Khaled Mahmoud
While the various political parties in Libya are unfolding a new political crisis, the Biden administration took a particular interest in the Libyan economy. The first step was to summon Saddek Elkaber, Libya’s Central Bank governor.
A glance at whom Elkaber met during his visit to the United States will illustrate how important this is for Washington. He held meetings with the Department of State to discuss the resumption of American companies’ business in Libya and the frozen Libyan assets abroad.
Elkaber discussed with the Terrorism and Financial Intelligence – Treasury Department some projects to develop the Central Bank’s Financial Information Unit. The bank’s role in achieving financial and monetary stability in Libya was also a topic in the discussion.
He also met with the World Bank Executive Director Merza Hussain Hasan. During the meeting they discussed Libyan economic and social development efforts and how to increase the focus on the technical support programmes of the World Bank in cooperation with the relevant Libyan institutions.
The American welcome to Elkaber was hardly unnoticeable, as Richard Norland, the US ambassador in Libya, met him twice within a week before heading back to Washington.
In an official statement issued from the US embassy, Norland did not hesitate to praise his guest, whom he met in Tunisia. Norland and Elkaber are practically performing their duties from Tunisia, given the ongoing security turmoil in the Libyan capital, Tripoli, since the deposition of Muammar al-Gaddafi in 2013.
However, the undisclosed reason why the Americans celebrate Elkaber is because of the Libyan money in the US. This money has been frozen for 11 years without a release, claiming that there is no functional central government in Libya.
The issue resurfaced at Elkaber’s meeting with the Federal Reserve. In a vague statement, he said that they discussed “strengthening the strategic relationship between the two institutions, managing assets, cooperating in external payments operations.”
According to Reuters, foreign governments froze around $150 billions of Libyan sovereign money, noting that Libya’s Central Bank has 144 tons of gold. The US alone froze over $34 billion.
During that period, the Libyan Investment Authority had $32 billion in several American banks, each managing up to $500 million.
Freezing Libyan funds was among a package of sanctions imposed by the UN Security Council to pressure the Gaddafi regime. However, since the downfall of this regime, Libya’s wealth abroad remained vulnerable to fraud, corruption and looting.
Possible Corruption
In October 2021, thirteen members of the House of Representatives demanded its speaker, Aguila Saleh, to arrest and investigate Elkaber for squandering $1.5 billion of the bank’s funds.
A report by the Audit Bureau mentioned the substantial waste of public funds in the Central Bank and demanded that Elkaber be referred to the Attorney General for actions that harmed the state’s economy. According to the report, Elkaber caused the value of the Libyan dinar to drop and prices to rise.
In its last review of the Libyan financial sector, the World Bank concluded that “the rise of militias, which control large parts of the Libyan capital, is a cause for great concern because they have turned into a criminal network that has managed to infiltrate business, politics and administration.”
The report, issued in February 2020, noted that “as the state funding to armed groups, which represent the capital’s security force, started to decline in 2015, the powerful militias turned to other sources of revenue, such as extortion, kidnapping, taxing markets, and financial fraud.”
According to the report, the deteriorating economic conditions subsequently catalysed “the growing influence of the militias over the banking sector, with rumours of bank employees colluding to provide information on bank depositors to the armed groups, which consequently led to further deterioration of consumer trust in the banking sector.”
In February 2021, The Global Witness reported that “Libya continues to lose millions of dollars annually through fraudulent use of the Letter of Credit (LC) system, run by the Central Bank of Libya.”
According to the report, “outsized LC issuance, coupled with source testimony, point to ongoing financial crime in Libya’s LC system at a high cost to Libyan public finances. The rate of LC issuance from April to July 2020 far exceeded historical demand for certain goods. For example, LCs for meat over thirteen weeks exceeded the value of Libya’s recorded meat imports for the entire duration of each of 2016, 2017 and 2018.”
It also revealed that high ranking officials in the Central Bank of Libya also hold senior positions in commercial banks owned by Libyans abroad, an apparent conflict of interest.
The Central Bank of Libya owns a network of commercial “correspondent banks” stretching across five continents. The key intermediary for LCs appears to be Bank ABC, the majority of which is indirectly owned by the Central Bank of Libya and based in London, and whose chairman is none other than Central Bank Governor Saddek Elkaber himself.
A Washington Times’ report quoted by local media noted how corruption in the Libyan financial system is a major stumbling block, in which corporations and citizens alike are unable to carry out basic financial transactions. Saddek Elkaber and his allies have established a network of businessmen who exploit the black market and the shadow economy for illegal profit.
The report went even further as it stated that Elkaber, along with his partners, undermined Libya’s economy and funnelled funds to what it describes as “secret armed militias,” working on breeding unrest in the country.
Ambassador Counsellor
Peter Millett, former British ambassador to Libya, is an excellent example of administrative and financial corruption in the Central Bank of Libya. The bank’s cash reserves amount to 71 billion Libyan dinars, while the value of foreign assets is $120 billion.
In a hearing in front of his Parliament, Millet testified that the Central Bank contributed to financing the civil war in Libya by paying salaries to armed militias deployed in the Western regions, which contributed to stumbling the formation of the Government of National Accord. Despite that testimony, Elkaber used the services of Millet.
He was appointed as an advisor to Elkaber, with a monthly salary of 16,500 British pounds, equivalent to $21,500 or 109,000 Libyan dinars per month.
And according to a statistics report provided by local Libyan media, the appointment of Millett as an advisor to the governor of the Central Bank took place in early 2019, which means that he received an estimated total of 4 million Libyan dinars ($855,000).
The documents showed that the decision aimed to disrupt the unification of the Central Bank, which is divided among itself between its main branch in Tripoli and the parallel branch in the eastern region.
While there are local and international pressures to unify the banking institutions in Libya, Elkaber stated he needed six months to complete merging the two parallel Central Banks, which observers considered a form of procrastination for Elkaber that will allow him to continue governing the Central Bank.
Days before Elkaber arrived in Washington, US President Joe Biden issued an executive order expanding the scope of the national emergency in Libya.
The decision is based on flimsy American arguments claiming “there was a serious risk that Libyan state assets would be misappropriated by Gaddafi, members of his government, members of his family, or his close associates if those assets were not protected.”
It also refers to “the ongoing violence in Libya, including attacks by armed groups against Libyan state facilities, foreign missions in Libya, and critical infrastructure, as well as human rights abuses. It mentioned also violations of the arms embargo imposed by United Nations Security Council Resolution 1970 (2011), and the misappropriation of Libya’s natural resources, threatening peace, security, stability, sovereignty, democratic transition, and territorial integrity of Libya. And thereby constitute an unusual and extraordinary threat to the national security and foreign policy of the United States.”
In this American view, “measures are needed to protect against the diversion of assets or other abuses by members of Gaddafi’s family, their associates, and other persons hindering Libyan national reconciliation.”
As a result, 11 years have passed since Gaddafi was overthrown, and the Biden administration still sees him as a threat to US national security, even though Libya and the US aren’t geographical neighbours, let alone share borders.
The Faltering Dismissal
The Libyan House of Representatives dismissed Saddek Elkaber from his position in September 2014, appointed his deputy, Ali el-Herbi, temporarily, and opened headquarters in the country’s east. However, the international community did not recognise it, claiming that the division may lead the entire institution to total collapse.
The decision to dismiss Elkaber has not been enforced until today. He continued to serve in office and refused to hand over his position, claiming that the political agreement was signed in 2015 in the Moroccan Skhirat Resort necessitates appointing a new governor jointly with the High Council of State.
Despite this, the Libyan Parliament, on Dec. 19, 2017, elected Mohamed Abdelsalam al-Shukri to be the new governor of the Central Bank, to which oil revenues go. However, Shukri was not recognised by the international community, which remained biased towards Elkaber.
What Did Cause Friction Between Bashagha and Elkaber?
The future relations between Elkaber and Prime Minister-designate Fathi Bashaga don’t look promising. The Parliament tasked the latter to form a new government titled “Government of National Stability.”
In December 2020, Fathi Bashagha, the minister of interior at the time in the former Government of National Accord, issued a travel ban on Elkaber when it comes to emissary capacity missions under the pretext of implementing the regulatory procedures for the travel of officials. This prompted Elkaber to accuse him of “illegitimate arbitrary measures and violating his authority.”
He also considered the decision an insult to a sovereign institution that reports to the legislative authority, namely the Parliament. This behaviour came from the minister of interior, who should have respected the rule of law and its institutions.
Bashagha sought to restrict the mobility of officials on diplomatic missions, claiming that there was administrative and security turmoil in the procedures for travelling abroad without adhering to regulations.
In response, Bashagha accused Elkaber of being arrogant and of reluctance to comply with the law and that he needed to fulfil the travelling requirements for emissary diplomats.
Bashagha’s government consists of 35 ministers, reflecting protracted negotiations and promises of enough seats to ensure the support of the majority in Parliament and the various interests it represents.
He aims to reassure the Libyans that a peaceful handover of power will occur without any problems. However, there are fears of another division in Libya between the two governments of Abdul Hamid Dbeibeh and Bashagha, perpetuated by the possibility that oil exports, which amount to 1.3 million barrels per day, will stop again.
During the previous years of division, the Central Bank and the National Oil Corporation were operating within the internationally recognised government in Tripoli but were apathetic to the skirmishes.
Analysts said that only one government could control the Central Bank, whose governor is considered an ally of Dbeibeh.
Between the worries of a war breaking out between armed factions and the territory dividing the two rival administrations, rival militias have mobilised in Tripoli over the past few weeks. They are opposing the inauguration of Bashagha, backed by Field Marshal Khalifa Haftar, commander-in-chief of the National Army, stationed east of the country.
The United Nations and other foreign countries avoided publicly disclosing any position toward Dbeibeh’s interim government when it was formed a year ago. However, they have always favoured Saddek Elkaber remaining in his position as governor of the Central Bank of Libya.
In any case, Elkaber has remained in his position over the past years, enduring changing governments and time itself, despite all the accusations and doubts looming over him. However, he has shown he is one of the key players in Libya and one of the most important cards in the Libyan political and economic discourse.