For complete victory in Libya, General Khalifa Haftar will need the keys to the Central Bank kingdom of petrodollars, and he’s willing to starve out Tripoli to get them.
Haftar, who controls the Libyan National Army (LNA), took 1.2 million barrels per day of Libyan oil off the market because the Tripoli-based Government of National Accord (GNA) switched off the country’s foreign exchange system.
No money. No oil.
And it’s all about turning Libyan petrodollars into shiny US dollars.
While Haftar controls the oil, he does not control the oil revenues, which go through the Tripoli-based Central Bank.
That’s made it very difficult for Haftar to fund his campaign. But in this game of economic warfare, Haftar has less to lose, and he won’t really come to the negotiating table for anything less than a sizable chunk of oil revenues, access to foreign currency at non-black-market rates, and a new caretaker government in Tripoli.
At stake is some $22 billion in annual revenues, and this is how it works: There are two Central Banks, the Haftar-aligned eastern central bank and the Tripoli-based central bank, where the GNA is situated.
The Libyan National Oil Company (NOC), based in Tripoli, is stuck between these eastern and Tripoli alignments and does its best to remain neutral. While it is technically responsible for all production, Haftar really controls the production, while…
For complete victory in Libya, General Khalifa Haftar will need the keys to the Central Bank kingdom of petrodollars, and he’s willing to starve out Tripoli to get them.
Haftar, who controls the Libyan National Army (LNA), took 1.2 million barrels per day of Libyan oil off the market because the Tripoli-based Government of National Accord (GNA) switched off the country’s foreign exchange system.
No money. No oil.
And it’s all about turning Libyan petrodollars into shiny US dollars.
While Haftar controls the oil, he does not control the oil revenues, which go through the Tripoli-based Central Bank.
That’s made it very difficult for Haftar to fund his campaign. But in this game of economic warfare, Haftar has less to lose, and he won’t really come to the negotiating table for anything less than a sizable chunk of oil revenues, access to foreign currency at non-black-market rates, and a new caretaker government in Tripoli.
At stake is some $22 billion in annual revenues, and this is how it works: There are two Central Banks, the Haftar-aligned eastern central bank and the Tripoli-based central bank, where the GNA is situated.
The Libyan National Oil Company (NOC), based in Tripoli, is stuck between these eastern and Tripoli alignments and does its best to remain neutral. While it is technically responsible for all production, Haftar really controls the production, while the NOC markets the product, which means that the General is also responsible for raising all the “petrodollars” that are then handed from the eastern Central Bank to the Tripoli Central Bank.
Why would Haftar allow the eastern Central Bank to simply hand over all revenues to the Tripoli Central Bank? Because the Tripoli central bank is the official bank that controls the foreign currency sales, and thus controls Haftar’s access to US dollars.
The Central Bank has cut off Haftar’s access to cheap dollars, and Haftar has responded by cutting the Central Bank off from oil revenues, which it needs to pay public salaries (more than 50% of all public spending) and ostensibly to fund the controversial militias backing up the GNA.
The Central Bank claims to also be a neutral force, but it is clearly doing the bidding of Tripoli-based Prime Minister Fayez al-Serraj.
Last week, Central Bank chief Sadiq al-Kabir told Reuters that oil now represents 93-95% of total revenue and “covers 70% of total spending”. Related: OPEC+ Struggles With Oil’s Fast And Furious Fall
He described Haftar’s move to shut down the country’s ports as “a bullet in the head”.
How long can the Central Bank continue to pay the massive lineup of public servants that form this rentier state? Likely for months, because it has reserves of around $73 billion.
Haftar is already being starved out of dollars, so he has little to lose in starving out the Central Bank as leverage to gain access to petrodollars at official rates.
Haftar could end up taking Tripoli without resorting to military action, if he can hold out long enough.
All he needs to close the loop is control of the Central bank, which handles all proceeds from oil exports in U.S. dollars and then funnels them to accounts held in Western financial institutions.
With access to these funds, Haftar would have power over money that is being funneled to the militias supporting the GNA in and around Tripoli.
This has become a conflict over foreign exchange rates, more or less, with Haftar paying a massive premium for petrodollars, even though he’s largely controlling production and ports. No one’s in complete control in Libya, and the stalemate will continue until all three keys are in the same hand--production, export and petrodollars.
Haftar’s latest move to force a shutdown of the country’s oil exports came after the Central Bank switched off the Inter CBL clearing system, denying FX access and trading to any bank in the country’s east.
Central Bank head Kabir has long allowed multiple warring parties to manipulate the system, including Haftar-aligned militias.
Some militias, most notably the Rada Special Deterrence Force (SDF), not only has infiltrated the Central Bank’s foreign currency system, but holds influence over it as well. While the SDF is nominally aligned with the GNA, it could easily switch over to Haftar if the General is seen to be winning this new form of economic warfare.
To hedge bets on who will come out on top in Libya, keep an eye on the Salafist Madkhalists--who man the Rada SDF in Tripoli. There are indications that the Madkhalists allowed Haftar to take Sirte on his way to Tripoli earlier in January, and what they decide to do next in the capital renders them the kingmakers in this conflict.
By Editorial Department
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