This crisis threatens to end a period of relative stability in Libya, which has been divided between Eastern and Western factions supported by Russia and Turkiye, respectively.
Despite the turmoil, the CBL and NOC have remained operational to ensure some continuity in governmental functions.
