A report by the Financial Times has revealed details of the illicit oil trade that keeps Libya divided. The British newspaper confirmed that the smuggling of subsidized fuel out of Libya and its sale abroad perpetuates the country’s division, supports competing factions, and obstructs UN efforts to hold elections, curb corruption, and unify the country under a single government in OPEC’s fourth-largest member by oil reserves.
According to UN experts, smuggling is facilitated by suspicious ships through a controversial barter system. Under this system, Libya—which lacks large-scale fuel refining capacity—exchanges its crude oil for refined fuel instead of purchasing it outright. Locally, this fuel is sold at heavily subsidized prices.
However, part of this cheaply imported fuel is smuggled abroad “to be sold on the black market or at market prices using forged documents,” according to the report. This system generates a “steady stream of revenue” for armed groups tied to rival factions overseeing the country. One faction is the UN-recognized government of Prime Minister Abdul Hamid Dbeibah in Tripoli, while the other is a rival administration in the east, controlled by Field Marshal Khalifa Haftar and his Libyan National Army militia. These illicit funds have hindered UN efforts to hold elections, reduce corruption, and unify the country under one government since the overthrow of dictator Muammar Gaddafi in 2011.
Libya’s Attorney General, Al-Siddiq Al-Sour, recently ordered a halt to the smuggling operation following an investigation by the Audit Bureau, the country’s regulatory authority. However, this suspension may not signal the end of the misuse of Libya’s oil wealth.
The UN report highlights the emergence of a new company, Arcino, which exports crude oil—making it the first private Libyan company to do so. The National Oil Corporation (NOC), Libya’s state-owned oil company, is officially the sole entity authorized to export oil. The UN Security Council report states that Arcino, which exported crude worth $483 million, is under the “indirect control” of Saddam Haftar, son of Khalifa Haftar. The UN resolutions stipulate that only the NOC can export oil, with revenues required to be deposited in the Central Bank of Libya.
The latest UN report concludes that fuel smuggling from the old port of Benghazi has given Haftar’s forces “indirect access to public funds,” while armed groups in Tripoli and Zawiya have “directly controlled key economic sectors and government institutions” to smuggle large amounts of diesel. According to the Financial Times, the barter scheme began in 2021 when the government selected it from three options presented by the NOC to mitigate the country’s foreign currency shortage, as stated by Mustafa Sanalla, then-chairman of the NOC.
The UN report states that around 70% of Libya’s diesel is imported, all through the barter system. Data from Kpler shows that in 2023 and 2024, a significant portion of Libya’s imports came from Russia, whose oil products have been excluded from European markets due to the war in Ukraine. Once imported, the NOC purchases these fuel types, paying for them entirely with crude oil. The fuel is then resold at heavily subsidized prices to local distributors and industrial consumers. This subsidy system allows Libyans to pay minimal amounts for gasoline, diesel, and electricity but also creates a strong incentive to divert petroleum products to the black market domestically or abroad, where they can be sold at full market value.
A World Bank report published in October 2024 estimated that Libya loses over $5 billion annually due to the illicit trade. The report stated that “fuel smuggling from the port of Benghazi is believed to have increased significantly since the war in Ukraine.”
The rising fuel imports have increased the cost of subsidies in Libya’s struggling economy. In a letter to Prime Minister Dbeibah in March 2024, then-Governor of the Central Bank of Libya, Sadiq Al-Kabir, stated that the annual fuel import cost of $8.5 billion “exceeds the country’s needs” and noted that subsidies had tripled to $12.5 billion between 2021 and 2023. Fuel subsidies accounted for $8.4 billion of this total annual expenditure.
