With Libya having slipped further down the priority list of Western powers, its fragile “cold peace” nearly collapsed in August amid a dispute over the Central Bank of Libya, or CBL, which almost ground the country’s financial system to a halt. Though narrowly averted, the crisis reveals how Libya’s fragile political landscape remains vulnerable due to internal power struggles and a lack of cohesive governance structures, problems that only a unified international effort toward stabilizing the country can address.
The crisis erupted when interim Prime Minister Abdul Hamid Dbeibah, who heads the internationally recognized Tripoli-based Government of National Unity, or GNU, sought to oust the Central Bank governor, Sadiq al-Kabir. Dbeibah was frustrated that al-Kabir—who exercised significant power over the country’s finances, with around $80 billion worth of foreign reserves at his fingertips—had restricted Dbeibah’s access to funds that are vital to Dbeibah’s authority, including for the financing of militias loyal to the GNU. That led to GNU-aligned militias threatening al-Kabir with violence, forcing him to flee Libya for his life. It also risked unleashing economic shockwaves for ordinary Libyans, as the country’s banking system was almost frozen out of international financial networks.
Meanwhile, as the threat to his ally in the CBL began to materialize, Gen. Khalifa Haftar—who commands the eastern-based Libyan National Army, or LNA, and is aligned with a rival government in Tobruk known as the House of Representatives, or HoR—retaliated by shutting down key oil fields in eastern Libya on Aug. 26 to pressure the GNU to back down on al-Kabir’s removal. Prior to that, on Aug. 7, Khalifa’s son, Saddam Haftar, led LNA forces in a bold westward advance toward the Ghadames region near the Algerian border, reportedly to capture the strategically located airport there. While Haftar’s forces faced pressure from local independent militias, leading to a delicate standoff, the advance effectively violated the United Nations-brokered cease-fire that ended the country’s civil war in October 2020. The rising tensions came at an already volatile moment, following unprecedented clashes between rival militias in Tripoli in early August.