Saddam Haftar, the son and adviser of commander of the Tobruk-based Libyan National Army (LNA), Khalifa Haftar, is reportedly seeking to take control of banking institutions in eastern Libya. Two administrations, one of which is based in eastern Libya, are vying to govern the entire country.

Control of banks in eastern Libya could allow the divisive commander, who announced his candidacy for cancelled presidential elections on 24 December 2021, to appoint supporters to key jobs in banks and provide them with access to letters of credit (L/Cs) to obtain foreign currency.

With these sources of funding, commentators say the commander would be able to consolidate his power base, pay to better equip the LNA and strengthen the position of the parliament based in eastern Libya.

Complex politics

The political landscape in Libya is complex. One of the two administrations vying for control of the country is based in in western Libya in Tripoli and is the seat of the Libyan National Unity government led by Abdel Hamid Dbeibé, who refused to step down after the 2021 elections were cancelled.

Libya's east-based parliament, which argues that Dbeibé's mandate ended on 24 December 2021 and is backed by the LNA, appointed a rival prime minister, Fathy Bashagha, who has since not been able to install a government in Tripoli.

Global Witness exposé

Abuses of L/C usage in Libya have been reported many times in recent years, culminating perhaps in damning evidence presented in 2021 by Global Witness in a report entitled Discredited that points to ongoing financial crime in Libya's L/C system, facilitated substantially by foreign banks.

The London-based non-profit that that works to break the links between natural resource exploitation, conflict, poverty, corruption and human rights abuses, created a searchable database of nearly US$2.5 billion worth of private sector L/Cs approved between April and July 2020.

Trade discrepancies

Comparing this to trade data from previous years, Libyan public money can be seen flowing out faster than the rate that goods specified in the L/Cs have come in.

The most plausible explanation of this, according to Global Witness, is "ongoing abuse of the system, on a large scale and at significant cost to Libyan public funds."

Further details on the research by Global Witness into Libya's L/C system and links to the searchable database of private sector L/Cs approved between April and July 2020 and the report, Discredited, can be found here.

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