Inside Africa: Libya’s Fuel Heist, How $0.03‑a‑Liter Gas Became a Regional War‑Financing Machine

Maksym Kaharlytskyi

When Libya’s fuel subsidy was introduced in the 1970s, the goal was simple: make basic energy affordable for the citizens of an oil‑rich state. Today, that same subsidy is the backbone of a multibillion‑dollar smuggling economy that drains roughly $6.7 billion a year from Libya’s treasury, and helps finance wars in Sudan and the Sahel.

The mechanics, and the beneficiaries, are not speculative. In November 2025, U.S. watchdog The Sentry published an investigation, “Inside Job: Libya’s Fuel Smuggling Escalation,” which concluded that Libya’s current rulers had orchestrated a three‑year surge in gasoline and diesel smuggling that cost the country about $20 billion between 2022 and 2024 alone. The Daily Maverick and Libya Review describe the scheme bluntly. Libya’s political leaders and their foreign allies are running a fuel‑smuggling racket that robs the state of billions and leaves ordinary Libyans queuing for power and petrol.

From Subsidy to Smuggling. The Crude‑for‑Fuel Swap

Libya produces about 1.4 million barrels of crude oil per day, but refines only a fraction of that into gasoline and diesel. To meet domestic demand, the National Oil Corporation (NOC) imports large volumes of refined fuel. Until 2021, those imports were financed in cash via the Central Bank of Libya (CBL), with at least some oversight and budgetary constraint.

That changed when the NOC shifted to a crude‑for‑fuel “offset” system. Instead of paying for fuel in dollars, Libya swapped barrels of crude oil for equivalent volumes of gasoline and diesel. The stated justification was a foreign‑currency shortage. The practical consequence was to detach fuel imports from the CBL’s books, creating an opaque channel where import volumes could quietly double.

The Sentry, drawing on NOC data and tanker‑tracking by analytics firm Kpler, found that Libya’s fuel imports rose from about 20.4 million liters per day in early 2021 to over 41 million liters per day by late 2024. Domestic consumption, including transport, industry, and power generation, sits around 23.9 million liters per day, leaving roughly 27 million liters available every day for diversion into smuggling networks.

In a March 2025 statement, the NOC defended the offset system as a “last resort,” arguing that the CBL had failed to allocate a dedicated fuel‑import budget. The Attorney General has since ordered an end to crude‑for‑fuel swaps, but, as Menas Associates notes, the core problem is not the instrument, it is the political economy that keeps import volumes inflated.

The IMF, in a Selected Issues paper and a dedicated analysis on energy subsidy reform, estimates that smuggling subsidized fuel to parallel markets yields about $0.70 per liter, generating roughly $3 billion in profits annually for the key networks involved.

The $0.03 Pump Price. Who Exploits It?

At the heart of the smuggling economy is Libya’s pump price. About 0.15 Libyan dinars per liter, which Le Monde and Libya Review translate to roughly $0.03 per liter at recent exchange rates. In neighbouring countries and Mediterranean export markets, that same liter sells at several times that price, often above $0.60.

The Sentry and Libya Analysis identify Saddam Haftar, son of eastern commander Khalifa Haftar, as the main architect of the boom in state‑sanctioned smuggling. Through his control of ports, depots, roads, and parts of NOC’s downstream bureaucracy, Haftar has consolidated what the report calls a “massive, well‑integrated illicit empire” in eastern Libya.

Imported fuel destined for domestic use is diverted at Benghazi’s old harbour and at Tobruk, loaded onto tankers, including ships that have turned off their tracking systems, and re‑exported to Malta, Italy, Turkey and other destinations. LAAF officer Ali al‑Mashai, described by The Sentry as Haftar’s “most trusted subordinate,” oversees much of this maritime trade.

In August 2024, Spain issued an arrest warrant for Haftar over alleged arms‑smuggling, after seizing vessels bound for Benghazi with military equipment on board. When Haftar was briefly detained in Naples, he reportedly ordered the shutdown of the giant Sharara oilfield, operated by Spain’s Repsol, demonstrating how easily Libya’s energy infrastructure can be turned into leverage.

Tripoli’s Hands Are Dirty Too

The Sentry is careful not to portray smuggling as a purely Eastern phenomenon. In the West, militias aligned with Prime Minister Abdelhamid Dabaiba and the Government of National Unity run their own fuel diversion operations, often plugging into the same southern routes as LAAF units.

In Misrata, the Joint Force commanded by Omar Bughdada exploits its control over airport and port facilities, including the Misrata Free Zone, to move fuel using manipulated shipping papers, hidden tank capacity, and container concealment. Trucks then carry diverted fuel south toward Shwayref and onward across the Fezzan, where it merges with eastern networks heading into Niger, Chad, and Sudan.

In Zawiyah, just west of Tripoli, the Petroleum Facilities Guard under Mohammed Koshlaf has long been documented by UN experts and NGOs as a major node in fuel smuggling by sea and land. Instead of guarding national infrastructure, the unit has become one of the main institutional vehicles for plundering it.

The paradox is stark. Two governments that cannot agree on an electoral law or a unified military structure have little trouble cooperating, directly or indirectly, along smuggling routes — routes that monetize the subsidy they all publicly defend.

Sudan’s RSF and the Kufrah Corridor

The smuggled fuel does not stop inside Libya. Since the Rapid Support Forces (RSF) launched their war against Sudan’s army in April 2023, eastern Libya has functioned as a key logistics base, with the remote airstrip at Kufrah in the southeast serving as a hub for overland and air resupply into Darfur. UN reporting and subsequent investigations by Reuters and Lighthouse Reports have traced a steady flow of fuel, weapons and fighters through Kufrah to RSF units, while Middle East Eye and Maghrebi.org describe Haftar’s LAAF as a key fuel supplier acting “on behalf of” the UAE, a role The Sentry’s November 2025 report characterises as a “strategic fuel supplier” to the RSF throughout the civil war.

Russia’s Africa Corps and Libyan Fuel

The fuel flows do not only run east. Investigations by The Sentry and Libya Analysis highlight regular cargo flights moving diesel, gasoline and jet fuel from LAAF‑controlled bases such as al‑Jufrah and al‑Khadim to Gao Airport in Mali, where Russia’s Africa Corps has replaced Wagner as the junta’s main military partner. The volumes “surpass what might be needed for Russian forces’ operations in Libya,” underscoring how Libya’s smuggling infrastructure now serves both domestic elites and Russian enterprises, with Saddam Haftar leveraging Russian support to turn eastern Libya into a regional hub for weapons, fuel and human trafficking.

The Balance Sheet at Home

The cost to Libya is visible on the CBL’s balance sheet. The Tripoli Post, citing CBL data, reports that oil revenues fell 22.6% in 2024 compared to 2023, to $15.51 billion, while expenditures reached about $27 billion, leaving a $5.2 billion foreign‑currency deficit.

A Central Bank letter to Prime Minister Dabaiba in early 2024, quoted by The Sentry and regional analysts, warned that annual fuel import costs had reached roughly $8.5 billion, that subsidy spending had tripled to around $12.5 billion between 2021 and 2023, and that smuggling was depriving the bank of the hard currency needed for food and medicine imports.

The World Bank, in findings cited by Libya Review, estimates that fuel smuggling costs Libya “at least $5 billion annually,” emphasizing how an unchanged subsidy regime from 1971 has become fiscally untenable.

The UN Secretary‑General, reporting to the Security Council in April and November 2025, warned that weak oversight of public finances, illicit practices, and subsidised fuel diversion were undermining Libya’s economy and called for stronger controls, while acknowledging that the crisis remains fundamentally political.

Unifying the Budget, Entrenching the Racket

In April 2026, Libya’s rival legislative bodies approved a unified national budget worth about 167.36 billion Libyan dinars, roughly $30–35 billion depending on the exchange rate, in what many hailed as a breakthrough after 13 years of fragmentation. The Middle East Council and Arab Center DC described it as a rare sign of cooperation.

But the core negotiators in that budget deal were Ibrahim Dbeibah, nephew of the Tripoli‑based prime minister, and Saddam Haftar. Those are the same actors The Sentry identifies as central to Libya’s fuel heist, underscoring how institutional bargaining is being conducted by the very networks that depend on the subsidy‑fed smuggling economy.

The IMF recommends phasing out fuel subsidies and replacing them with cash transfers to households, removing the price differential that makes smuggling profitable. The Sentry urges targeted sanctions on named fuel‑sector and NOC officials, alongside subsidy reform, as preconditions for meaningful unification. Yet, as Debuglies and African Security Analysis note, the income structures of Libya’s armed and political elites remain so tied to illicit economies that they have little incentive to voluntarily dismantle them.

A Business Model of Fragmentation

Libya’s fuel heist is not a side‑effect of division; it is one of the main reasons division endures. At $0.03 a liter, the subsidy creates an arbitrage opportunity that is simply too lucrative for the armed networks controlling Libya’s ports, depots, and borders to voluntarily surrender.

As long as those networks are headed by generals and prime ministers, any formal unification, of budgets, of central banks, of armies, will risk being another negotiation among smugglers over how to share the rent. The Sentry, Le Monde, Bloomberg, the IMF, UN, and Lighthouse Reports have already documented in granular detail who profits, where the fuel goes, and how much it costs.

The question now is whether external actors who claim to want a stable Libyan state, from the UAE and Russia to the US and EU, are prepared to confront the subsidy‑fed business model they have been quietly enabling.