Turkey, Egypt shake hands across Libyan divide, but will it last?

Muhammad Amin

The Libyan squabble between east and west over control of the central bank and foreign oil revenues had hardly been settled this week with UN mediation before Turkey and Egypt were signing business deals.

It would have been unthinkable just a few short months ago, but within hours of the settlement being announced, Turkish company Selahattoroglu was sealing construction contracts with warlord Khalifa Haftar’s son, Belkacem, for the development of Benghazi.

It seems rapprochement between the foreign powers seeking a piece of Libya’s significant oil reserves, reportedly the biggest in Africa, has resulted in an overarching reconciliation between Libya’s warring east and west sides of the country. The central bank has over $80billion in foreign reserves.

Competing factions

Turkey has been the main backer of the UN-recognised Government of National Unity in Tripoli, which also depends on several localised militia to keep control in the west, while Russia, Egypt and the UAE have been Haftar’s supporters in the oil-rich east.

It remains to be seen, however, if the GNU and Libya’s competing clans and militia in the West are going to be content with the outcome of the central bank negotiations.

The central bank crisis was sparked when its former governor, Al-Siddiq Al-Kabir, fled to Turkey, apparently fearing for his life, after resisting pressure from GNU head Abdul Hamid Dbeibah who was demanding a greater share of oil revenues to feed competing demands from heads of clans and militia heads.

The deal clearly has resonated warmly with the foreign powers active in the country, but whether or not Bdeibah and his fractious supporters will accept it in the long run its still a big unknown.

Al-Kabir had publicly criticized Dbeibah for ramping up government expenditure on consumption at the expense of development, straining ties.

Business deals in full swing

The subsequent closure of oil fields prompted the United Nations to intervene, ultimately brokering a settlement that allowed all parties to have a say in the appointment of the new Central Bank leadership, Fanack, an oil sector research site, reports Friday

Those oil fields are now back in full swing and the foreigners are not wasting time snuggling down to do business instead of war.

Turkey and Egypt have been forced into a business brotherhood as a response to their mutually ailing economies.

The two “fell out in the aftermath of the 2011 Arab spring, primarily because of the Egyptian president, Abdel Fatah al-Sisi’s coup against his Islamist predecessor Mohamed Morsi, an ally of the Turkish president, Recep Tayyip Erdoğan.

“Nearly three years of rapprochement culminated last week with Sisi travelling to Ankara to meet Erdoğan. There the two signed more than 30 memorandums of understanding designed to increase trade to $15bn (£11.5bn) over five years. The two countries have been brought together by the need to boost their economies, as well as concern about the war in Gaza,” the Guardian reports.

Analysts have noted the “growing financial partnership between Turkish and Libyan businesses in the country’s east, for instance the construction of the largest steel and iron production plant in the world in Benghazi”.

New governor has mountain to climb

Some says the budding developments indicate Turkey’s continuing support for Tripoli is not absolutely predestined, but western Libya has given Turkish troops near-total immunity in a memorandum of understanding, so that may keep Ankara on Tripoli’s good side.

The recent settlement resulted in the appointment of Naji Muhammad Issa Belqasim as governor of the Central Bank, a technocrat with much experience in juggling Libya’s shifting political interests.

Fanack says Belqasim has his work cut out for him, not least because his predecessor did not hand over governorship, so just getting its internal priorities straightened out may take time.

Then, there’s more than 2.5million public sector employees still awaiting September’s salaries and the Libyan dinar has plummeted from four to the dollar to over eight, pushing up prices of imported goods.

Fanack notes: “A key factor shaping the challenges facing Libya’s Central Bank is the influence of external interventions. Algeria has maintained firm support for the western-based government, providing intelligence coordination and military training. This stance is largely driven by Algeria’s strategic interest in keeping General Khalifa Haftar’s forces, which back the eastern government led by Osama Hamad, away from its eastern borders.

Navigating stormy seas

“On the other hand, Egypt has taken a more pragmatic approach, supporting the Hamad government in exchange for lucrative reconstruction contracts in areas damaged by Hurricane Daniel. Meanwhile, Russia continues to foster a close relationship with Haftar’s forces, seeking investment contracts in eastern Libya’s oil fields. In response, the United States has focused its involvement on curbing Russian influence in Libya, even if that means exerting pressure on the Central Bank, which remains tied to transactions in U.S. dollars.

“These external interventions contribute to the protracted nature of Libya’s political crisis, which in turn impacts the operations of the Central Bank. The bank will need to navigate this geopolitical complexity, aligning its strategies with the country’s ongoing political division to mitigate the impact on Libya’s monetary and financial stability.

“American pressures, particularly in contrast to Russia’s growing ties with Haftar, present a long-term challenge for the Central Bank. Until Libya’s political institutions are unified under a leadership capable of establishing a balanced and independent foreign policy, external pressures will continue to complicate the bank’s efforts to maintain stability.”