Libya to investigate claims oil smuggling is fuelling Sudan civil war

Libyan authorities have announced plans to investigate allegations of widespread mismanagement within the National Oil Corporation (NOC), amid concerns that rampant smuggling is exacerbating the civil unrest in Sudan.

Mohamed al-Menfi, the chair of the presidential council, is set to initiate an inquiry this week, which is expected to delve into various issues including fuel smuggling and its beneficiaries.

The accusations, ranging from financial recklessness to corruption, extend beyond Libya’s borders. Officials claim that extensive smuggling operations are providing fuel to Sudan’s paramilitary Rapid Support Forces, a matter underscored in a recent report submitted to the UN Security Council. There are indications that profits from this illicit trade may also indirectly benefit the Russia-backed Wagner Group, now operating under the guise of the Africa Corps.

Despite Libya’s significant oil wealth, the country relies heavily on fuel imports due to inadequate domestic refining capacity. Instead of directly subsidizing fuel for its citizens, the Tripoli government sells imported fuel at heavily discounted prices, with gasoline often priced at a staggering 90% below market rates.

Fuel oils, including heating oil, diesel, and heavy fuel, are typically sold at a 70% discount compared to the government’s procurement costs. However, it is estimated that up to 40% of imported fuel is subsequently re-exported and smuggled out of the country, generating substantial profits for smugglers.

Since the overthrow of Muammar Gaddafi in 2011, Libya has been divided between two rival administrations in the east and west, thwarting attempts to establish a unified government through UN-led initiatives.

The latest escalation in tensions arose when the governor of Libya’s central bank, Sadiq al-Kabir, raised concerns about unsustainable public spending. His remarks triggered a public exchange with Prime Minister Abdel Hamid Dabaiba, revealing deep-seated issues of corruption and financial mismanagement.

Kabir highlighted a significant increase in fuel subsidies and questioned the rationale behind subsidizing fuel at a considerable loss to the state, allowing smuggling networks to profit.

Dabaiba countered by asserting the strength of Libya’s public finances and rejecting proposals for measures to address the country’s mounting deficit. However, Kabir contested these claims, emphasizing the dire fiscal situation faced by the country.

Fuel smuggling, primarily facilitated by third parties in Turkey, has become a lucrative enterprise, with Russia reportedly playing a significant role in supplying fuel to Libya. This illicit trade not only undermines Libya’s economy but also perpetuates conflict in Sudan, where fuel shortages severely hamper military operations. Closing off this smuggling route could potentially bring an end to the conflict, according to Libyan officials.