Disparity in the distribution of letters of credit (L/Cs) to the eastern and western regions of Libya is being used by the country's strong man in the east, field marshal Khalifa Haftar, in support of his threat of military action if a higher financial committee is unable to arrange a fairer distribution of the country's substantial oil revenues.

In a televised speech, Haftar said the Libyan people are calling for the establishment of the committee to establish financial arrangements that result in the "fair management of public funds". If the committee is unable to complete this task by the end of August, "armed forces will be ready for orders when the time comes," he added.

L/C disparities

Haftar claims that central bank data indicates that value of L/Cs in 2022 was US$10 billion.

Proceeds of the L/Cs were "distributed to 1,646 private companies last year, of which the share of the eastern region was 7 per cent, and the southern region received only 2 per cent of the total of these credits," he says.

Divided country

Libya has long been divided between two governments - one in the west based in Tripoli, the other in the east. Reunification is not a prospect before presidential elections are held, which are not anticipated until at least next year.

Haftar's broadcast follows complaints from the head of the parallel government in eastern Libya, Osama Hammad, who has threatened to prevent oil exports.

Production and revenues

Oil revenues, Libya's main source of income by far, are managed by the National Oil Corporation and the Central Bank of Libya, both of which are based in the capital, Tripoli, where the UN-recognised government is located.

Eastern politicians argue that while Libya's oil is produced mainly in the east, the bulk of oil revenues go to the government in Tripoli.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.