On August 26th, the Tripoli-based government in western Libya dismissed Central Bank Governor Sadiq al-Kabir, a decision that drew criticism from the eastern Libyan administration, which, although not widely recognized internationally, controls the majority of the country's oil fields. In response to the dismissal, the eastern authorities halted oil production, which accounts for 90% of Libya's national income. Following threats from armed groups, Sadiq al-Kabir relocated to Istanbul, accusing the prime minister of financial mismanagement and providing misleading information regarding the state of the economy in public addresses. The dispute over the central bank has paralyzed transactions for over a week with people unable to access their money or make transfers. This underscores how the country's fragmented political environment and competing governing institutions complicate taking actions in crisis times. The Tripoli-based Presidential Council has appointed a new board of directors to the central bank to counter the suspension of most banking operations in the country. Following the shutdown of oil fields, oil prices fell by nearly 5% to their lowest levels in almost nine months. Furthermore, Libya’s National Oil Corporation said recent oilfield closures have caused the country to lose approximately 63% of its total oil production.
The governance conflicts in Libya began in 2011 following the fall of authoritarian leader Muammar al-Qaddafi, toppled by a US-backed intervention. Since then, two main rival factions—the Tripoli-based Government of National Accord (GNA) in the west and the House of Representatives (HoR) in the east—have vied for control. In 2014, these tensions escalated into a civil war, resulting in ongoing challenges, including a fragile economy, security concerns, and a worsening humanitarian crisis. In 2019, HoR appointed commander Khalifa Haftar —who was supported by Russia, Egypt, and Saudi Arabia— made several attempts to invade Tripoli, which was repulsed by GNA’s army with the help of the Turkish military. Türkiye had previously signed a maritime demarcation deal with the GNA to begin oil and gas exploration in the eastern Mediterranean and the intervention was necessary to preserve the strategic cooperation between two governments. Following Haftar’s defeat, a cease-fire in October 2020 was signed with the diplomatic efforts of Russia and Türkiye, concluding the six-year civil war. However, political disputes still continue to this day as rival governments battle for control, including over oil resources.
Following weeks of political unrest, Libya's two legislative bodies reached an agreement on Tuesday to jointly appoint a new central bank governor. The negotiations, facilitated by the United Nations Support Mission in Libya (UNSMIL), also resulted in an extension of talks until September 9. Despite progress in appointing a central bank governor, the country’s oil fields remain closed. According to Libya's National Oil Corporation, the losses incurred due to suspension of oil and gas production exceeded 120 million dollars in three days. With the loss increasing day by day, the next steps of the two legislative bodies are a matter of curiosity.
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