In September 2023, an estimated 20,000 people died in the city of Derna in northeastern Libya when two dams spanning an inland valley burst, causing flooding and sweeping thousands into the sea.

Rescue teams among the rubble in the port city of Derna on 18 September 2023, days after Storm Daniel swept across eastern Libya. (Photo: EPA-EFE / STR)

A new report by the Washington-based investigative and policy organisation The Sentry attributes this failure to neglect of the economy and indifference to crumbling infrastructure by Libya’s rulers, who are instead engaged in a “surge in corruption, looting and organised crime”.

Headlined “Libya’s Kleptocratic Boom”, the report describes in detail how a “small yet fractious” elite is holding back a country which has vast natural resources and a relatively small population of seven million.

The report traces the roots of kleptocracy to the governance of Colonel Muammar Gaddafi’s regime. It says, “The regime’s pervasive security apparatus closely managed the distribution of assets and punished those who stepped out of line”, but graft and corruption were rampant.

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The Sentry criticises the US and Western governments that mistake the absence of large-scale fighting since June 2020 for stability, thereby turning a blind eye to the informal arrangements that members of the elite have worked out among themselves.

But, says the report, “Bargains between existing power brokers with no popular mandate are so flimsy, opaque and devoid of political legitimacy that they can yield neither a genuine reconciliation nor a sufficient improvement in outcomes for the population.”

It refers to an interview given by Richard Norland, the US special envoy for Libya, in which he indicated that Washington was constrained in its capacity to break the country’s political deadlock by fears of a relapse into violence.

‘Corrupt bargain’

“Kleptocracy cannot be the basis upon which a functioning state is built: a corrupt bargain among Libya’s incumbent leaders does not constitute sustainable peacebuilding, especially when no progress is being made in security sector reform or militia disarmament.”

Since the collapse of elections in December 2021, Libya has been run from two centres: the Government of National Unity (GNU) in Tripoli and a rival government elected by the House of Representatives in Tobruk.

The Libyan Arab Armed Forces under Khalifa Haftar does not recognise the GNU, while armed groups have “leveraged their control of territory”, using a protection economy model to “bolster their involvement in embezzlement, procurement fraud, and smuggling and trafficking in goods including weapons, narcotics and humans”.

The report examines the role of the Central Bank of Libya, which oversees a banking system that is split politically and institutionally between the west and the east, which has a parallel ledger system and a secondary banknote circuit.

“The continued split of the banking system aids an array of illicit practices and black-market businesses whose beneficiaries use their clout and influence to resist a return to normalcy,” the report adds.

The report says that kleptocratic activities in both parts of Libya have accelerated markedly over the past two years.

The report details “sweetheart deals” involving the family of Prime Minister Abdelhamid al-Dbeibah who, despite being civil servants, became oligarchs and acquired assets around the world. Many Libyans regard these resources as pivotal in securing Dbeibah’s rise to the prime ministership.

The Sentry probes several corrupt schemes used by the elite to enrich themselves: abuse of the fuel subsidy programme; billions of dollars of unreported crude oil exports; and illicit scrap metal exports made from stripping public infrastructure.

Other illicit schemes include black market gold trading; the smuggling of migrants crossing the Mediterranean; and the sale of narcotics, including Captagon, a synthetic amphetamine from Syria.

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The report calls on governments to push four key objectives for systemic change in Libya:

1. Expose the practices of the kleptocrats and apply pressure on them;
2. Reform the system of governance;
3. Ensure that public funds lead to public good, not private enrichment; and
4. Tackle the culture of impunity for those who violate human rights.

The report calls for a revised approach towards Libya that embraces a framework for “inclusive state building” and ends the appeasement of corrupt leaders. DM