China makes moves to reopen economic ties with Libya, 13 years after suspending trade

Before the 2011 revolution that toppled Muammar Gaddafi and led to a bloody civil war in Libya, China had vast interests in the oil-rich North African nation.

At the time, 75 Chinese companies controlled 50 large projects with a contract value of more than US$20 billion, according to estimates by China's ministry of commerce.

Spanning oil, construction, railways and telecoms, the extensive Chinese investments came to an abrupt halt after some of the companies were raided and dozens of workers were seriously injured.

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Beijing acted fast to evacuate its citizens from the turmoil. During the crisis, 35,860 Chinese nationals were pulled out of the country - officially the largest overseas evacuation since the founding of the People's Republic in 1949.

Then, as the security situation worsened, China suspended new investments, something which has remained relatively unchanged - until now.

Currently Libya is split between two administrations: the internationally recognised Government of National Unity (GNU) based in Tripoli in the west of the country, and the rival Government of National Stability (GNS) which is aligned with renegade general Khalifa Hifter of the Libyan National Army in Benghazi in the east.

Recently, signs have begun to emerge that China is ready to return to the energy-rich, yet still politically divided, country.

On June 10, Libyan Minister of Economy and Trade Mohamed al Hwej issued a directive to activate the Libyan-Chinese Joint Economic Chamber. The minister urged the chamber to help build bridges and enhance investment communication between the two countries.

Chinese officials and Libya's National Transitional Council have been negotiating China's return to Libya, which was one of the issues under discussion when GNU Prime Minister Abdul Hamid Dbeibah, visited China in late May.

He held talks with Premier Li Qiang and Foreign Minister Wang Yi on the sidelines of the 10th Ministerial Conference of the China-Arab States Cooperation Forum, where they discussed restoring political and economic cooperation between the two countries.

Li said China is willing to work with Libya to tap the potential for cooperation under the framework of the Belt and Road Initiative, strengthen cooperation in areas such as infrastructure construction and provide more support for Libya's development.

"It is hoped that Libya will provide a fair and non-discriminatory business environment for Chinese companies," Li said.

Meanwhile, Wang also offered China's backing.

"China always supported Libya's stabilisation and development ... and the Libyan-led and Libyan-owned political transition process," he said.

In return, Dbeibah said at the meeting: "Libya highly appreciates China's important role in supporting Libya's political process and national reconstruction."

The meetings also discussed the start of processes for the Chinese embassy to resume operations in the capital, Tripoli, according to Libyan media.

Libya's GNU Prime Minister Abdul-Hamid Dbeibah met Chinese Premier Li Qiang in Beijing where they discussed a possible way back to opening trade and infrastructure projects. Photo: Xinhua alt=Libya's GNU Prime Minister Abdul-Hamid Dbeibah met Chinese Premier Li Qiang in Beijing where they discussed a possible way back to opening trade and infrastructure projects. Photo: Xinhua>

But according David Shinn, a China-Africa specialist and professor at George Washington University's Elliott School of International Affairs, continued political instability in Libya could still prove to be a fly in the ointment.

"China supports a unified Libya and encourages dialogue as a solution to their differences," Shinn said.

He said that Libya exported US$36 billion worth of oil in 2023 and China accounted for US$2.2 billion of this total. China would like to re-engage in winning infrastructure contracts, he added, while the GNU would like to see the return of Chinese companies.

"Political instability remains a concern, however, and it is not clear how China would interact with the Khalifa Haftar regime in eastern Libya," Shinn said. "Any major re-engagement in the country would require a reopening of China's embassy in Tripoli."

John Calabrese, a senior fellow at the Middle East Institute in Washington, said before the Libyan civil war, all three Chinese state-owned energy giants - China National Petroleum Corporation, China National Offshore Oil Corporation and China Petroleum & Chemical Corporation - had projects in Libya. He said the recent developments might have something to do with those companies wanting to recover losses, re-establish themselves and resume potentially lucrative work.

He noted that China had dealings with both sides during the second civil war (from 2014 to 2020), just as it has elsewhere, such as Afghanistan and the Saudi Arabia-Iran conflict.

"Somehow, they have managed to avoid permanently alienating either of the two rival camps," Calabrese said.

"If China does not help with reconstruction, who will? Arguably, the Europeans should. As far as I can tell, Washington has tended to hand over this poisoned chalice to them. Maybe Beijing has found it opportune to insert itself into this situation as a means of capitalising on the Euro-Atlantic partners' preoccupations with other, more pressing priorities."

Mohammed Soliman, a global strategy adviser at McLarty Associates, said the reopening of the Chinese embassy could signal strengthened diplomatic ties and further validate the political structure in Tripoli.

"Chinese companies have a proven track record in executing large-scale projects swiftly and efficiently, which is essential for Libya's reconstruction," Soliman said, adding that China's involvement in Libya's reconstruction aligns with Beijing's broader interests in the Mediterranean and North Africa.

"After [Italy] departed from China's Belt and Road Initiative, Libya's location at the crossroads of Africa, Europe and the Middle East could make Tripoli a gateway for Chinese investments into the broader region, enhancing China's belt and road objectives," Soliman said.

"Furthermore, by playing a role in Libya's recovery, China positions itself as a key global player committed to international development and stability."

Amjed Rasheed, a lecturer of defence studies at King's College London, said Libya is in dire need of reconstruction as part of its transition to a post-conflict country.

"The idea here is that reconstruction leads to normalcy and ends the circle of political violence. This is important for the Government of National Unity to score credit and strengthen the legitimacy of [Dbeibah's] UN-backed government vis-a-vis his political rivals in Tobruk and eastern Libya," Rasheed said.

He said Libya is yet another partner with the Belt and Road Initiative to secure and enhance energy security.

"Libya can play a key role, along with Egypt and Algeria, in completing the picture in Mediterranean Africa to ensure access to the European single market," Rasheed said. At the same time, he said, as with any post-conflict society, Libya provides a lucrative opportunity for Chinese companies.

Since that tense evacuation of its citizens in 2011, China has maintained its neutrality in the Libyan conflict, biding its time for an eventual return of Chinese-owned businesses to the country, according to Shaio Zerba, director of the Centre for Intelligence and Security Studies at the University of Mississippi.

She said Libya needs foreign investors to rebuild its capacity to tap into its vast oil reserves.

"Violent conflict, political instability and a divided government in transition have severely limited foreign investment in Libya. Given Libya's vast oil reserves, China is willing to assume the risk and assist in the country's reconstruction in exchange for access to oil," Zerba said.

"Engaging in economic cooperation and infrastructure projects with Libya advances two Chinese goals - achieving energy security and increasing China's influence in Africa."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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