Libya is reaping a huge windfall from the conflict in Iran as oil prices surge, with its production reaching its highest level in more than a decade, but the bonanza risks fuelling armed factions that have divided the country.
Libya’s National Oil Corporation said production in April reached 1.4mn barrels a day, of which an estimated 1.2mn were exported. This was the highest level of output since at least 2013.
The company said on Friday that oil revenue had climbed to $2.9bn in April, from $1bn in February. The US-Israeli war against Iran began on February 28.
“Demand for Libyan barrels as a replacement for lost barrels from the Mideast Gulf has increased markedly,” said Michael Carolan, editor of Crude Oil at Argus Media.
International oil companies have flocked to Libya in recent years as they search for new reserves. With more than a fifth of the world’s crude production now trapped by the closure of the Strait of Hormuz, buyers have been scouring for alternatives and Libya’s high-quality oil has been much in demand.
Libya’s economy is completely dependent on oil exports as a source of foreign revenue. But the country’s opaque finances, rampant corruption and division under competing authorities in the east and west mean the oil bonanza could end up enriching politicians and armed factions instead of benefiting Libyans suffering from rising prices and growing poverty, analysts say.
“There is a well-established track record of embezzling state funds,” said Claudia Gazzini, senior analyst for Libya at the International Crisis Group. “There’s a high probability that, in the future, increased revenues will end up following the same pattern of being mismanaged and embezzled.”
Armed groups dominate Libyan politics and have infiltrated state institutions and the security sector, plundering the country’s wealth, according to the UN.
Using the increased oil revenue for development or improving health and education services was “a far-fetched dream”, said a Libyan official. Much public spending, added the official, “was basically lining the pockets of many different factions”.
The country of 7.5mn people has been in chaos since an armed uprising in 2011 ousted longtime dictator Muammer Gaddafi. Following disputed elections in 2014, Libya split into rival political camps propped up by violent militias.
In Tripoli in the west, a UN-recognised government is headed by Prime Minister Abdul Hamid Dbeibeh, whose tenure is protected by a patchwork of militias, which sometimes clash on city streets.
Warlord Khalifa Haftar commands the Libyan National Army, an armed faction headed by his son Saddam. Another son, Belgasim, leads the state-funded Libyan Development and Reconstruction Fund, which controls billions of dollars’ worth of projects.
Haftar has repeatedly used his militia to blockade oilfields and export facilities to press for concessions, including a bigger share of oil revenues held by the Central Bank of Libya.
In recent years, as Libya’s divisions became more entrenched, ruling elites across the divide have managed an uneasy coexistence. A shared desire to profit from the country’s wealth has underpinned this new stability, analysts say.
In the “new status quo”, armed groups have become the main players shaping “governance” by providing “an umbrella of impunity” to those who “generate ever-increasing streams of revenue”, said a UN-commissioned report by a panel of experts presented to the Security Council in March.
They named certain members of the eastern and western regimes as having facilitated the plunder of oil revenues by providing protection to officials who “served the interests of competing networks of armed groups”.
“The scale and level of the organisation of illicit petroleum exports — both crude oil and refined products — reached unprecedented levels during [2025],” said the experts.
UN attempts to hold elections and reunite Libya under one government have repeatedly stalled as politicians have stymied steps that would deprive them of influence and access to resources.
The US has led efforts in recent months aimed at laying the ground for a unified government by forging agreement between power centres in the east and west on a unified budget. This has culminated with the announcement by the Central Bank of Libya in early April of the country’s first budget in a decade, produced after consultations with both sides.
No details of the planned public spending have been announced, but the Libyan official said total expenditure was set at $31.5bn, $10bn more than in 2025.
One impact, however, of the agreement was that it “de facto consolidates the power of those who already have power [including the Haftar and Dbeibeh families],” said Gazzini.
But Tim Eaton, senior research fellow at Chatham House, the London-based think-tank, argued the budget was still “a positive, incremental step”.
“It is very difficult to clamp down on corruption without some kind of budget and reporting of expenditure,” said Eaton.
Foreign currency from the oil windfall should reduce pressure on reserves and help ease inflation, after prices of some goods shot up 40 to 50 per cent in the past six months, he said.
“Whilst the public is discontented at the moment, they haven’t felt able to go into the streets because of the strength of the security forces,” Eaton said. “But perhaps that calculus would change if the situation continued to get worse and worse.”
