Debate Over Lifting Fuel Subsidies in Libya and its Effect on Smuggling

Lifting fuel subsidies…will it limit its smuggling out of Libya?

Controversy has been renewed in Libya regarding the possibility of lifting fuel subsidies, after Abdul Hamid Al-Dabaiba, head of the interim “National Unity” government, hinted at the need to move forward towards activating this decision, to combat fuel smuggling internally and externally.

Libyans were divided regarding the decision between supporters and opponents, amid questions about the possibility of this in reducing the “extensive smuggling” operations of state-subsidized crude.

Analysts believe that the political bill for this decision, once implemented, “will make it difficult for any party in the country to bear its consequences, with talk of expected legislative and parliamentary elections.”

Al-Dabaiba during his government meeting in the city of Gharyan (northwestern Libya) last week (Our Government Platform)

A ministerial committee previously formed by Dabaiba last March did not reach results regarding developing an integrated proposal to lift fuel subsidies, but the Prime Minister of Aad considered this decision “inevitably coming, whether in his government or after it,” proposing to give the citizen the value of the subsidy in cash. Or a coupon for the amount of fuel he needs, during a government meeting last week.

Hafez Al-Ghawil, a Libyan researcher at the Institute of International Studies at Johns Hopkins University, monitors the ongoing controversy over fuel subsidies in Libya, saying that it “distorts the value of any commodity and opens the door to manipulation and theft.”

In a statement to Asharq Al-Awsat, Al-Ghawil wondered whether the political and economic environment in Libya was prepared to replace in-kind support with cash, and said: “The matter requires integrated measures and a plan, otherwise Libya will face new political and economic problems.”

The price of gasoline in Libya is among the lowest in the Arab world, as the price of a liter does not exceed 0.15 Libyan dinars (the dollar corresponds to 5.71 dinars), which the Dabaiba government considers to be an appetite for the “mafia” of fuel smuggling, despite the efforts of the Public Prosecution to track down the smuggling operations, whether they are taking place. Controlling it internally, or transporting it across the borders and coasts outside the country. However, a member of the Libyan House of Representatives, Balkhair Al-Shaab, criticized the “unity” government’s hints to prevent fuel smuggling, and considered that the military and security authorities in the west of the country were not able to prevent smuggling, and today it is being stopped at the expense of the citizen,” according to a statement on the social networking site “X.”

Happy Friday, my God. The government told you that fuel subsidies must be lifted in order to stop smuggling. This means with all your brigades, your army, the Ministry of Defence, the Ministry of Interior, and support for stability, internal and external. It was not able to stop smuggling by stopping it at the expense of the citizen, and raising subsidies on it. You have plans and studies conducted by our government. pic.twitter.com/NXSWz6M1U9

—ASBelkher. With goodness, the reefs (@AbolkherB) November 10, 2023

As for the oil expert, Abdul Rahim Al-Naas, he strongly opposed any cancellation of subsidies. He said: “Libya is an international oil sector, and unfortunately the citizen has not benefited from anything from it compared to its counterparts.” He promised that “the problem of fuel smuggling is an easy solution, but removing fuel subsidies has other goals, especially.” .

Professor of International Relations and Head of the Department of Political Science at Derna University, Yousef Al-Farsi, says, “Reviewing fuel subsidies and reconsidering the price of fuel are two necessary options, but they require wisdom in their application.”

Al-Farsi explained in a statement to Asharq Al-Awsat that “the great waste of Libyans’ money through fuel smuggling is on the rise, and its increase has major repercussions, including the growing influence of smuggling groups,” but he considered that “the fragility of the state and the attractive price differences will make controlling it impossible.”

The annual fuel subsidy bill in Libya amounts to $12 billion, while Libya loses approximately $750 million annually as a result of fuel smuggling activities, according to an investigative investigation conducted by “The Sentry,” an organization concerned with investigative reporting.

The Libyan researcher and academic, Muhammad Mahfouz, rules out the Libyan state’s tendency to cancel support at the present time, in light of the presence of temporary transitional executive authorities. He said in a statement to Asharq Al-Awsat: “It is difficult for any government to adopt a difficult, complex, and implementable option in all parts of Libya.” Such as reducing support, not increasing it.”

Analysts fear the outbreak of popular unrest if a decision is issued to lift or replace support, in light of the fragile security conditions that the country has been experiencing since 2011.

Al-Farsi points out “concerns of a political and security nature, including popular reactions in a period when the government needs calm and popular support, as well as pressures exerted by stakeholders, as there are influential people in the state whose interests are linked and whose wealth has increased from fuel smuggling.”

Mahfouz also warns of “dangerous popular repercussions if this decision fails to be implemented,” and explains: “There are fears that support will be replaced with cash, that it will not reach the citizen, and that prices will increase without oversight.” He added: “There is no Libyan political party that has the ability and ability to exhaust its popular support and bear responsibility for this decision in light of talk about upcoming elections.” He continued: “This decision requires a unified and elected government.”

Al-Dabaiba, together with Farhat Bin Gudara, Chairman of the Board of Directors of the National Oil Corporation (the “unity” government)

The National Human Rights Committee promised that threatening the decision to lift subsidies amounts to “blaming the inability and failure of the authorities to secure and protect borders and land and sea ports to limit the smuggling of fuel and its derivatives, by lifting subsidies on fuel.” It concluded that “only the poor and middle-income classes will suffer from the consequences of the decision, which will lead to an increase in the burden on citizens in exchange for freeing the government from its obligations.”

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2023-11-14 17:21:22