Libyan rival government halts oil output over bank dispute

Libya’s eastern government announced it will halt crude oil production and exports, escalating a conflict with its Tripoli-based rival over control of the central bank and the country’s oil wealth, which threatens to reignite violence.

Brent crude oil prices surged as much as 3.2% to above $81 per barrel following the eastern authorities' statement on Facebook on August 26, declaring a “force majeure” on all oil fields, terminals, and facilities, Caliber.Az reports via foreign media.

Waha Oil Co., which supplies Libya’s largest export terminal, Es Sider, stated it will begin to gradually reduce shipments. Sirte Oil Co. also announced it would decrease output.

Despite a 2020 United Nations-backed cease-fire aimed at ending fighting, Libya remains divided between eastern and western factions. These divisions often lead to conflicts and blockades that disrupt the country’s crucial oil production. Libya has Africa’s largest known crude reserves, but its output has been frequently disrupted due to political turmoil since the overthrow of dictator Moammar Al Qaddafi in 2011.

Libya's ongoing unrest, marked by competing governments and frequent clashes, has hindered efforts to stabilize the economy. Armed factions loyal to different political groups often target key oil fields to control crude revenue, exacerbating the nation's instability.

The current dispute centres on control of the central bank, which manages billions of dollars in energy revenues. The Tripoli-based government seeks to replace Governor Sadiq Al-Kabir, who has refused to step down, arguing that the Presidential Council lacks the authority to remove him. On Monday, a Tripoli government delegation entered the central bank's offices to assert control, according to local media reports.

Al-Kabir, backed by the eastern legislature, has resisted removal, asserting that the attempt to oust him is unlawful. Critics accuse Al-Kabir of mismanaging oil revenues during his tenure since 2011.

Relations between Al-Kabir and Tripoli-based Prime Minister Abdul Hamid Dbeibah have deteriorated over the past year, with the central banker accusing Dbeibah of corruption and excessive spending — claims that Dbeibah has strongly denied.

The dispute over the central bank leadership has intensified amid worsening political and security conditions. In a briefing to the UN Security Council on August 20, Stephanie Koury, the UN's top official in Libya, warned that the situation has "deteriorated quite rapidly" in recent months, with armed groups mobilizing and tensions escalating.

Earlier this month, the eastern legislature declared the Tripoli government "illegitimate" and stripped the Presidential Council, established under a 2021 UN transition agreement, of its role as the supreme commander of Libya’s army, arguing that the transitional phase had ended. This move marks a significant challenge to international efforts to reunify the country, with national elections still pending.

The ongoing struggle for control of the central bank follows a series of oil-sector dismissals by Dbeibah, raising concerns that he seeks to exert full authority over Libya's most valuable industry.