How Severe Has the Economic Impact of the Iran War Been?

May 15, 2026

Silhouette of Kuwait City’s skyline with a vibrant sunset backdrop, highlighting the urban landscape. by Abdullah Alsaibaie via Pexels

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How severe has the economic impact of the Iran war been for the Gulf states?

By Emilie Rutledge, The Open University

The US and Israel’s war on Iran has cast a long shadow over the Gulf. It has placed many of the economies that make up the Gulf Cooperation Council (GCC) regional grouping – Bahrain, Kuwait, Oman, Qatar, the United Arab Emirates (UAE) and Saudi Arabia – under substantial strain.

Since the war began in February, the World Bank has downgraded its 2026 GDP growth forecast for the region from 4.4% to just 1.3%.. Some thinktanks, including Oxford Economics, even predict that some GCC economies will enter recession in the second half of the year.

However, the effects of the war have differed across the region. While the Gulf states are often viewed as a unified economic bloc bound by a shared dependence on hydrocarbons, the conflict has revealed significant differences in their economic vulnerability and resilience.

Countries like Qatar and Kuwait have seen their oil and gas exports seriously disrupted by the effective closure of the Strait of Hormuz. But Saudi Arabia and the UAE, which have access to bypass infrastructure, have been partly able to circumvent this limitation.

Saudi Arabia has diverted 7 million barrels of crude per day through its east-west pipeline, allowing it to export oil from Yanbu on the Red Sea. The UAE, meanwhile, has utilised a pipeline from Habshan to Fujairah to export up to 1.8 million barrels of oil each day from the Gulf of Oman.

This infrastructure has enabled both countries to capitalise on soaring global oil prices. Saudi Aramco, Saudi Arabia’s state oil company, reported a 26% jump in profits in the first quarter of 2026.

Disruption to energy exports is one part of the story. The war has also caused substantial physical damage to energy infrastructure across the region. Around 80 energy facilities, ranging from production plants to refineries and pipelines, have been targeted by Iranian missile and drone attacks so far.

It will take months – and in some cases years – to repair the damage (which stands at an estimated US$58 billion) once the war ends. Qatar’s liquified natural gas industry, in particular, has suffered serious damage. QatarEnergy, the state-owned energy company, says it will take up to five years to repair its Ras Laffan industrial hub alone.

Gulf diversification

The GCC states have adopted strategies to diversify their economies away from a dependency on hydrocarbons. Tourism and aviation are two central pillars of this, with GCC countries investing heavily in these sectors. The Gulf is now home to some of the busiest international airport hubs in the world.

But these industries, too, have been damaged by the war. Financial analysis firm, Moody’s, suggested recently that hotel occupancy in Dubai is set to plummet to 10% in the second quarter of 2026 from 80% before the war. Some Iranian attacks have targeted civilian areas, including hotels and residential buildings, prompting tourists to stay away.

The Iran war has also placed Gulf airlines such as Emirates, Etihad and Qatar Airways under increasing financial pressure. More than 30,000 flights to the Middle East were cancelled in the first month of the war and jet fuel prices – the biggest variable cost to airlines – are up 90% on the annual average.

The logistics sector is another area of Gulf diversification. It has grown rapidly since the early 2000s thanks to the region’s strategic position between east-west trade routes. The UAE’s Jebel Ali Port, for instance, is now one of the world’s largest container ports and the base of Dubai’s multinational logistics firm, DP World.

However, Jebel Ali has seen a 40% drop in vessels due to the war, with container carriers rerouting to alternatives such as Salalah in Oman and Colombo in Sri Lanka. And while DP World has opened emergency land corridors to ports outside the Gulf to keep cargo moving, these routes are costly and have limited capacity.

The UAE and Qatar also both serve as major air freight hubs, acting as bridges for cargo travelling between Asia and Europe. But this has been affected by the war too. Freight rates have increased following attacks on both Dubai and Doha that led to grounded flights and air space closures.

In the long-term, the economic impact of the war on the Gulf economies will hinge on its duration and political outcome. But the risks are firmly tilted to the downside. The fiscal outlook for some GCC states is deteriorating, with several facing scenarios where government spending exceeds revenue. Public sector debt in some GCC states is rising too.

Moody’s has downgraded its outlook on Bahrain, which was already facing longstanding financial issues prior to the war, from “stable” to “negative”. This will make it harder for Bahrain to access much-needed capital and increase future borrowing costs.

GCC economies invest their surplus oil and gas revenues through sovereign wealth funds, which collectively manage between US$4 trillion and US$6 trillion in global assets. Governments are likely to draw on these funds to support domestic spending on reconstruction and bolstering their defences after the war.

This could undermine their future potential to fund large long-term diversification mega-projects such as Saudi Arabia’s Neom City. Plans for Neom, which was initially proposed as a linear city to home 9 million people, have already been scaled down in recent years due to issues including funding pressures.

The Gulf’s loss of “safe-haven” status due to the war, and the resulting reputational damage, cannot easily be reversed. Even after the conflict ends, higher risk premiums will persist for those doing business in the Gulf. Shipping disruptions could take months to unwind, and a prolonged closure of the Strait of Hormuz would be likely to trigger permanent rerouting.

If the conflict drags on, structural shifts in global supply chains may deepen, with lasting costs for the Gulf economies.

Emilie Rutledge, Senior Lecturer in Economics, The Open University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Gulf State Cooperation Has Long Been Shaped by Iran

May 14, 2026

Scenic view of Musandam’s rugged mountains and serene coastline under a clear sky. by Siarhei Nester via Pexels

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Gulf state cooperation has long been shaped by the threat of Iran − but shows of unity belie division

Leaders attend the 45th Gulf Cooperation Council Summit in Kuwait City, Kuwait on Dec.01, 2024. Amiri Diwan of Kuwait/Handout/Anadolu via Getty Images
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Firmesk Rahim, UMass Boston

Arab Gulf countries, battered economically and physically by the war with Iran, were keen to put on a united front at a key regional meeting on April 28, 2026.

Gathering in the Saudi city Jeddah, representatives of the Gulf Cooperation Council warned the Iranian government in Tehran that an attack on any one of its six members would be taken as an attack on all. Rejecting Iran’s claims to control of the Strait of Hormuz, Qatari Emir Sheikh Tamim bin Hamad Al Thani later described the summit as embodying “the unified Gulf stance” over the conflict.

The show of togetherness may seem at odds with other recent developments that have seen members of the GCC split over policy and vision for the region – not least the United Arab Emirate’s decision to quit the oil cartel OPEC.

But to followers of Gulf politics, like myself, the scene felt familiar. Time and again, Iran has accomplished what no outside mediator could: It has pushed divided Gulf Arab states together. When tensions rise, the monarchies of the GCC – Bahrain, Qatar, UAE, Saudi Arabia, Kuwait and Oman – tend to stand united, at least publicly.

From revolution to coordination

The modern Gulf security environment was profoundly shaped by the 1979 Iranian Revolution.

Iran shares a narrow and strategically vital waterway with the Gulf states but has long differed in identity and outlook. Specifically, Iran’s Shiite revolutionary model contrasts with the Sunni-led monarchies across the region.

Before 1979, when Iran was ruled by Shah Mohammad Reza Pahlavi Iran and Saudi Arabia, the largest of the Sunni Arab Gulf states, were regarded by Washington as “twin pillars,” protecting American interests in the Middle East. Their relationship was cooperative, but not close.

Then the emergence of the Islamic Republic after the revolution in 1979 introduced a new kind of regional actor – one defined not only by state power but also by Shiite ideological ambition.

Gulf monarchies’ concern over both external security and internal stability was reinforced by the 1979 Grand Mosque seizure in Saudi Arabia, when Islamist militants seized Islam’s holiest site. The event, alongside Iran’s revolution, exposed the vulnerability of Gulf regimes to religiously driven upheaval.

A large plume of smoke is seen amongst buildings — The 1979 siege at Mecca’s Grand Mosque raised concern over security across the Gulf region. AFP via Getty Images

In response to this revolution ideology, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE established the GCC in 1981. Although officially framed as a platform for economic and political cooperation, the organization also reflected shared security concerns and Arab identity.

But unity had limits. Member states did not all view threats to their respective regimes in the same way.

Saudi Arabia worried about U.S. pressure for reforms; Kuwait feared neighboring Iraq; Bahrain was concerned about Iran’s influence over its own Shiite population; and the UAE worried about both Iran and its own large foreign workforce. Meanwhile, Oman and Qatar followed a more independent or balanced approach.

These differences would shape the trajectory of the GCC, and Arab Gulf states’ relationship with Tehran.

The eight-year Iran–Iraq War, which began in 1980, brought to the fore fears of Iran’s influence across the region. While Oman declared neutrality, other GCC states supported Iraq by funneling billions of dollars to the regime of Saddam Hussein.

This revealed an early pattern: Gulf states could coordinate politically, but avoided acting as a single strategic bloc. The GCC broadly favored Iraq as a counterweight to Iran, but there was no unified strategy or formal policy.

Security dependence

The Iraqi invasion of Kuwait in 1990 reshaped the region’s security structure again. In early 1991, the move prompted a U.S.-led coalition, including Saudi Arabia and other Gulf states, to expel Iraqi forces. Saudi Arabia’s role was especially significant: It not only hosted coalition forces but also actively participated militarily – marking one of the first major episodes in which a GCC state was directly involved in the defense of another member.

Soldiers are seen walking in a line in the desert. — American troops at Dhahran airport in Saudi Arabia during Operation Desert Shield.
Eric Bouvet/Gamma-Rapho via Getty Images

During – and especially after – the Gulf War, GCC states deepened their reliance on the United States, agreeing to host U.S. military bases and expanding long-term defense cooperation.

This external security umbrella provided a measure of stability, but it also introduced new differences. While Saudi Arabia, Kuwait, the UAE and Bahrain aligned more closely with Washington’s strategic framework, others – notably Oman and Qatar – maintained a more flexible approach. As a result, the appearance of unity coexisted with growing variation in national strategies.

This pattern has continued in recent years, significantly through diplomatic moves to normalize ties with Israel under the Abraham Accords. While the UAE and Bahrain moved quickly to formalize ties with Israel, others remained more cautious.

The effort to contain Iran

When it comes to combating Iranian influence, GCC states have long played different roles.

Oman has consistently acted as a mediator, maintaining open channels with Tehran and facilitating quiet diplomacy — including back-channel talks between Iran and Western states.

Qatar also kept communication open, partly because of shared economic interests with Iran – particularly the management of the North Field/South Pars gas reserve.

Saudi Arabia and the UAE, by contrast, have generally taken a more cautious and at times confrontational stance toward Iran. Both view Iran as a regional competitor and a source of security concerns, particularly due to Tehran’s missile program and its support for ideologically opposed non-state actors.

This contrasting approach to Iran across the GCC allows different states to engage Tehran through multiple channels, but it also makes it harder to form a consistent, unified GCC strategy.

A changing regional balance

The 2003 Iraq War marked a turning point in the GCC-Iran dynamic. The removal of Iraq as a regional counterweight allowed Iran to expand its influence.

And this development sharpened divisions within the GCC.

Saudi Arabia and the UAE increasingly viewed Iran as a direct strategic threat requiring containment. Qatar and Oman, however, emphasized dialogue and mediation.

These differences became more visible during the Qatar diplomatic crisis of 2017. The dispute centered around Qatar’s support for Islamist political groups such as the Muslim Brotherhood, considered a terrorist organization by the UAE and Saudi Arabia.

Saudi Arabia, the UAE and Bahrain severed diplomatic ties with Qatar and imposed a full air, land and sea blockade in June 2017. The three nations accused Qatar of supporting extremist groups and maintaining close ties with Iran. Isolated, Qatar relied on Iran for airspace, trade routes and supplies, strengthening the relationship between the countries. The blockade eventually ended in January 2021, when the parties signed a declaration restoring diplomatic and trade relations at a GCC summit in Saudi Arabia.

GCC under attack

The series of events that began with the Oct. 7, 2023, attack by Iranian-backed Hamas in Israel shook up GCC relations with Tehran.

In June 2025, in response to the U.S.-Israeli attack on Iran, Tehran struck a U.S. base in Qatar – the first such attack on a GCC state by Tehran.

At an extraordinary meeting in Doha, Qatar’s capital, GCC members pledged full solidarity with Qatar and strongly condemned the Iranian attack.

But it was not enough to prevent Iran from attacking all six GCC states in response to the ongoing conflict begun in February 2026 by U.S. and Israel.

The subsequent closure of the Strait of Hormuz, affecting 20% of global oil supplies, has sparked what many see as the biggest crisis in the Gulf since the inception of the GCC.

The GCC responded by emphasizing collective security and unity. But yet again, the public show of togetherness masks divergent views on how to respond. When the war ends, each state will likely return to its own strategic and foreign policy approach.

Understanding the pattern

Since 1979, Tehran’s actions in the Gulf region have exposed two parallel developments. On the surface, there are shared concerns among GCC members and public shows of unity. But underneath this facade of unity, each state has continued to develop its own national priorities and risk tolerance.

The combination of these two factors helps explain why the GCC often appears unified during crises, while remaining internally divided over how to respond to them.

Rather than viewing the GCC as a fully cohesive bloc, it may be more accurate to see it as a framework where cooperation and disagreement coexist.

Firmesk Rahim, PhD Student, UMass Boston

This article is republished from The Conversation under a Creative Commons license. Read the original article.

GDP Is Not Enough to Tell If People Are Better Off

May 8, 2026

A vibrant market stall in Erbil showcasing a variety of Middle Eastern pastries during the day. by Zanko Bakhshi via pexels

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UNCTAD – 07 May 2026

Gross Domestic Product, or GDP, remains essential but cannot measure whether lives are improving.
The report proposes 31 indicators to track progress beyond output.
It is the first UN blueprint of this kind requested by Member States.
The framework includes cross-border spillovers, from emissions to supply chains.
UNCTAD, UNDP and partners will support countries that choose to test it.

Timur, Indonesia - 14 April 2024: A farmer is harvesting rice in a field. He is wearing a brown shirt and a scarf around his neck. He is holding a large bundle of rice in his arms. — Default image copyright and description

**© Shutterstock/Thoha Firdaus** | Workers harvest rice in Belitang, Sumatra, Indonesia

Gross domestic product, or GDP, measures the value of goods and services produced in an economy. It has long been treated as the world’s scoreboard for progress. But a growing economy can still leave people poorer in security, trust, opportunity and hope.

A new United Nations report argues that governments need a broader way to judge whether development is working. It does not call for replacing GDP. It calls for complementing it with a practical dashboard that captures what GDP misses: well-being, equity, sustainability and resilience.

Growth is not the whole story

Between 1980 and 2025, global economic activity contracted only twice: During the 2009 financial crisis and the COVID-19 pandemic in 2020. By GDP’s measure, the world has rarely been richer.

Yet trust in institutions has eroded, inequality has widened in many places and environmental pressures have intensified. In some wealthy countries, young people report high levels of anxiety and isolation. The gap between economic output and lived experience is becoming harder to ignore.

“What we measure shapes what we value,” said Pedro Manuel Moreno, Deputy Secretary-General and Acting Secretary-General of UN Trade and Development (UNCTAD). “That is the question this work now places squarely on the international agenda.”

A dashboard for the real economy

The report proposes 31 indicators built around four areas: Peace, human rights and respect for the planet; current well-being; equity and inclusion; and sustainability and resilience.

The dashboard would track material conditions, health, education, social cohesion, institutional quality, environmental conditions, poverty, inequality and the assets societies pass to future generations – including produced, human, social, institutional and natural capital.

It is designed to be country-owned, so governments can adapt it to national priorities and capacities. Close to half of the indicators are drawn from the Sustainable Development Goals, meaning many countries already have data systems in place.

Why it matters now

Unlike earlier Beyond GDP efforts, this report comes with a political track. It was produced in response to a direct request from Member States under the Pact for the Future and will now move into an intergovernmental process at the General Assembly, led by Spain and Guyana.

It also recognizes that progress does not stop at borders. One country’s well-being can be shaped by decisions made elsewhere — through emissions, trade, finance, technology and supply chains.

UNCTAD, together with the UN Development Programme and partners across the UN system, will support countries that choose to begin testing the framework.

“GDP tells us how fast an economy is growing,” Mr Moreno said. “It does not tell us where we are headed, what we pass on the way, or what we leave behind for the next generation.”

How the US-led War in the Region Affects Poverty

May 7, 2026

A broad aerial view of a refugee camp with makeshift shelters and blue tarps in an urban area. by Abd Alrhman Al Darra via pexels

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How the US-led war in the region created an Arab poverty crisis

By Jad Chaaban

The New Arab 06 May, 2026

The US-Israel war on Iran could increase poverty for millions across the MENA, as people grapple with double-digit price hikes, writes Jad Chaaban.

War has always been a mechanism that destroys some economies while enriching others, often following old imperialist frameworks, writes Jad Chaaban. [GETTY]

The costs of the current US-Israel war on Iran are often measured in cold, macroeconomic abstractions. We hear of “supply disruptions,” “energy shocks,” and “inflationary pressures”. But behind the fluctuating price of a Brent crude barrel, there is a far more devastating and silent reality: the systematic destruction of human lives and the rapid descent of millions of our neighbours into poverty.

As researchers and policymakers, we have a moral and professional duty to re-centre the discourse on the people of this region. While some economies may benefit from military investments, the direct victims of this conflict are becoming invisible in the grand geopolitical narrative.

The latest macroeconomic projections from April 2026 reveal a grim economic landscape. The International Monetary Fund (IMF) has been forced to slash its growth projections for the Middle East and North Africa (MENA) region to nearly a quarter of its original estimates. We are witnessing severe contractions even in countries once considered stable, and these economic shocks ultimately impact livelihoods.

The mechanics of this crisis are rooted in the extreme vulnerability of the Arab states. Our region is uniquely exposed to price shocks due to our heavy dependency on food imports. When conflict disrupts trade routes, it is the poorest families who feel the immediate sting of inflation. While the United States maintains a low inflation rate, the Arab region is grappling with double-digit price hikes.

Perhaps most concerning is the “remittance trap.” Many Arab nations rely heavily on financial lifelines from workers in the Gulf Cooperation Council (GCC) countries. In Egypt, these workers’ remittances from the GCC accounted for over $22 billion in 2022—nearly 5% of its GDP.

In Jordan and Lebanon, the figures are even higher, reaching 7% and 8% respectively. As the economies of the Gulf contract under the weight of regional instability, these flows are drying up, triggering a domino effect of poverty across the Levant and North Africa.

Our simulations suggest that under current conditions, we will see an additional 4.4 million people fall into poverty across the Arab region. If the war continues to drag on and the GCC economies contract further, that number will likely climb to nearly 5.3 million. These are not just statistics; they represent people whose education will be interrupted, whose health will be compromised, and whose potential will be stifled by traumas that will last for decades.

War has always been a mechanism that destroys some economies while enriching others, often following old imperialist frameworks. But the human cost of this specific conflict is a compounded deterioration of human development.

Women and children, as is so often the case, are bearing the heaviest burden. Refugees and displaced populations, who already have limited capacity to recover, are being pushed to the absolute brink.

The priority must be an immediate end to this destructive war. However, even if the guns fall silent tomorrow, the road to recovery will require more than just rebuilding physical infrastructure. We must design a new model for economic growth that is explicitly biased toward the poor—one that ensures an equitable distribution of resources and prevents poverty from becoming a hereditary condition passed down from one generation to the next.

We cannot allow the “invisible” victims of this war to remain so. The data is clear: the cost of this conflict is being paid in the form of human capital and the dignity of the Arab people. It is time for our policies to reflect that reality.

Jad Chaaban

Dr. Jad Chaaban is an economist and public policy expert, and currently an associate professor of economics at the Doha Institute for Graduate Studies. He was the Lead Author of the United Nations Development Programme (UNDP) Arab Human Development Report 2016, and a member of the Advisory Board of UNDP’s Global Human Development Report (HDR). His research focuses on sustainable human development, political economy and public economics.

Follow Jad on X: @JadChaaban

Libya: One Step Forward, Two Steps Back in Politics

May 7, 2026

Three children enjoying a playful moment in the historic streets of Tripoli, Libya. by Mohammed Alashibi via pexels

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Libya: One Step Forward, Two Steps Back

Arab Center Washington DC May 5, 2026

By Gregory Aftandilian

In April 2026, with the help of the United States, Libya’s two parallel governments reached an agreement on a unified national budget for the first time since 2013. The two administrations also participated in military exercises sponsored by the United States African Command (AFRICOM) that were held in Libya for the first time. While these developments may signal cooperation between the rival governments, realities on the ground belie any optimism about imminent reunification. Endemic corruption within each government works to perpetuate the status quo. Well-armed militias run patronage networks that help keep each government in place, while outside powers continue to aid their Libyan clients by way of various military and economic schemes, hindering unification. The United Nations continues to call for a stop to Libyan groups’ weapons smuggling and illicit petroleum exports. Although the United States and Europe may encourage higher Libyan oil production to make up for the shortfall caused by the closure of the Strait of Hormuz, any additional revenues are unlikely to filter down to the Libyan people.

A Country Plagued by Divisions

Libya remains deeply divided. The internationally recognized Government of National Unity (GNU) is based in the capital city of Tripoli, but its authority extends only to the western part of the country. The GNU is led by Abdul Hamid Dbeibah, who was supposed to be only an interim prime minister until the nationwide elections that were scheduled for December 2021. After those elections were postponed, however, he stayed on as prime minister (the 2021 vote has yet to be rescheduled). His government is supported by various militias based in and around Tripoli.

In eastern Libya, a second government, the House of Representatives (HoR), traces its origins to the June 2014 elections that created that body. Months after the vote, Libya’s supreme court ruled that those elections were unconstitutional and that the HoR must be dissolved, but instead the HoR relocated to Tobruk, near Libya’s border with Egypt, and became the base of the eastern government. The HoR is supported militarily by the so-called Libyan National Army led by self-anointed Field Marshal Khalifa Haftar. Based in the city of Benghazi, Haftar is the real power in the east. In 2019-2020, Haftar attempted to take over the entire country, but his offensive was stymied by Tripoli-backed forces and by Turkey, which provided this government with advanced military equipment and personnel. Haftar then retreated to his stronghold in Benghazi. Now, his forces control the eastern coast and much of the interior.

The challenges of holding new national elections and creating a unified national government have frustrated the UN Support Mission in Libya (UNSMIL) for many years. On April 22, 2026, UNSMIL head Hanna Tetteh stated that the political process was stalled, delaying efforts to reunify the country. She voiced frustration, stating, “Allowing status quo actors to evade their responsibilities will only undermine efforts to preserve Libya’s unity and wealth and delay the path to sustained peace, stability, and development.” Her comments echoed those of past leaders of UNSMIL who resigned after facing similar intransigence.

Some Positive Developments

On April 11, 2026, the two governments approved the first unified state budget since 2013, a potential step toward unifying fractured state institutions and reducing corruption. The High State Council, the legislative body of the GNU, and the HoR agreed on a national budget of 190 billion Libyan dinars, equivalent to about $30 billion. The central bank governor, Naji Issa, stated optimistically that “this is a clear declaration that Libya is capable of overcoming its differences when a unified vision for its future is forged.” Representatives from the two governments said that the unified budget would help ensure a fair distribution of resources and would allocate substantial funds to improve the state-run National Oil Corporation (NOC).

Efforts to agree on a unified budget were assisted by Massad Boulos, Senior Advisor to President Donald Trump for Africa and Arab and Middle Eastern Affairs and the father-in-law of Trump’s daughter Tiffany. Boulos praised the new budget as not only supporting nationwide development projects in Libya but also as shoring up the NOC to allow it to increase energy production and to generate higher state revenues.

Given the current difficulties of exporting oil and gas from the Gulf because of the Iran war’s effective closure of the Strait of Hormuz, the Trump administration may be looking to Libya to meet part of the worldwide oil shortfall. Libya has the largest oil reserves in Africa, estimated at 48 billion barrels, and the country’s oil production has recently increased. Libya reportedly produced 1.43 million barrels per day (b/d) in early April 2026—one million more than it had produced in the previous month, and a ten-year high. Other reports have indicated that Libya plans to substantially increase natural gas exports to Europe by 2030. Currently the country exports very little gas via the Greenstream pipeline that runs from Libya to Sicily, but there are hopes of boosting this with the assistance of foreign companies.

In early April 2026, AFRICOM for the first time sponsored military exercises in Libya, called Flintlock, in partnership with 30 African and European countries. The exercises are designed to improve counterterrorism efforts in the Sahel and perhaps also to push back against Russian influence in the region. US Embassy Libya (which is currently based in Tunisia because of security concerns) said that Libya’s hosting of the exercises “highlights the ability of Libyan security institutions from east and west to work together to contribute to and lead regional security cooperation,” and that it was an “important step toward stronger, more unified Libyan military institutions.” During the exercises, Khalifa Haftar’s son Saddam, who serves as deputy commander of his father’s forces, said that the exercises reaffirmed “Libya’s position as a reliable partner in supporting regional and international peace and security.”

Meddling Across Borders and Corruption Continue Unabated

Such upbeat words belie facts on the ground, however. Haftar’s forces and allied militias have reportedly aided the Rapid Support Forces (RSF) in Sudan’s brutal civil war by taking over the so-called triangle area where the borders of Sudan, Libya, and Egypt meet. This territorial hold has allowed the RSF to smuggle gold, drugs, and people into Libya, often receiving arms and illicit petroleum exports in return. The RSF has committed numerous human rights abuses, including the execution of thousands of civilians in the town of al-Fasher in the North Darfur province, which makes it difficult to say, as Saddam Haftar claimed, that Libyan security forces are reliably contributing to regional peace and security.

Both Libyan administrations are engaged in extensive corruption schemes. In the words of one analyst, in western Libya “the appearance of state-building masks a far more predatory ecosystem. Over the past decade, ministries, public agencies, and state-owned enterprises have morphed into personal fiefdoms for factions that operate more like organized crime families than political actors.” In eastern Libya, where most of the country’s oil fields are located, Saddam Haftar has, as that same analyst put it, “refined the art of large-scale fuel smuggling, exploiting Libya’s heavily subsidized fuel system to siphon off billions [of dollars] annually.” Such smuggling schemes deprive the state of hard currency and contribute to a collapsing welfare system. The International Monetary Fund has noted persistently large fiscal deficits, which have put pressure on the exchange rate, foreign exchange reserves, and inflation, exacerbating social tensions. Many Libyan citizens are angry over their living conditions, given that Libya is an oil-rich country with only 7.5 million people but according to 2023 data has a poverty rate of nearly 40 percent.

Human rights groups have castigated both of Libya’s governments. Human Rights Watch, for example, recently noted that “armed groups, smugglers, and state authorities in Libya have subjected migrants, including infants and young children, to arbitrary detention, extortion, forced labor, sexual violence, and other serious abuses.” It also reported widespread arbitrary detention, torture and ill treatment in facilities run by state-affiliated forces and armed groups.

The Damaging Role of Outside Players

External powers, including Egypt, Russia, Turkey, and the United Arab Emirates (UAE), are known to have assisted Libya’s rival factions to further their own agendas, with other outside actors such as the European Union (EU) also contributing negatively to the situation.

A March 2026 report by the UN Security Council’s Panel of Experts on Libya, mandated to monitor weapons embargo violations and other illicit activities involving the North African country, discusses the involvement of foreign actors in illegal schemes that fund Libya’s militias. The UN report confirmed the findings of a 2025 investigation by the Italian publication Il Foglio of an elaborate scheme involving the UAE and a notorious Libyan businessman known as Ahmed Gadalla, who is close to Saddam Haftar. The investigation showed that foreign actors continue to violate the UN embargo on weapons and other military items destined for Libya. It also revealed either lapsed judgment or a cover-up by the EU’s naval mission, Operation IRINI, which was established to monitor the arms embargo.

According to Il Foglio, in July 2025, a container ship that left the UAE port of Jebel Ali was intercepted by frigates associated with IRINI in the Mediterranean Sea near the port of Derna, Libya, after a tip-off from US intelligence. The cargo ship was then escorted to the Greek port of Astakos for inspection. Although the ship officially declared that it was only carrying cosmetics, cigarettes, and electronic equipment, it was actually transporting 240 pickup trucks destined for Libya, 86 of which were armored. Typically used for mounting machine guns, these trucks are the vehicles of choice for Libyan and Sudanese militias. The UN has defined these trucks as military equipment and their shipment is considered a violation of the embargo.

The investigation revealed that the decision to allow the ship to leave for Libya was the result of “secret negotiations” between the EU, Greece, the UAE, and the two Libyan authorities in the east and the west. According to Il Foglio, Greece—worried about the wave of migrants coming from eastern Libya to Crete—sought to avoid offending Haftar and to prevent any retaliation in the form of a new irregular migration surge, decided that allowing the cargo to Libya was the “lesser evil.” Instead of offloading the trucks in Tripoli, the ship docked in Misrata, a port under the control of Dbeibah’s government. Some 209 trucks were offloaded there; the rest were delivered to Benghazi, suggesting that both Libyan governments were involved in the scheme. The March 2026 UN report noted that 26 of the trucks wound up in the hands of a Libyan militia, al-Katiba 55, that run a notorious prison camp for migrants near Tripoli.

No Political Solution in Sight

Libya’s government is likely to remain divided for some time. Each administration benefits from the status quo through corruption schemes, while the militias depend on patronage that they receive from the governments or on revenues from their own rackets. While recent cooperation to agree on a unified budget may be encouraging, the fundamentals of the situation have not changed.

The decision by AFRICOM to host military exercises in Libya and to include military units belonging to each Libyan administration has done nothing to foster unity. Indeed, all it has probably achieved is to make those factions feel important. Rather than trying to forge unity through military posturing, the international community should increase its efforts to stop oil smuggling out of Libya in exchange for arms.

Some moves in that direction are already underway. On April 14, 2026, the UN Security Council unanimously passed a resolution to reinforce international efforts to monitor and prevent illicit oil smuggling from Libya. The resolution reaffirmed that the NOC is the sole entity authorized to market Libya’s oil and called for a prohibition on depositing Libyan oil revenues anywhere but in official accounts.

Yet there appears to be no real mechanism to enforce such a resolution except to target individuals and entities with sanctions—an approach that obviously has not worked well in the past. Only if meaningful punitive measures are applied to those involved in illicit oil sales will there be pressure on the two administrations to hold national elections and to bring about a unified government.