Negative outlook for Libya in 2015 amid worsening violence


09 Jan 2015

Negative outlook for Libya in 2015 amid worsening violence

The conflict in Libya will worsen in 2015 as political and diplomatic efforts prove incapable of halting the continued escalation of the violence, which has now spread across much of the country. High levels of fighting are likely to persist with neither side currently capable of a decisive military victory. Given the need to secure vital revenues, both the internationally recognised government based in Beida and the rival Islamist-led regime in Tripoli will continue to prioritise their military efforts to control critical oil and gas infrastructure. As witnessed in the past two months, this will continue to threaten national oil production and exports, reversing the recovery in output made since an April 2014 deal ended the blockade of several Libyan oil ports.

 

Conflict intensifying

 

The intensification and geographic expansion of the conflict since August 2014 has returned Libya to a de facto state of civil war. The fighting primarily involves those who support the internationally recognised government based in the eastern city of Beida, and the rival administration supported by several Islamist groups set up in Tripoli in August 2014. Fighting has spread from Benghazi and Tripoli throughout the country, with air and ground attacks by pro-government forces targeting supporters of the Islamist Libya Dawn militia near the Tunisian border. South of Tripoli in the Kilka and Ghariyan areas, pro-government tribesmen from Zintan and elsewhere have been engaged in weeks of heavy clashes following an offensive by forces loyal to Libya Dawn. Troops backing the government led by Prime Minister Abdullah al-Thinni have broadened their aerial campaign, targeting areas previously unaffected by the conflict with recent air strikes occurring in Misrata, home to the powerful Misrata Brigade, and Derna, a militant stronghold. Air forces allied with Thinni’s government also helped to repel a Libya Dawn offensive against the pro-government militias in control of strategic oil export terminals in Sirte in December 2014. Violence has also effected southern Libya, with clashes between militias from Misrata and tribal fighters seeking to displace forces loyal to the government in oil-rich areas such as Obari since September 2014.

 

Pro-government forces may be emboldened by their momentum in the current offensive in Benghazi, but neither side has proven capable of decisively breaking the stalemate, and districts have regularly been gained and lost by rival forces throughout 2014. Claims that military operations to retake Tripoli and Derna from Islamist forces are imminent seem exaggerated. Although operations could intensify, previous fighting in the capital suggests this would be protracted and could even exceed the current intensity of urban conflict in the restive city of Benghazi, where around 450 people were killed in six weeks of fighting in November 2014.

 

The political and security vacuum throughout 2014 has enabled Islamist militants groups such as Ansar al-Sharia and Islamic State to establish strongholds in Libya, particularly in the east of the country. Recent operations claimed by Islamic State affiliates in Libya, including a December 2014 car bombing outside a Tripoli security building and a January 2015 raid that killed 14 soldiers north of Sabha, are significant national security developments. The presence of new militant groups has generated considerable concern among Libya’s neighbours and Western powers and could see increased international intervention in the conflict. Egypt and the UAE have already been accused of launching air strikes against Islamist fighters in 2014, while Qatar is alleged to have provided funds for the Tripoli-based regime. A growing threat of regional militancy originating in Libya could facilitate a more decisive intervention in the coming months, as advocated by Chad and Niger. Officials with the International Crisis Group warned in December 2014 that Egypt’s overt and covert support of the government-backed offensive was destabilising the situation. Unconfirmed media reports in 2014 that Cairo was preparing to offer the internationally recognised government more substantive military assistance, and that Egypt and members of the Gulf Cooperation Council (GCC) were considering a joint military force that could intervene in the conflict, have fuelled speculation of widening participation. The impact of foreign support on the direction of the conflict is unclear and will be influenced by the level and nature of participation by interested parties. With direct ground involvement unlikely, further participation may prolong the violence, reinforce mistrust between warring parties and weaken prospects for a political resolution.

 

Attempts to resolve the conflict through political negotiations have failed and diplomatic efforts may even encourage fighting in the short term as both sides seek to gain leverage and position themselves ahead of any dialogue. In January 2015, the UN warned that the continued escalation of the fighting was undermining the prospects for a political resolution after peace talks were delayed for second time. Internal divisions also threaten any near-term efforts to stem the violence and present challenges for Libya’s long-term stability. Prime Minster Thinni and Khalifa Haftar, the general leading the campaign against Libya Dawn and its allies, have clashed previously over Haftar’s decision to act independent of the government. The growing prominence of more radical militants in Libya could fracture the coalition of moderate Islamists and tribes whose opposition to the Beida-based government is motivated in part by the presence of former Gaddafi regime loyalists.

 

Oil sector disruption to persist

 

Since the emergence of a rival Tripoli-based regime, Libya’s Central Bank has sought to remain neutral. The bank has paid civil servants employed by authorities in both Tripoli and Beida but refused to provide funds for other purposes. This has increased the strategic importance of physical control over oil and gas infrastructure, and prompted an offensive by Libya Dawn forces in December 2014 seeking to seize control of the Es Sider and Ras Lanuf oil export terminals. The failed offensive was an escalation of the fight for control of key infrastructure following the seizure of Libya’s largest oil field, El Sharara, by Islamist rebels in November 2014. The attack on Es Sider resulted in damage to key infrastructure at the 400,000 barrel per day terminal. Two crew members aboard a Greek oil tanker were killed when the vessel was attacked by government jets at the port of Derna in January 2015, underscoring the growing threat to wider personnel and operations in Libya not directly involved in the conflict. The attack will have further weakened investor confidence in Libya, where large numbers of foreign companies have already withdrawn staff.

 

Violence has already slashed the country’s oil production by around two-thirds to less than 300,000 barrels per day, reversing the recovery in output since April 2014. With only two export terminals and offshore fields unaffected by the current clashes, some forecasts have said oil and gas exports will only yield USD 11.6 bn in 2015, compared to a USD 15 bn budget deficit as of November 2014. The impact of falling oil prices, corruption and the collapse in the collection of customs revenues will exacerbate the financial damage caused by the suspension of oil exports. The Central Bank has already warned of a financial crisis and a devaluation of the Libyan dinar is increasingly likely in 2015. Any failure to meet the wages of armed groups in particular could threaten the loyalty of forces on government payrolls and further divide groups of fighters. It has been estimated that USD 38 bn worth of damage has already been done to the country’s infrastructure, undermining the investment climate and threatening Libya’s long-term economic potential. The negative outlook for the conflict and subsequent impact on oil exports in the next six months mean that the wider economy is likely to continue to struggle throughout 2015.

 

 

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