Libya is once again on the brink of civil war

Libya has had the full attention of oil markets all week, with the Haftar clan in the east blocking oil production to gain leverage in a battle for control of the Central Bank, which controls the country’s oil revenues. The initial shutdown caused a spike in oil prices, which was later tempered by a smaller-than-expected draw in U.S. crude stockpiles in the weekly inventory report. As of Thursday, Libya’s oil output was down 700,000 barrels per day from 1.2 million bpd output in 2024. Production was also either halted or reduced at the Sarir, Abu Attifel, Amal and Nafoora oil fields. Some forecasts see production losses as high as 1 million bpd, and no one will be able to forecast at this point how long it might take for one to take hold. (In 2020, Haftar blocked Libya’s oil for eight months).

Keep an eye on the ongoing Libyan Central Bank scandal, where it remains unclear who currently controls the bank. Al-Kabir, the governor who is in the middle of a rift with Dbeibah, who tried to replace him, has not been seen for several days, and some reports said Dbeibah’s men had retaken control and found the bank abandoned, but they didn’t have the password keys to the kingdom.

As Libya simmered on the back burner, while the world turned most of its attention to Israel and Iran, as well as intermittently to Russia-Ukraine, the country’s latest supply shock hit markets immediately, and the situation could still escalate. . The extent of the conflict will depend on how external actors decide to play this delicate game.

This is a war of two clans: the Haftars (in Benghazi) and the Dbeibahs (in Tripoli). Haftar’s son Saddam (recently promoted to LNA chief of staff) led the shutdown of Libya’s Sharara oil field (the country’s largest). Immediately thereafter, he began to deploy his forces westward. Civil war is coming, and that outcome depends largely on external forces, though no one can prevent it from happening now.

A wild kleptocracy was essentially the watered-down glue that held Libya together for the past year – everyone cut into the fuel-smuggling schemes. But this form of “stability” is short-lived, and a small break in the chain leads to the situation we see now. Haftar maintains the upper hand, having amassed a wealth of power-buying wealth over the past year.