Libya’s Wealth Outpaces Political Will

NTC Chief Mustafa Abdul Jalil

I’m still an optimist when it comes to Libya. The country is blessed with Africa’s largest oil reserves; a fantastic perch on the Mediterranean; nearby European markets; and a lengthy shoreline that could energize a post-war tourism industry. Perhaps most importantly, it has a small population of only 6.5 million, meaning that more wealth may be enjoyed by fewer people. The country also has access to unfrozen assets from the Qaddafi era which amount to well over $100 billion. And pre-war oil output levels should be reached this summer—less than a year after Qaddafi’s demise. Libya has every economic advantage.

Libya’s political problems, however, have hamstrung the country as it climbs out from the depths of civil war. In spite of rising oil revenues and released frozen assets, the interim government refuses to act boldly. Prime Minister Abdurrahim El Keib, with the blessing of the National Transition Council (NTC), has thus far failed to improve the country’s condition. He may be forced to fire cabinet ministers as soon as next week so that the NTC can blame them for failures. Keib’s status is also in question, although there’s no reason to believe that a new interim prime minister or cabinet would do a better job.

Limited fighting between militias persists and occasionally erupts in major cities. Services are unreliable or non-existent, as trash piles up in the streets, utilities falter, and schools stay closed. Impatience with the interim government has naturally forced some to push for controversial solutions ahead of June elections. In March, thousands in the east challenged the NTC by declaring their desire for a federalist system limiting Tripoli’s authority. A recent program dedicated to absorbing militias into the armed forces was canceled because of corruption charges. There’s no doubt the state is fundamentally dysfunctional.

The dynamic that now defines the country’s post-revolutionary recovery is counter-intuitive: Libya’s national purse is swollen but its leaders will not act. As Barak Barfi wrote back in March, “Unseasoned in the art of politics, the NTC frequently lacks the foresight needed to make critical decisions. During last year’s eight-month revolution, the NTC concentrated on overthrowing Qaddafi, gaining international recognition, and securing access to frozen Libyan assets. Those tasks left little room for attention to planning a post-Qaddafi Libya. Today, the NTC simply does not have the human resources to consolidate the transition.”

Last year’s estimates of Libya’s frozen assets hovered around $150 billion. Most UN sanctions have been lifted as of April; Libya’s banking sector is gradually being re-integrated into global financial networks, thus allowing for easier asset transfers; and, since late last year, several countries have released billions of dollars worth of Qaddafi’s assets to Tripoli’s temporary government. Most importantly, assets belonging to the Central Bank of Libya and the Libyan Arab Foreign Bank are now available. Banks can intervene in exchange markets and support the Libyan dinar as a result. In an April 16 interview, the IMF’s Libya mission chief Ralph Chami said, “There is no longer a shortage of foreign exchange, and normal imports have resumed.” Over $100 billion has now been unfrozen by Europe and United States.

Libya could still gain access to even more frozen assets. On March 28, Italian authorities seized $1.5 billion worth of assets associated with his regime and family, including shares of the Italian bank Unicredit, the Juventus soccer team, and the Italian energy company ENI. Malta released assets totaling $394 million on April 11. Because Qaddafi disguised his investments and held non-liquid assets like real estate, more assets will likely trickle in for years. It takes time for governments to identify and ultimately sell off investments so that money can be transferred to the new government in Tripoli.

Oil production—the oxygen of any Libyan government—is also returning fast. Libya’s first post-war oil and gas exhibition concluded yesterday in Tripoli. Although the interim government has made it clear that no new contracts or exploration deals will be granted until after Libya holds elections, companies with long-established ties, including Total, Wintershall, Statoil, and Repsol, attended the four-day Oil & Gas Libya 2012 exhibition, as did newcomers. All attendees hope that elections establish a government that enjoys public trust and is thus able to sign new contracts.

According to Libyan Oil Minister Abdulrahman Ben Yazza, production now stands at 1.5 million b/d—only 100,000 b/d short of pre-war levels. “We have reached 85 percent [of pre-conflict levels],” Ben Yazza told attendees at this week’s exhibition. “We hope to reach our target by the middle of this year,” in keeping with forecasts announced by officials in December. Security is still inadequate, the negotiating power of Libya’s national oil company remains an open question, and it’s unclear how soon exploration rights will be available. But, given how far the industry has come in such a short time, even these obstacles seem surmountable.

Optimism has its limits, however, and many Libyans are clearly frustrated with the disconnect between their country’s resources and today’s post-war living conditions. On Monday, protesters shut down the offices of the state-owned Arabian Gulf Oil Company (AGOCO)–a symbol of the country’s wealth. They demanded that the interim government spur job growth and account for money already spent. It should be abundantly clear now that the key to unlocking Libya’s wealth is a popular mandate. The June elections for a national assembly must be free and fair. They must produce a government that can create a sound constitutional basis for power sharing and responsibility. The NTC assumed power during the civil war and with it the pretense of mass appeal—but only the pretense. Events since the appointment of the interim government in November prove the NTC does not speak for all Libyans.

Although it sits on massive oil revenues and unfrozen assets, the NTC has yet to issue bold reconstruction plans beyond a modest 2012 budget. This is understandable even if it is inadequate. Libya’s reconstruction will take many years. But the NTC—the National Transitional Council—holds only temporary authority. Libya’s potential can only be realized if the government can plan policy year-to-year rather than day-to-day. Sadly, patience is the one resource that may be exhausted in Libya; the population has already waited decades to pursue normality and prosperity on their own terms, without the crushing weight of Qaddafi’s legacy.

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2 responses to “Libya’s Wealth Outpaces Political Will

  1. Pingback: A Balanced View of Libya | The Foreigner – الأجنبي

  2. Pingback: Libyan Oil Held Hostage By Politics | The Foreigner – الأجنبي

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