Libya's political economy has significantly changed over the past ten years of unrest and upheaval. Yet, even though political and business elites frequently set ever-worse examples of misconduct, Libya's militia class has emerged as the country's biggest winners from disintegration.
Since 2012, militias have undergone a process known as "mafiaization," in which they cleverly exploit politicians' need for protection or use them to disarm rivals to interfere with their corrupt schemes and acquire official status.
How Mafiaization Affects Migration Control and the Economy in Libya
Mafiaization led Libya's armed groups to quickly transform from opportunistic young men to small-time thugs and criminals.
Due to mafiaization, Libya's armed groups have rapidly changed from opportunistic young men to small-time thugs and criminals to what are now primarily white-collar criminals with the potential for highly violent street behavior.
The protection of energy supplies, immigration, and regular economic activities are just a few of the critical areas of European interests that this has significantly impacted.
As a result, if Europe hopes to manage its relationship with and normalize activity in the Mediterranean's center, it must understand how Libya changed and how to manage these changes.
The de facto division of the country under two administrations since 2014—each in desperate need of military force to make up for their lack of political or legal legitimacy—has been a significant contributor to the mafiaization of Libya.
The then-renegade General Khalifa Haftar, who struck a deal with essential tribes in eastern Libya to support his war for supremacy in Cyrenaica, served as the pioneer for this new nexus.
Despite being marketed as a war against terrorism, this agreement gave tribal forces the means to drive out wealthier urbanites in Benghazi, seize their property, and eventually take over the public sphere.
The last sentence was crucial because Muammar Gaddafi's rentier-style government system persisted even after his people waged a bloody uprising to remove him in 2011.
Therefore, in Libya, natural wealth and power derive from access to public funds and the capacity to create patronage networks by giving others government jobs.
A comparable, albeit slightly different, system of violent state co-option emerged in western Libya. However, the power in west Libya was too dispersed for any group to dominate, despite attempts by groups from Zintan and Misrata—two of the critical cities of the 2011 revolution—to replicate Haftar's state capture.
Instead, through rent-seeking, armed groups gained strength and inertia if any critical state. Pty crime would frequently suffice if assets or lucrative businesses weren't nearby.
Local elites, like Central Bank Governor Sadiq el-Kabir, traded protection for a leg up on militias' ability to profit from the banking industry or global credit systems, which worsened the situation.
In other instances, best illustrated by the then-Presidency Council led by Fayez el-Serraj, important state properties like the Libyan Post and Telecommunications Company were given to friends, fostering a system of trickle-down corruption.
Then, as is always the case, armed groups began to seek wealth and power when the money ran out. Wealth and power were necessary to reshape economies and ecosystems and ensure armed groups' centrality.
At the same time, wealth and power also allowed them to control significant parts of the interior and defense ministries, giving the armed groups a platform to establish relationships with other countries.
Ironically, the balance of power in east and west Libya was reversed after Haftar's failed coup in 2019–2020.
The "Tripoli Cartel," a coalition of local militias, began consolidating control over the capital before 2019 and continued the trend of centralization into established institutions.
While the Libyan Arab Armed Forces (LAAF) are still present, the actual control of eastern Libya has frequently fragmented into fiefdoms.
The LAAF central command maintains only very slender operational oversight or command and control capacity.
Given Libya's wealth and globalized conflict, it may not be surprising that international actors have frequently exacerbated the mafiaization of Libya. However, the roles played by European nations, in particular, should be cause for alarm and reflection.
The active sponsorship of Haftar's LAAF by France is the most contentious illustration. In this case, a counterterrorism cooperation policy about political patronage, military support for these political objectives, and active diplomatic shielding and protection changed.
Haftar had complete impunity thanks to this support and security. He was never forced to negotiate with other Libyan organizations. This allowed Haftar to divide the country administratively, advance militarily, and reshape the local economy.
For instance, a liquidity crisis in eastern Libya led to Russia printing a parallel currency due to Saddam Haftar's son's robbery of the Central Bank of Libya's headquarters in Benghazi and the impunity he was given for it despite solid evidence of his involvement.
Libya's banking system might have collapsed if it weren't for following restrictions imposed by the Central Bank, which also reinforced the east-west.
Haftar was created due to Haftar's violent coercion of Libyan private banks to finance his criminal and military activities over the years, up until his unsuccessful war on Tripoli and forced unification talks.
There is still a problem with the debt load. In addition to banking, Haftar's Military Investment Authority's economic cannibalization of eastern Libya has produced a highly corrupt organization that obstructs efforts to rebuild destroyed cities like Benghazi and Derna or carry out infrastructure upgrades.
However, Europeans have also unintentionally contributed to the mafiaization of Libya, which has distorted opportunities to develop long-term systems for safeguarding vital interests.
Following the 2014 civil war, migration and human trafficking became the primary industry of the rent-seeking shadow economy.
Then-Italian Interior Minister Marco Minniti created a plan to give Italy greater control over migration flows across the Mediterranean as the crisis in Europe and Italy came to a head; however, this had the unintended consequence of formalizing and strengthening the very trafficking organizations.
As a result, a network of detention facilities for migrants eventually emerged throughout Libya, giving the militias in charge of them the authority to establish themselves as official departments within the interior ministry while remaining unaffected by civilian oversight.
Additionally, this new Libyan system produced its tiny economy based on the capture of non-Libyans, or people from Sub-Saharan Africa, to increase the amount of funding and support these groups would receive from Europe, enabling them to develop into powerful entities in their own right.
The rise of a bribery class of oligarchs in Libya has been aided by unofficial policies pursued by European states as well as the involvement of criminal organizations.
This corrupt class has since become a formidable barrier to change and empowered smuggling gangs to become a significant drain on Libya's political economy.
An array of intricate and mysterious financial mechanisms is made possible due to Europe's RELEX (Working Party of Foreign Relations Counsellors) decision to issue a highly polarizing interpretation of the United Nations Security Council's sanctions regime on Libya.
This enables Libya's oligarchs and particular European partners to withdraw funds from and profit from what ought to be the nation's frozen assets.
While this is mainly under the radar, the power struggle among the various Libyan administrations for control of the Libyan Investment Authority, the body that formally controls the majority of these assets, is a valuable indication of how highly valued and profitable this has become.
Similar to this, western Libya has long benefited financially from the smuggling of fuel from the country's refinery in the town of Zawiya.
Despite extensive documentation of this in reports by the UN Panel of Experts, even how much of this refined fuel is illegally smuggled offshore. It is most likely towards offshore storage facilities near Malta. This industry and the gangs that control it continue to thrive.