Libya’s General National Congress (GNC) ousted Prime Minister Ali Zeidan on 11 March. The Prime Minister’s position had become increasingly precarious over the past months, as he struggled with broad challenges while divisions within the GNC impeded effective governing. The inability to prevent eastern federalists, who have been blockading oil terminals since last summer, from loading an oil tanker with about 250,000 barrels of crude oil proved to be the straw that broke the camel’s back. Minister of Defence Abdullah Al-Thanni became caretaker prime minister until the appointment of a permanent replacement by the GNC, which is expected to struggle further to agree on a consensus candidate. Meanwhile, oil production and exports (still by far Libya’s largest source of income) remain decimated due to facility shutdowns in several parts of the country.

Impact on country risk

Political risk in Libya will remain very high. The replacement of the Prime Minister is not expected to solve the political stalemate, given the difficult functioning of the GNC on the one hand and the continuing tensions between the government in Tripoli and the federalists in the east on the other hand. As a result, Libya’s political challenges remain largely untouched. They include the increasing socio-economic frustration among the population, high security risks, dependency on powerful armed militias and the continued absence of a permanent constitution. Moreover, the eastern federalists’ move to (so far unsuccessfully) try to sell oil in defiance of Libya’s National Oil Corporation shows their determination to pressure the central government in Tripoli further, increasing the risk of armed clashes if tensions escalate. Risk remains somewhat mitigated by Libya’s still very large foreign exchange reserves and the fact that so far, important damage to energy installations has been avoided.

Analyst: The Risk Management Team, r.cecchi@credendogroup.com