The United Nations Support Mission in Libya (UNSMIL) announced that it held talks in Tripoli on Monday 26 August 2024 in an attempt to resolve the Central Bank Crisis in Libya (a major energy exporter) that has triggered the country’s worst crisis in years and led to the suspension of oil production.[i] This deadlock began when Libya’s Tripoli government last month attempted to oust long-serving Central Bank Governor Sadiq al-Kabir last month and replace him with a rival board of directors, leading the Haftar-controlled Benghazi administration to halt all oil production.
The crisis is seen as the biggest evidence of Libya’s long-standing political stalemate and the dysfunction of state organs. The Central Bank of Libya is the only legal depository of the country’s oil revenues and pays government salaries across the country.[ii]
If these functions are disrupted due to the current crisis, Libyan citizens will soon face economic difficulties. If the bureaucratic struggle between the sides is protracted, it threatens energy security through the global oil trade as well as causing a number of local problems, especially the failure to pay salaries.
Geopolitical developments, which have been the most important determinant of prices in the past, played an important role in the crisis, with the testing of stagnant energy security concerns. The fact that Brent oil prices exceeded $81 and crude oil prices exceeded $77 in the week of the crisis is regarded as the most important evidence.[iii] This test of prices shows how fragile energy security is despite the fact that many countries have increased their security expenditures and developed mechanisms.
In the power struggle in Libya, the knowledge of the energy basins allows us to have an idea about where the political power of the internationally unrecognized Benghazi Government comes from. In addition to the Zawiyah and Mellitah basins held by the Government of Tripoli, it is known that Libyan oil is exported and its weight in terms of reserves is in the eastern regions. Both oil refineries and storage areas in Sirte, Brega, Lanuf, Benghazi and Marsa al-Hariga are under the control of the Benghazi Government, which is also the largest oil producer and exporter in the North African region.[iv]
The crisis was apparently caused by the shutdown of the largest oil field, Sharara, which pumps around 270,000 barrels per day. The eastern region is home to the Sirte basin, where most of Libya’s oil reserves and four of the country’s oil export terminals are located.[v] As a result of the oil field shutdown, the state-owned National Oil Company (NOC) reported that production fell from around 959,000 b/d to just over 591,000 b/d as of August 28, 2024, with losses of more than $120 million over the last three days. On July 20, 2024, NOC had reported production at around 1.28 million b/d.[vi]
This crisis threatens to end four years of relative peace in the OPEC member country, which has been divided between east and west for a decade. The crisis in Libya could have significant implications for Turkey’s foreign policy and energy security. Turkey supports the internationally recognized legitimate government in the Libyan conflict.
The resurgence of conflict in Libya could strain Turkey’s diplomatic relations with the legitimate government in Tripoli, which Turkey supports, as well as with other regional actors. Political pressure on the country’s main source of income, oil, could push the government of Dibeybe into an artificial crisis. Moreover, the crisis may make it difficult for Turkey to focus on other foreign policy priorities. As Libya is a battleground for influence between global and regional powers, this energy crisis could further deepen the power struggle and threaten Turkey’s strategic interests in the Eastern Mediterranean.
Instability in Libya also jeopardizes Turkey’s energy supply security. Uncertainties over Libya’s oil production and exports could increase Turkey’s energy import costs and lead to fluctuations in energy markets. Moreover, Turkey’s planned energy projects in Libya, especially oil and natural gas exploration activities, may be disrupted by the conflict.
This could hamper Turkey’s efforts to ensure energy security. The crisis in Libya also carries the risk of reigniting the civil war. The power struggle between the East and the West could escalate into armed conflict if no compromise can be reached between the parties. This could lead the international community, including Turkey, to witness a larger humanitarian and political crisis in Libya. In sum, this crisis in Libya could have significant implications for Turkey’s foreign policy and energy security and increase the likelihood of a renewed outbreak of civil war in Libya. Turkey’s response to this energy crisis will determine its capacity to protect its strategic interests in the region.
[i] “UN hosts talks in Tripoli to resolve Libya’s central bank crisis”, VOA, https://www.voanews.com/a/un-hosts-talks-in-tripoli-to-resolve-libya-s-central-bank-crisis-/7769244.html, (Accessed: 26.08.2024).
[ii] The Central Bank of Libya, https://cbl.gov.ly/en/, (Accessed: 03.09.2024).
[iii] “Petrolde Libya gerginliği”, Bloomberg, https://www.bloomberght.com/petrolde-libya-gerginligi-2358992, (Accessed: 26.08.2024).
[iv] “Libya Executive Summary”, IEA, https://www.eia.gov/international/analysis/country/LBY, (Accessed: 02.09.2024).
[v] “Oil reserves in Libya”, Wikipedia, https://en.wikipedia.org/wiki/Oil_reserves_in_Libya, (Accessed: 02.09.2024).
[vi] “UN hosts talks in Tripoli to resolve Libya’s central bank crisis”, Middle East Monitor, https://www.middleeastmonitor.com/20240903-un-hosts-talks-in-tripoli-to-resolve-libyas-central-bank-crisis/, (Accessed: 03.09.2024).
