Libya grapples with mounting food costs, diminishing oil revenues

Like most of its North African peers, Libya has been grappling with rising wheat costs  following the outbreak of the Russia-Ukraine war. Combined with the April blockade of a number of oil plants, the country is particularly vulnerable and unable to benefit from the global rise in oil prices.

The current situation is rooted in the political divisions of the post-Gaddafi period. In February 2021, the international community welcomed the election of UN-backed prime minister Abdul Hamid Dbeibeh as a unifying figure after years of political divisions and bloody conflicts.

One year later, after the postponed elections of December 24, 2021, old wounds reemerged with two different governments — that of Abdul Dbeibeh and that of House of Representatives-designate prime minister Fati Bashagha — claiming the exclusive authority over the country, raising concerns of a new and large-scale armed confrontation between Libyan political factions. 

The Russian invasion of Ukraine has exacerbated the situation in Libya as it results in higher food prices and insecurity. Moreover, local militias close to General Khalifa Haftar who support Bashagha closed down some oil fields mid-April in an attempt to force Dbeibeh to resign. Since then, Libya's oil production has dropped below 1 million barrels per day, and according to recent estimates, the country is losing $60 million in revenue daily. 

A recent World Bank report showed that after the Russian invasion of Ukraine, flour prices rose significantly. Libya is one of the Middle Eastern countries, along with Egypt, Lebanon, Yemen, and Tunisia, that depends heavily on Russian and Ukrainian food commodities. According to the report, Libya imports 54% of its wheat, 62% of its barley, and 69% of its maize and corn from these two countries.

However, because the crisis is impacting Libya on a number of different levels, the food security issue is often sidelined. The wheat crisis, although not widely covered, has been exacerbated by the civil war, drought, desertification, and the COVID-19 pandemic, according to Giuseppe Dentice, Middle East analyst at Centro Studi Internazionali, an Italian foreign policy think tank.

Based on the most recent data provided by the Food and Agriculture Organization, Libya imports half of its annual wheat consumption (approximately 1.3 million tons) from Ukraine and Russia. Following the invasion in mid-February, Libya started to look at alternative markets for its wheat supply, particularly the United States, Canada, Argentina and Uruguay. Still, the shift is likely to be a lengthy one, and prices will increase due to longer shipping distances and the rise in fuel prices.

"The persistence of the domestic political conflict will lead to the growing dependence on foreign food supplies. In addition, rising oil prices risk becoming a lost opportunity due to the production blockade imposed by General Haftar's militias," Dentice told Al-Monitor. "Goods and transportation prices could rise even more, and international organizations could face major problems in delivering their food assistance programs."

According to Emadeddin Badi, nonresident senior fellow at the Atlantic Council, "the oil plants' blockade is designed to cater to a specific Libyan faction's short-term outlook. The goal is to oust the Government of National Unity."

At the same time, many EU countries are seeking new energy providers other than Russia. The refinery closures have hurt Libya’s already precarious reputation as a reliable oil supplier, after more than ten years of domestic conflict that undermined the country's export capabilities. Nevertheless, recent data shows that in 2020 European countries collectively imported 63% of Libyan oil, while China imported 25%. On April 27, the US embassy in Libya stated, "The United States considers the shutdown of Libyan oil production to be a hasty response that hurts the Libyan people and undermines international confidence in Libya as a responsible actor in the global economy."

The Russia-Ukraine crisis has also sent Europeans scrambling for gas throughout the region. Libyan gas, however, does not top their priority list, "partly because additional infrastructure and financing are needed to increase Libyan gas production," Badi concluded. "This discussion is, therefore, more strategic and long-term than political. And, at the moment, political goals are the ones that are taking the leading role in local actors' decision-making process."