Libya’s leaders running huge fuel-smuggling racket, hobbling embattled country’s development: report

Libya’s political leaders – and their foreign allies – are running a huge fuel-smuggling racket which costs the embattled north Africa country about $6.7-billion a year in lost revenue, according to a new report. 

This revenue would be enough to more than triple Libya’s funding of education and health.

Leaders from both the rival western and eastern governments of the divided oil-rich nation are abusing the country’s generous fuel subsidy to enrich themselves at the expense of ordinary people. 

The report, Inside Job: Libya’s Fuel Smuggling Escalation, is written and published by The Sentry, a US organisation that investigates violence and corruption.

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It suggests that the fuel smuggling is giving both governments little incentive to resolve their standoff and build a prosperous, unified state.

The smuggling “reveals a shattered system of governance wherein public institutions are increasingly subordinated to a small handful of illegitimate rulers reliant on coercion”, it says. 

The report fingers Saddam Haftar, son of Khalifa Haftar the military strongman who effectively rules the eastern government based in Benghazi, as the kingpin of the fuel-smuggling industry. But it says Abdelhamid Dabaiba, the prime minister of the internationally recognised rival government in Tripoli, is also complicit. 

The smuggling of fuel has exploded Libya’s refined fuel imports, precipitating a hard currency deficit in 2023 and 2024, and forcing the country to barter for fuel imports with its own crude oil. The dollar deficits have jeopardised the government’s ability to finance public services and civil service salaries.

Read more: El Fasher descends into chaos with UN reporting mass killings and unprecedented human rights violations 

The repercussions flow beyond Libya, as the fuel smuggled by Haftar helps to finance Sudan’s brutal Rapid Support Forces (RSF), which recently massacred hundreds of civilians in the Darfur town of El Fasher. Haftar’s fuel also helps to finance Russia’s militias operating inside Libya and supporting him. 

Buy low, sell high

Haftar and others are buying refined fuel, mainly petrol and diesel, at the hugely subsidised price of just three US cents a litre (about one-fortieth of the fuel price in South Africa) for all buyers and reselling it, either in Libya or across the borders, at much higher prices.

Brega Petroleum Marketing Company, the distribution arm of the National Oil Corporation (NOC), supplies subsidised fuel on demand to authorised entities such as the General Electricity Company of Libya (Gecol), the police and armed forces, as well as to four special distribution companies which deliver it to petrol stations. 

“This system is widely abused, as many recipients inflate their requisitions, with Gecol being among the worst offenders,” the report says. 

The report notes that hundreds of petrol stations exist only on paper, and are used by smugglers to justify allocations of subsidised fuel from Brega Petroleum which is then diverted into the black market. 

Until 2021 the Central Bank of Libya (CBL) paid for imported fuel with dollars. But then imports surged and the bank couldn’t afford to pay for them all in dollars. So the NOC began paying for most fuel imports with Libya’s crude oil. 

The Sentry says this barter arrangement keeps most of the oil transactions off the books, which facilitated a surge in fuel imports, from about 20.4 million litres per day in early 2021 to more than 41 million litres by late 2024 – more than double. This also prompted a “drastic” expansion of fuel smuggling. 

Libya’s average daily fuel imports in 2024 were about 37.2 million litres, while another 13.8 million litres a day were produced in Libya – totalling about 51 million litres. 

Yet the report says the combined daily fuel consumption in 2024 was only about 23.9 million litres. This left about 27 million litres unaccounted for, which was “likely diverted” into smuggling, the report says. 

The Sentry calculated that about $6.7-billion worth of fuel was smuggled out of Libya in 2024, enough for the country to have more than tripled its spending on both healthcare and education. 

And bartering most of its crude oil sales for refined fuel, deprived the country of the hard currency it needed to import food and medicine. Despite steady oil production and favourable market conditions, Libya ran a deficit in 2023 and 2024. 

“The fiscal imbalance stems in large part from Libya’s swapping of crude output for fuel imports, with more than half of the imported fuel siphoned off by criminal networks.”

The surge in smuggling has contributed to the Libyan dinar’s depreciation on the black market and added to consumer price inflation, hurting households across the country.

“Plus, as corrupt officials increasingly dominate the fuel subsidy programme, legitimate consumers face fuel shortages, risks of electricity outages, and higher prices at the pump.”

Strongmen in control

Although fuel smuggling has been rife in Libya for years, the report says it really took off in 2022. 

After Libya’s civil war ended in June 2020, the Haftar coalition solidified its hold on the eastern and southern regions.

That coalition is led by Haftar, the military strongman whose Libyan Arab Armed Forces is the army of the eastern government. His son Saddam is in charge of the coalition’s fuel smuggling, the report says. 

The Haftars’ military control over eastern and southern Libya enables them both to transport their own illicit cargo and to tax the fuel smuggled by others.

The Haftars, being part of the government, have had extensive authority over northeastern Libya, on land and at sea, through control of ports, roads, storage facilities, customs, border police and key parts of the NOC and Brega Petroleum.

This allows Saddam Haftar a virtual monopoly of eastern Libya’s maritime smuggling, including diverting huge shipments of subsidised fuel, often several million litres at a time. 

The report says “the active involvement and complicity of senior officials within Brega Petroleum, as well as the NOC’s top leadership, is crucial for the large-scale diversion of fuel. It ensures that the NOC remains publicly silent while its multimillion-dollar fuel cargos disappear at sea”.

The Haftars also control most of the landward smuggling. They restrict the supply of subsidised fuel to petrol stations, so they can sell their own fuel at much higher prices, up to $1.20 to $2.40 a litre.

They shift fuel from the northeast to the south of Libya and across the border into neighbouring Niger, Chad and Sudan. 

Since 2021 Saddam Haftar has been extending his control of fuel smuggling also into southwestern Libya, either subduing or co-opting local groups. 

Prime Minister Dabaiba is much less involved in fuel smuggling than his political rival Haftar. Nevertheless the report says that some of the smugglers in northwestern Libya “are directly linked” to Dabaiba, “who has taken no genuine action to curtail their activities”.

And in the port city of Misrata, Libya’s third-largest city, 187km east of Tripoli, the report describes the Tripoli government’s “active complicity” with the Joint Force armed faction which controls Misrata and is involved in several illicit activities including fuel smuggling. 

Russia, UAE support

The nefarious impact of fuel smuggling spills across Libya’s borders.

“To maintain dominance over eastern and southern Libya, the Haftar family relies on Russia’s military support and the UAE’s political backing,” the report says.

“Although other countries also assist, these two stand out. In return for their crucial assistance, the Haftars grant them numerous concrete advantages, including the systematic diversion of subsidised fuel to Russian personnel in Libya and to the Emirati-backed RSF in Sudan.

“Since 2020, Russia has maintained a significant military presence at four air bases in Libya: al-Khadim, east of Benghazi; al-Jufrah in central Libya; al-Qardabiyah, near Sirte; and Brak al-Shatti in the southwestern province.”

The Russians operate radar installations and air defence systems which protect Haftar’s forces from any possible advance by the forces of the Tripoli government which is still heavily reinforced by Turkish forces. 

The Sentry says the Russians sell some of the smuggled fuel that Haftar gives them to local traffickers for a profit, which likely helps to cover their living costs. And the report adds that regular cargo flights transport fuel to Mali, where the Russian military is helping to prop up the military junta. 

Read more: In Libya, everything comes down to military muscle

Libyan fuel was also being trucked to the Russian mercenary outfit Wagner in Darfur until it withdrew from there in 2023.

And, since the start of Sudan’s civil war in April 2023, the Haftars have been key suppliers of fuel to the “genocidal” RSF of General Mohamed Hamdan Dagalo, known as “Hemedti”, which has been fighting the Sudan Armed Forces of General Abdel Fattah al-Burhan. The Sentry suggests Haftar did this at the behest of the United Arab Emirates (UAE) which heavily backs both the RSF and Haftar.

Shattered governance

The Sentry concludes: “Libya’s untouchable thieves… must not escape justice.”

It says “fuel smuggling has become a multibillion-dollar enterprise pursued by the country’s incumbent rulers – with international backing – that can further derail the nation’s legitimate economy.”

The report’s authors estimate that about $20-billion was “diverted” by fuel smuggling between 2022 and 2024. 

Much of the wealth was moved abroad, while some was used “to import weapons and cement the grip of unelected incumbents through repression and armed force, ultimately blocking any path to free and credible elections”.

“Ultimately, the crisis transcends the fuel trade. It reveals a shattered system of governance wherein public institutions are increasingly subordinated to a small handful of illegitimate rulers reliant on coercion.

“The reach of Libya’s rulers now goes well beyond the realm of security. They have learned to penetrate the heart of the legitimate economy by installing loyalists in key administrative positions. And because Libya’s current calm hinges on these very same factions coexisting without open warfare, any sudden shakeup may precipitate a broad conflagration.”

The report says the appointment this year of a new NOC chairperson who ended the crude-for-fuel swaps signalled a push towards greater transparency. But it believes that powerful smugglers will push back. 

The Sentry called for an investigation into the barter system, saying data suggested the NOC had paid far above prevailing market rates in its fuel-for-crude swaps, with overpayments potentially reaching nearly $1-billion annually. 

“Fundamental questions must be answered: Where did the stolen billions go, and how can Libya deliver justice to those who stole from its population?”

The Sentry recommends that both Libyan governments should collaborate to pass a budget that itemises all fuel consumption for the fiscal year.

The government should also produce an accurate and transparent account of Gecol’s true consumption of fuel, to stop it diverting fuel to smugglers.

The government should gradually phase out the fuel subsidy and replace it with a cash stipend that is disbursed directly to households, thereby removing financial incentives to engage in fuel smuggling. 

And the government should forbid fuel exports until large-scale smuggling is eradicated. As the report notes, fuel exports from a net fuel importing country “should raise red flags”.

And the government should dismiss NOC officials who have been significantly implicated in fuel-related abuses, the report says.

It also recommends that the US, the EU, the UK and other like-minded jurisdictions should investigate and, if appropriate, impose targeted sanctions on the principal perpetrators and facilitators of fuel smuggling.

International banks should “exercise heightened caution” when dealing with the NOC.

And the report recommends that international maritime forces deployed in the Mediterranean Sea should enforce UN Security Council Resolution 2146 and 2701 by interdicting vessels illicitly exporting refined petroleum products from Libya. DM