Libya’s War Economy: Predation, Profiteering and State Weakness

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Series Details April 2018
Publication Date April 2018
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+ Libya suffered from interlinked political, security and economic crises that were weakening state institutions, damaging its economy and facilitating the continued existence of non-state armed groups. As rival authorities continued to compete for power, the resulting fragmentation and dysfunction have provided a fertile environment for the development of a pervasive war economy dependent on violence.

+ This war economy was dynamic and constantly in flux. Relative to earlier problems, there were signs of progress on several fronts in 2017: a reduction in human smuggling, a tripling in oil revenues, and increased local action against fuel smuggling. Yet the dynamics that had supported the war economy’s rise remained.

+ Libya’s war economy was highly damaging for the future of the state for three reasons:

- First, it provided an enabling environment for networks of armed groups, criminal networks, corrupt businessmen and political elites to sustain their activities through illicit sales and predatory practices. Their operations were closely linked to the dispensation of violence, and were thus a spur for further conflict.

- Second, the war economy perpetuated negative incentives for those who profitted from the state’s dysfunction. Only effective governance, supported by a durable political settlement, could tackle the foundations of Libya’s war economy. But neither a return to functioning central governance nor the development of a security sector that was fit for purpose was in the interests of war economy profiteers, who were therefore motivated to act as powerful spoilers of reform.

- Third, the political contestation and resource predation practised by those engaged in the war economy were having a disastrous impact on Libya’s formal economy, undermining what remained of its institutions. As the war economy persisted, therefore, the prospects for the restoration of functioning central governance become more distant. This threatened to create a vicious cycle that accelerated further state collapse.

+ Due to the limited capacity for coercion available to any actor or entity connected with the state, a strategy of co-opting networks of war economy profiteers had almost exclusively prevailed. This had failed. Drawing on the lessons from these attempts, a more successful policy must pursue targeted measures to combat the enabling structures of Libya’s war economy where possible, and to co-opt war economy profiteers only where necessary.

+ In this, state authorities could do more to utilise what power they had to name and shame war economy profiteers in order to weaken the local legitimacy critical to profiteers’ survival. The state must present credible alternative livelihood opportunities to those engaged in, or benefiting from, the war economy. Progress would depend in part on the creation of positive incentives to abandon such activity. Where profiteers cannot be incentivised to move towards more legitimate economic activities, greater and more effective efforts must be made to reduce the profit margins of illicit schemes.

+ The international community could do more to support Libyan efforts in countering the war economy. Cooperation over the targeting of criminal groups’ overseas assets, support for increased transparency over the dispensation of state funds, and measures to reduce the viability of illicit activities could all help to strengthen the position of state authorities.UK think tank Chatham House published a Research Paper Libya’s War Economy: Predation, Profiteering and State Weakness in April 2018. The report suggested that as Libya's war economy persisted, prospects for the restoration of functioning central governance became more distant.

The paper forms an output of the Chatham House Programme Mapping Libya’s War Economy.

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Related Link(s)
ECFR: Commentary, 13.03.18: Libya's rebounding oil sector critical to stabilization
Mediterranean Politics Vol.22, No.4, December 2017, p545-552: Priorities for international co-operation with Libya: a development perspective
Chatham House: Publications: Libya’s War Economy: Predation, Profiteering and State Weakness
Chatham House: About Chatham House: Structure: MENA Programme: Mapping Libya’s War Economy

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