In Libya, networks of armed actors, corrupt business executives and politicians continue to find ways to make money through avenues such as the smuggling of fuel or people, the diversion of state resources and the growth of extremely profitable protection rackets. Categorizing such activity is difficult. Some prefer to use the term “shadow economy,” yet this suggests that there is an illicit economy running parallel to a lawful economy when the two are effectively indistinguishable in Libya. I prefer the term “war economy” because much of the marketplace in Libya is now dependent on the dispensation of violence — either directly or indirectly.
This war economy is more than a symptom of Libya’s troubles: It has become a key driver of them. It establishes incentives for networks of profiteers to compete for resources and power and to frustrate the return to functioning central governance, while having a devastating impact on the formal economy.
Undermining the war economy’s structures will be challenging, to say the least. The revenue generated from the war economy is significant, can benefit local communities and is often concentrated in areas where few alternative livelihood opportunities exist.
Carrots without sticks
Without a monopoly on force, the state has been too weak to coerce actors that engage in these activities. What is more, in many cases the war profiteers also have roles within the state. The state has sought to co-opt troublesome armed groups by incorporating them into either the Ministry of Interior or Defense. The pitfalls of such strategies were seen last month when the mayor of Tripoli, Abdelraouf Bedat al-Mal, was taken from his home by an unidentified armed group. It remains unclear whether Bedat al-Mal was kidnapped or the subject of an arrest warrant issued by state authorities. It has been suggested that the mayor’s detention may be linked to an initiative he led that had negatively impacted the business interests of local armed groups. Such groups retain their chain of command and their own interests, and do not necessarily accept the authority of the state they ostensibly serve.
In the coastal city of Sabratha, the U.N.-backed Government of National Accord sought to enlist armed groups involved in human trafficking to become an anti-trafficking force. This has led to a reduction in migrant crossings of the Mediterranean since the spring of 2017. But it has also stoked local conflict, disempowered the state entities that are supposed to disrupt illegal migration and — most worryingly — reconditioned the rent-seeking behavior of armed groups, this time to seek payment for preventing human smuggling.
Means of combating networks of profiteers
So, with such limitations in mind, what can Libya’s state authorities do? One answer may lie in undermining the social legitimacy enjoyed by armed groups. Armed groups draw members from the very communities they claim to protect, so it is important that they are perceived to be providing a service. Naming and shaming of networks of profiteers that are demonstrably damaging the interests of these communities can impact the ability of armed groups to maintain their social legitimacy. One example of this was the expulsion of many human smugglers from the coastal city of Zwara after a community campaign apparently initiated when the bodies of migrants who drowned in the Mediterranean washed up on Zwara’s coastline in 2015.
Yet there are limits to such powers. In a number of cases, attempts to call out abuses have resulted in a backlash and highlighted a lack of enforcement capacity. This has been shown in Zawiya, where the National Oil Company has been unable to oust an armed group from the city’s refinery, despite open condemnation of the group’s alleged responsibility for smuggling fuel from the refinery.
A meaningful approach to tackling Libya’s war economy is likely to hinge upon the state’s ability to address the powerful system of incentives that the war economy creates and sustains. Generating employment opportunities will be particularly important for rank-and-file members of armed groups as part of disarmament, demobilization and reintegration efforts. The program to support such outcomes appears to have stalled, however.
In lieu of the ability to coerce, Libyan authorities face difficult choices over their approach to confronting the leaders of these powerful networks of profiteers. Here, Libyan authorities will most likely be forced to consider pathways to allow them to convert their profits into legitimate activity. Where profiteers cannot be incentivized in such a way, finding ways to reduce the profit margins of illicit schemes may be worth exploring.
In the end, a political settlement and functioning governance are required to successfully tackle the structures that underpin Libya’s war economy. The international community could lend its support to the efforts of Libyan authorities. For instance, many of Libya’s profiteers have financial interests outside the country, which could be targeted. Cooperation between Italian authorities and the Libyan attorney general’s office over an investigation into a transnational fuel-smuggling network offers a positive example of how international players can work constructively to support Libyan state institutions.
But with no settlement in sight, the interests of networks of profiteers continue to grow, and the longer these issues are left unaddressed, the more difficult such vested interests will become to roll back.
Tim Eaton is a research fellow for Chatham House’s Middle East and North Africa Program. His paper, “Libya’s War Economy: Predation, Profiteering and State Weakness,” is available here.