Outlook for 2011-15

• Political uncertainty will remain high for the foreseeable future as pro- and anti-regime forces continue to fight for control of territory in Libya in what risks becoming a protracted civil war.
• The Libyan leader, Muammar Qadhafi, has shown that he is determined to hold on to power at any cost, and the balance of military capability remains on his side in spite of ongoing international air strikes against his forces.
• Failure to overthrow the Qadhafi regime could lead to the fragmentation of Libya, with the opposition controlling the east of the country.
• The international community is enforcing a no-fly zone aimed at protecting civilians and has imposed extensive sanctions on the regime. It is likely that foreign involvement in Libya will be long term.
• Economic reform under the Qadhafi regime has been halting. We do not expect any further liberalisation until a new regime is in place. The opposition has said that it will seek to establish effective economic institutions.
• We forecast that the Libyan economy will contract by 24.6% in 2011 as a result of a steep fall in oil production and exports. Oil output is likely to rise gradually once the political situation stabilises.
• Falling oil output will result in a fiscal deficit of 25.4% in 2011. The effects of lower exports will be mitigated by higher oil prices on the back of widespread unrest in the Middle East.

Monthly review

• The UN Security Council voted in mid-March to impose a no-fly zone over Libya. Resolution 1973 authorises "all necessary measures" to protect civilians.
• A NATO-led force has launched air strikes against Colonel Qadhafi's forces. However, the ill-equipped opposition has been unable to take advantage of this action.
• The opposition's interim government has established the Central Bank of Benghazi and the Libyan Oil Company, distancing themselves from the Qadhafi regime's institutions in Tripoli.
• Qatar Petroleum has offered to market oil on behalf of the opposition in the east of the country. The first shipment was due to leave Marsa el-Hariga near Tobruk in the first week of April.
• Italy's Eni, the largest foreign oil and gas operator in Libya, has contacted the opposition leadership in Benghazi, most likely in an effort to secure its future position in the country.

Libya has descended into civil war as pro- and anti-regime forces battle for control of the country. Political uncertainty will remain high for the foreseeable future. The first signs of a popular uprising emerged in mid-February when a small group of demonstrators marched through Benghazi. As the unrest spread rapidly across the country, the Libyan leader, Colonel Muammar Qadhafi, responded with extreme force, prompting the UN Security Council to impose a no-fly zone in a mission to protect civilians. The balance of military power seems to be on Colonel Qadhafi's side, as he has retained the backing of the best-equipped elements in the Libyan armed forces. Even with support from international air strikes against loyalist troops and artillery, the opposition has failed to make significant progress on the ground, unable to take Sirte, a regime stronghold. At the same time, the no-fly zone has prevented Colonel Qadhafi's forces from advancing eastwards. The inability of either side to break through has resulted in what is likely to be a protracted deadlock, with fighting continuing in the area between Ajdabiya and Ras Lanuf. UN Security Council resolution 1973 does not rule out arming the revolutionaries, a tactic that may become increasingly necessary if they are to stand a chance of overthrowing Colonel Qadhafi. The NATO-led foreign intervention team has floundered in articulating the exact goals of its mission, appearing reluctant to confirm or deny the possibility of targeting Colonel Qadhafi himself. Without a clear objective, it is likely that the international mission will be protracted.

Failure to overthrow the incumbent regime could lead to the division of Libya along east-west lines. The opposition has already established an interim government-the Transitional National Council of the Libyan Republic-in Benghazi. The administrative body is chaired by Mustafa Abdel-Jalil, the former justice minister, who reportedly resigned from his cabinet position in protest at the excessive force used against protesters. The council has declared itself to be the sole representative of the Libyan people.

There are also signs that the Qadhafi regime could be weakening from within. Several senior members of the regime have defected, most notably the foreign minister, Mousa Kousa, and some army units have joined the ranks of the opposition. Colonel Qadhafi's children have so far remained loyal to him, with his second son, Saif al-Islam, long perceived to be a reformer, having assumed a particularly prominent role in publicly defending the regime. However, in early April media reports suggested that Saif (and his brother, Saadi) had put forward a proposal that would see him take over from his father and lead a democratic transition process.

Libya's political structure under the Qadhafi regime has been based on 600 Basic People's Congresses (BPCs), which included all citizens over the age of 18. The BPCs voted annually on representatives to the General People's Congress (GPC) and also on major decisions. However, key government officials were appointed by the prime minister, who was in turn appointed by Colonel Qadhafi. There has been little transparency in voting processes and the political system has, in effect, revolved entirely around Colonel Qadhafi. The opposition movement has said that it will seek to establish a representative democratic system in the post-Qadhafi era.

Foreign relations with the Qadhafi regime have taken a sharp turn for the worse and will remain tense for as long as the Libyan leader continues to cling on to power. The regime's attempts to violently suppress the revolution have met with near universal condemnation. The international community, led by NATO, has imposed a no-fly zone over Libya. The military intervention, authorised under Security Council resolution 1973, is aimed at protecting civilians. As of early April, NATO said that its strikes had destroyed 30% of Colonel Qadhafi's military capacity. In addition, the UN, the EU and the US (as well as other individual countries) have imposed sanctions on senior members of the Qadhafi regime and on Libyan state institutions that represent a source of funding for the government.

All 192 UN member states voted to suspend Libya from the Human Rights Council, and the Security Council unanimously decided to refer the country to the International Criminal Court. The Arab League also agreed to exclude Libya from the organisation. The US and the EU have called on Colonel Qadhafi to stand down immediately. Meanwhile, France, Italy and Qatar have recognised the Benghazi-based Transitional National Council as the only legitimate representative of the Libyan people. At the time of writing, Kuwait had announced its intention to follow suit.

In the early days of the conflict, thousands of foreign workers flooded into Tunisia and Egypt from Libya. If the security situation inside the country worsens, its neighbours may face a full blown humanitarian crisis on their borders as they struggle to accommodate large numbers of refugees escaping the fighting.

Economic reform under the Qadhafi regime has been limited, facing stiff resistance from vested interests, as some regime insiders have been reluctant to relax their control over large swathes of the state-dominated economy. However, there have been some privatisations and reforms. Large public stakes in the banks have been sold. A new preliminary banking licence has been issued to UniCredit, an Italian bank, and Bahrain-based Arab Banking Corporation (which is majority Libyan-owned) has purchased a 49% stake in Libya's Mediterranean Bank. A second foreign banking licence was due to be awarded in 2011, but this is unlikely to happen now. Bank lending to the private sector had been on the rise since 2007. The partial privatisation of two telecommunications companies and an iron and steel firm has been proposed, and the latter had been planning an initial public offering of shares. Prior to the eruption of violence, the government had been committed to streamlining the bureaucracy and was in the process of transferring 340,000 workers to the private sector. Ten new laws were introduced in 2010 to improve the business and investment environment, but were awaiting executive regulations when fighting broke out in mid-February.

The whims of Colonel Qadhafi created tremendous uncertainty in policymaking. During 2009-10 the government suspended visas for EU citizens living within the Schengen visa area and hinted that it might nationalise the hydrocarbons sector. Despite the award of dozens of oil exploration permits, drilling success has been limited and discoveries small. When exploration has been successful, development of the discoveries has been impeded. Four companies decided not to renew their exploration licences for a further five years in October 2009. In light of ongoing unrest, foreign companies have evacuated their employees and suspended operations. However, several large international oil companies-including OMV (Austria), Occidental, ConocoPhillips, Marathon and Hess (all US), Eni (Italy) and Suncor (formerly Petro Canada)-remain committed to Libya, having recently renegotiated their contracts for up to 30 years. UK-based BP has put plans to begin onshore exploration on hold, having previously delayed its deepwater exploration owing to safety concerns resulting from the oil spill in the Gulf of Mexico.

Should the opposition succeed in ousting Colonel Qadhafi, it is likely that a new government would introduce drastic changes to economic policy, increasing the pace of liberalisation and reform and eliminating excessive bureaucracy. The Transitional National Council has not formally outlined its future policies in this area except to say that it will endeavour to create "effective economic institutions to eradicate poverty and unemployment".

The government has usually had a healthy budget surplus in recent years owing to high oil revenue and a tendency not to fulfil its spending commitments. As the hydrocarbons sector provides 89% of government income, we expect that a sharp decline in oil production and hydrocarbons exports in 2011 will result in a fiscal deficit of 25.4% of GDP. Higher oil prices owing to widespread unrest in the Middle East, will partly compensate for falling hydrocarbons export volumes. Capital expenditure will stagnate in the short term as the regime struggles to remain in power. As oil revenue falls, the regime will seek to draw down its foreign-exchange reserves, largely to fund its war against the opposition. However, its access to overseas funds has been curtailed by the imposition of asset freezes and other sanctions by the international community. If the opposition succeeds in overthrowing Colonel Qadhafi we expect oil revenue to recover as production and exports resume gradually. However, if Libya fragments into opposition- and Qadhafi-controlled regions, the recovery scenario will be limited to the east of the country.

The currency is pegged to the IMF's special drawing rights (SDR), which restricts monetary policy flexibility. It appears that lower oil revenue and a freeze on the assets of the Qadhafi regime have already negatively affected liquidity. In mid-March the government ordered banks to begin recirculating old currency. As one of very few state institutions in Libya with significant independence and decision-making power, the Central Bank of Libya will play an important role in shaping economic development in the post-conflict era. The apparent defection of the former governor, Farhat Bengdara, has weakened the institution. He was replaced in the interim by Abdel-Hafez Zleitni, a technocrat who served in a number of senior roles, including as finance and planning minister, under the Qadhafi regime. In early April Mohammed al-Zarroug Rajab was appointed as the new governor. Mr Rajab is a former governor of the Central Bank and a former chairman of the Libyan Arab Foreign Investment Company.

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We expect the Libyan economy to contract by 24.6% in 2011 owing to the disruption to oil production and exports caused by the ongoing political turmoil. This is a fairly optimistic estimate, which is based on the assumption that the political situation will be resolved later this year, allowing oil production and exports to resume gradually. We estimate that GDP growth will average 2% in 2011-15. Resumed activity in the hydrocarbons sector will depend heavily on the return of foreign oil service companies, which have withdrawn from the country, citing security concerns.

There is potential for the non-oil sector to grow rapidly, albeit from a low base, supported by government infrastructure investment programmes, particularly in the construction, utilities, communications, transport and financial sectors. However, government funding of infrastructure projects will decline in the immediate future as the regime focuses on strengthening its position by trying to pacify Libyans using direct transfers while also spending heavily on arms and foreign mercenaries. We expect foreign direct investment to decline steeply in 2011-12 as investor interest is all but erased amid continuing political uncertainty.

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We estimate that inflation averaged 2.5% in 2010 given that Libya's consumer price index rose by 2.9% in the year to November 2010. Inflation is forecast to rise to an average of at least 6.8% in 2011. This estimate is based on the assumption that Libya, which imports 75% of its food, will face significant shortages owing to the ongoing conflict. In addition, higher international food and non-oil commodity prices will increase the cost of imports. Upward inflationary pressure may be mitigated by a shortage of local and foreign currency. However, it is possible that the Qadhafi regime could secure funds by liquidating direct investments by Libyans in foreign assets, particularly in Sub-Saharan Africa. In the medium term, inflation will be sustained, however, by a revival in consumer confidence and higher oil revenue leading to greater domestic liquidity. It is likely that government subsidies under any future regime will be maintained, which will ensure that prices for many staple goods, particularly housing and healthcare, are kept in check.

The Libyan dinar is pegged to the SDR and is tightly managed. As a result, we do not expect a significant change to the official dinar rate, despite severely restricted access to foreign-exchange reserves. However, as of mid-March the exchange rate has weakened to LD2:US$1 on the black market from the official 2010 average of LD1.26:US$1, providing further evidence that foreign exchange is already in short supply. We expect the peg to the SDR to remain in 2011-15.

The current account is dominated by hydrocarbons exports. Earnings from goods exports are expected to fall sharply in 2011, averaging US$37.8bn a year in 2011-15, down from US$46.3bn in 2010. Lower oil production and exports in 2011-12 will be partly offset by higher oil prices on the back of growing concerns over the spread of political upheaval across the Middle East. We expect dated Brent Blend to average US$101/barrel in 2011 before falling to US$85/b in 2012. Goods exports will resume growth as the political situation becomes clearer, rising from US$22bn in 2011 to US$45.8bn in 2015. We expect imports to decline in the short term owing to the disruption caused by the political and security crisis, which will dampen private consumption. Consequently, we forecast that the trade surplus will average US$14.9bn in 2011-15.

The most important element of the services account is oil-sector payments abroad, which are expected to fall in the short term as a result of foreign companies pulling out and suspending their activities. We therefore expect the services deficit to narrow to an average of US$3bn in 2011-15, down from an estimated US$4.7bn in 2010. Owing to the dominance of oil exports, the current-account surplus will rise and fall with oil prices and is expected to average US$13bn (15.2% of GDP) in 2011-15.

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On March 17th the UN Security Council voted in favour of a resolution authorising the establishment of a no-fly zone over Libya as well as air strikes against forces loyal to the Libyan leader, Colonel Muammar Qadhafi. Security Council resolution 1973 approves "all necessary measures", except a ground invasion, to protect civilians and was adopted after a vote of ten for and none against (with five abstentions from Russia, China, Germany, India and Brazil).

The first air strikes under Operation Odyssey Dawn began on March 19th and halted an advance by pro-Qadhafi forces on Benghazi, quickly altering the dynamics of the conflict on the ground. Following protracted negotiations, the US formally handed command of the implementation of the UN resolution to NATO at the end of March. Two Arab states, Qatar and the UAE, agreed to contribute to the international force, both providing additional air support.

Despite support from NATO air power, the opposition has failed to make much headway against the Libyan army's far superior ground forces. After an initial, successful counter attack, which saw them recapture towns they had lost to pro-Qadhafi forces only days before, the revolutionaries were pushed back as the Libyan army regrouped. The opposition forces are a ragtag army made up of civilian irregular militias, poorly co-ordinated by defecting army officers and soldiers. They operate under the leadership of Omar Hariri, who has been handed responsibility for military affairs within the Transitional National Council, the Benghazi-based political body representing the opposition. Mr Hariri is a revolutionary who was involved in the 1969 coup that brought Colonel Gaddafi to power, but who later fell out of favour with the Libyan leader and was imprisoned. General Abdul Fatah Younis, who also took part in the 1969 coup and remained a close ally of Colonel Gaddafi until his resignation as interior minister on February 22nd, has taken command of the opposition forces.

In early April thousands of Libyans demonstrated outside the headquarters of the Transitional National Council in Benghazi to demand more air strikes against Colonel Qadhafi's forces following a decline in their number since NATO took command. Speaking at a press conference on April 5th, General Younis said that NATO had failed to provide what was needed. He warned that the Transitional National Council would raise the issue with the UN Security Council if the situation did not improve. The revolutionaries have called on the West to supply them with arms and munitions, a request that remained on the table at the beginning of April. The matter was seemingly discussed at a conference attended by representatives from more than 40 nations in London on March 29th. David Cameron, the British prime minister, argued that although Libya was subject to an international arms embargo, the UN resolution, which allows for "all necessary measures to protect civilians and civilian-populated areas", provides the legal basis to supply the rebels with arms if necessary. Mr Cameron insisted that his government had not yet taken the decision to provide weapons. Similarly, the US president, Barack Obama, was reluctant to articulate a definitive stance on the matter, but confirmed he had already agreed to provide non-lethal aid, such as communications equipment, medical supplies and transport to the opposition forces. It subsequently emerged that Mr Obama had signed a secret presidential "finding" authorising covert US operations to support the rebel forces. Additional reports suggested that British intelligence and special forces were also operating in Libya alongside the CIA.

Islamists among the rebels

The possible presence of Islamists among the rebels has raised concern that Western moves to arm the rebels may have unintended negative consequences. The US military has stated publicly that it has discerned "flickers" of Islamist activity in Libya and is clearly alarmed at the thought of a well-armed Islamist group emerging in the country.

It is not inconceivable that this might happen. Islamists, specifically the Libyan Islamic Fighting Group (LIFG), previously posed the gravest threat to the regime of the Libyan leader, Colonel Muammar Qadhafi, fighting a low-intensity civil war with the government in the late 1990s. The LIFG attempted to assassinate Colonel Qadhafi on three separate occasions, provoking a harsh crackdown that led to the group's virtual elimination. By 2005 the LIFG was in effect moribund domestically, with much of its leadership and membership incarcerated. However, riots in Benghazi in 2006, which the LIFG purportedly instigated, showed that it remained a latent force. Al-Qaida documents discovered in Iraq at around the same time revealed that Libyans made up the second-largest contingent of foreign jihadis in the country.

It is possible that, encouraged by the instability in Libya, many jihadis fighting abroad may now have returned, perhaps bringing some of their militant co-religionists with them. They will also have links to the North African regional Islamist network, al-Qaida in the Islamic Maghreb (AQIM), whose militants may have already infiltrated their way into Libya.

Since 2007 the Qadhafi International Charitable Foundation, headed by Saif al-Islam Qadhafi, Colonel Qadhafi's second son, has conducted a dialogue and rehabilitation programme, which led the LIFG leadership in prison to renounce violence, denounce al-Qaida and offer their allegiance to the Qadhafi regime. As a result, over the past four years some 700 members of the LIFG have been released from prison. However, concerns persist over the efficacy of the rehabilitation programme, and many Islamists are not believed to have genuinely recanted. More Islamists were freed at the start of the unrest in mid-February, in an abortive effort to relieve tensions.

That said, the Libyan revolution is driven by a popular desire for freedom and an end to the Qadhafi regime, not by Islamist ideology. The LIFG is merely exploiting events to its advantage.

Whether the rebels' demands for more arms from the West are met or not, their chances of wresting control of the country from Colonel Qadhafi's forces are limited. The huge distance between Tripoli and Benghazi (the capitals of Libya and "Free Libya" respectively) militate against a rebel victory. About 1,000 km separate the two cities, and the amorphous rebel army has neither the armour nor the supply lines to operate effectively over such a long and narrow corridor. In addition, the regime strongholds of Sirte and Tripoli will prove extremely challenging military targets, making it very difficult to dislodge pro-Qadhafi forces. Equally, with the destruction of the Libyan air force and as much as one-third of his armour and artillery in the last two weeks of March, Colonel Qadhafi's chances of launching a sustained military offensive are looking increasingly slim.

The combination of these factors suggests Libya is facing a prolonged military stalemate, with Colonel Qadhafi holed up, but more or less impregnable, in Tripoli and the opposition likewise ensconced in the east. In this context, it is difficult to see what options remain open to the international community if it is to avoid becoming embroiled in a prolonged a civil war. Sending in peacekeepers would be highly problematic, and the US has explicitly ruled out putting "boots on the ground".

Assuming that the West baulks at increasing its active military engagement, there seem to be three broad scenarios going forward: a swift internal collapse of the regime; a negotiated settlement; or a stalemate in which Libya is divided into two de facto states-a NATO-protected "liberated" zone in the east and a sanctions-beset rump of Colonel Qadhafi's jamahiriya (republic of the people) in the west.

The defection of Mousa Kousa, the foreign minister, on March 30th could have an important bearing on the chance of either of these first two scenarios. If the claim of the British foreign secretary, William Hague, that Mr Kousa is genuinely disaffected with the Qadhafi regime is correct, he could play a critical role in bringing the regime down, both by passing on information about its weak points and through engineering further defections. There is also the possibility that Mr Kousa is still acting for the regime, or parts of the regime. In this case his presence in London could mark the start of a negotiation about the regime's capitulation. His choice of London is not surprising, given his extensive contacts with the British intelligence and diplomatic services during the negotiations about lifting the sanctions imposed in the wake of the Lockerbie bombing and about dismantling Libya's nuclear weapons programme. As head of Libya's external intelligence services between 1994 and March 2009 (when he was made foreign minister), Mr Kousa was the chief Libyan interlocutor with the West over these issues.

The former foreign minister's defection is likely to encourage others, and by early April there were rumours that more senior officials were preparing to do the same. The decision by the US Treasury Department's Office of Foreign Assets Control (OFAC) to lift sanction against Mr Kousa on April 4th may encourage others considering absconding. In an official statement, OFAC said that Mr Kousa had "severed ties with the Qadhafi regime" and would therefore no longer be subject to an asset freeze. The statement explained that the aim of the sanctions "was to motivate individuals within the Qadhafi regime to make the right decision and disassociate themselves from Qadhafi and his government".

In the wake of Mr Kousa's apparent defection, the Qadhafi regime seems to have recognised the need to engage with the West and sent its envoy, Abdelati Obeidi, then deputy foreign minister, to Greece, Turkey and Malta to discuss possible solutions to the ongoing conflict. (Mr Obeidi was promoted to foreign minister on April 5th.) Meanwhile, a second envoy, Mohammed Ismail, who is a senior aide to Saif al-Islam Qadhafi, visited London. The diplomatic foray came amid growing speculation that Saif al-Islam and Saadi Qadhafi, the two more reform-minded of Colonel Qadhafi's sons, had proposed a plan for Saif al-Islam to assume power and oversee a transition to a more democratic system. The opposition has rejected this possibility outright.

In late March the Transitional National Council published its charter, outlining its "vision for rebuilding the democratic state of Libya". The charter declared that, having learned from living under a dictatorship, there is "no alternative to building a free and democratic society". It promised the "peaceful transfer of power through legal institutions and ballot boxes" and stated that a new constitution would be put to the people in a referendum. As of early April the council had received diplomatic recognition from France, Qatar and Italy. Kuwait announced it would also back the opposition leadership.

In a statement issued on March 19th, the Transitional National Council announced it had designated the Central Bank of Benghazi "as a monetary authority competent in monetary policies in Libya" and appointed Ahmed el-Sharif as governor. The opposition also established the Libyan Oil Company, which, like the Central Bank, will be "based temporarily in Benghazi".

The independence of the two institutions from the Central Bank of Libya and the National Oil Corporation (NOC) in Tripoli should enable the opposition to circumvent the international sanctions imposed on the Qadhafi regime. On March 22nd OFAC identified 14 entities owned by the NOC that are subject to sanctions:

• Arabian Gulf Oil Company (AGOCO);
• Azzawiya Oil Refining Company;
• Brega Petroleum Marketing Company;
• Harouge Oil Operations (Veba Oil);
• Jamahiriya Oil Well Fluids and Equipment (Jowfe Oil);
• Mediterranean Oil Services Company;
• Mediterranean Oil Services Gmbh;
• National Oil Fields and Terminals Catering Company;
• North African Geophysical Exploration Company;
• National Oil Wells Drilling and Workover Company;
• Ras Lanuf Oil and Gas Processing Company;
• Sirte Oil Company;
• Zueitina Oil Company; and
• Waha Oil Company.

However, OFAC also said that should NOC "subsidiaries or facilities come under different ownership and control", the Treasury Department would consider" authorising dealings" with them.

The NOC and the Central Bank of Libya remain under EU and UN sanctions. In early April the Qadhafi government appointed Mohammed al-Zarroug Rajab as the new governor of the Central Bank, replacing Abdel-Hafez Zleitni, who held the position briefly following Farhat Bengdara's defection.

Mr Sharif, the governor of the Central Bank of Benghazi, has warned of a looming currency crisis, according to an April 5th report by the UK-based Financial Times. The Transitional National Council has paid public-sector salaries for February and March, but may not be able to meet its obligations for April if it cannot access Libya's foreign assets, the report said. The opposition leadership has introduced restrictions on bank withdrawals and capped salaries at LD750 (US$600).

According to the International Energy Agency, oil exports from Libya, which amounted to just under 1.3m barrels/day (b/d) in 2010, had "ground to a halt" by mid-March. The problem was partly a result of lower production, but legal restrictions on the sale of oil played just as significant a part. Initially sanctions made buying Libyan oil illegal, but on March 28th the US announced that it would allow oil sales from rebel-held areas provided that separate payments systems were put in place to ensure that none of the cash from any sales went to the NOC, the Central Bank of Libya, or any other government entity. AGOCO, the main producer in the east, remains on OFAC's list of sanctioned bodies, however. In late March the opposition said that it was producing up to 130,000 b/d of oil and could increase this to 300,000 b/d. In the west, oil supplies are running out as the regime has run down its stocks and the Azzawiya refinery has reportedly shut down. In an interview published by The Wall Street Journal on April 5th, Shokri Ghanem, the chairman of the NOC, said that Libya was producing between 250,000 b/d and 350,000 b/d of oil, down from previous levels of 1.6m b/d. The Qadhafi regime has warned that it will sue any company that strikes an oil deal with the rebels.

Qatar, which was the first Arab country to recognise the Transitional National Council as the sole legitimate representative of the Libyan people, was also first to offer to help the revolutionaries sell oil. In late March state-owned Qatar Petroleum agreed to market oil produced in the east, either by buying the oil and reselling it or by delivering it on behalf of the rebels. Ali Tarhouni, a Libyan opposition official responsible for economic, financial and oil issues, said that the revolutionaries had set up an escrow account to receive oil export revenue. If the scheme goes ahead, it is likely that Qatar will employ a swap mechanism, providing the Libyan opposition with food, fuel and medical supplies. On April 5th Reuters news agency reported that the first shipment of oil in 18 days from the east was due to leave the Marsa el-Hariga terminal near Tobruk. According to Lloyd's List, a daily shipping newspaper, about 1m barrels of oil were to be loaded onto a tanker headed, most probably, for Qatar.

Qatar has shown itself to be one of the staunchest supporters of the Benghazi-based opposition movement. It has been shipping fuel to the east of the country and allowed Libya TV, a new opposition channel, to base its headquarters in Doha, the Qatari capital. Perhaps more importantly, Qatar was also the first Arab state to send fighter planes to enforce the no-fly zone over Libya.

Italy's Eni, the largest foreign oil operator in the country made contact with the Transitional National Council in early April in an effort to secure its future in a post-Qadhafi Libya. Before Italy's recognition of the opposition on April 4th, there were concerns that the position of Italian companies could be threatened by their government's seeming reluctance to support the revolution. Eni was producing about 280,000 b/d of oil equivalent before the outbreak of violence and had US$2.5bn worth of net capital employed in upstream activities as of end-2010. In 2007 Eni, which operates in the west of the country and is Libya's only gas offtaker, signed a US$28bn deal extending its oil and gas supply contracts to 2042 and 2047 respectively.

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Please see graphic below

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Land area

1,759,540 sq km

Population

6.16m (2007 mid-year estimate, IMF)

Main towns

Population in '000 (2003 estimates, National Authority for Information and Documentation)

Tripoli (capital): 1,149

Benghazi: 636

Misurata: 360

Al Mirqab: 328

Al Bitnan: 142

Sebha: 126

Climate

Hot and dry with mild winters

Weather in Tripoli

Hottest month, August, 22-30°C (average daily minimum and maximum); coldest month, January, 8-16°C; driest month, July, 1 mm average rainfall; wettest month, December, 94 mm average rainfall

Language

Arabic

Measures

Metric

Currency

Libyan dinar (LD) = 1,000 dirham. Average official exchange rate in 2010: LD1.26:US$1

Time

2 hours ahead of GMT

Public holidays

Commercial offices and government establishments are closed on Fridays. Other than the usual Islamic celebrations, national holidays include Declaration of the People's Power Day (March 3rd); Evacuation Day (June 11th); Revolution Day (July 23rd); and National Day (September 1st)

Official name

The Great Socialist People's Libyan Arab Jamahiriya

Form of state

Since 1977 Libya has been a jamahiriya (republic of the people) in accordance with the Third Universal Theory propounded by Muammar Qadhafi in his Green Book, which is a blend of socialist and Islamic theories inspired by tribal traditions. The jamahiriya system defines the political and social order, which is also governed by the Holy Quran. The General People's Congress is the highest legislative body. In 1992 Colonel Qadhafi changed the political structure by dividing Libya into 1,500 mahallat (communes), each with its own budget and legislative and executive powers, formerly vested in the Basic People's Congresses. The mahallat and the congresses are supervised by Revolutionary Committees directed by secretaries, who are chosen personally by Colonel Qadhafi

Head of state

Colonel Qadhafi was appointed supreme leader by the General People's Congress in March 1990 after taking power in a coup in 1969. Saif al-Islam Qadhafi was put forward as general co-ordinator of the Popular Social Command in October 2009 with power over the legislature

Executive

In 2000 Colonel Qadhafi abolished most central government executive functions, devolving responsibilities to the 26 municipal councils that make up the General People's Congress. Centralised control is maintained over the economy, finance, defence and security, energy, infrastructure, foreign affairs, social security and trade portfolios, the heads of which all report directly to the prime minister's office. The opposition has set up a parallel administration in Benghazi

Legislature

The General People's Congress, delegates to which are chosen by the Basic People's Congresses

Secretary of General People's Committee (prime minister): Baghdadi al-Mahmudi

Key ministers

Agriculture & fisheries: Abu Bakr al-Mabruk al-Mansouri

Communications: Mohammed Ali Zeidan

Economy, industry & trade: Mohammed Ali al-Huwaij

Education & scientific research: Abdel-Kabir al-Fakhri

Energy: Ali Shamikh Mohammed

Foreign affairs & international co-operation: Abdelati Obeidi

Health & environment: Mohammed Mahmoud al-Hijazi

Industry & mines: Ali Yusuf Zikri

National security: Abdel-Fattah al-Ubaidi

Social affairs: Ibrahim al-Zarruq

Utilities: Matouq Mohammed Matouq

Secretariat of the General People's Congress

Foreign affairs: Suleiman Sasi al-Shahumi

Popular Committees: Huda Fathi bin Amir

Popular Congresses: Ibrahim Abderrahman Abjad

Secretary (speaker): Mohammed Abdul Quasim al-Zwai

National Oil Corporation chairman

Shokri Ghanem

Central Bank governor

Mohammed al-Zarroug Rajab