Libya Is Showing Early Signs of an Industrial Turn for the Best

Libya's recent reputation has been defined by conflict, division and instability. Understandably, the civil war and ongoing dispute between East and West has grabbed the headlines.

Yet despite this, the country's economy has developed relatively steadily through that period. The past year has produced the clearest evidence yet of a new chapter. Foreign businesses, long cautious about the country, are starting to take a greater interest.

The obvious structural issue has been the east-west divide. The Government of National Stability rules from Benghazi, whilst the rival Government of National Unity rules from Tripoli. For more than a decade that division has added a layer of complexity to doing business in Libya.

This April, however, an announcement by the central bank was welcomed in a joint statement by dozens of interested parties, providing the strongest indication yet that the two sides can align on economic policy. Companies already operating in the country have adapted to this landscape rather than awaiting resolution, putting them in pole position.

The second structural problem is fiscal. Libyan fuel is among the cheapest anywhere, thanks to a generous subsidy programme. The IMF puts energy subsidies at roughly 20 per cent of GDP, alongside a public wage bill of around 30 per cent, describing both as among the largest anywhere.

The cost is compounded by Libya's relatively limited refining capacity, meaning most refined fuel is imported at market rates. The import bill rose from around $3bn a year between 2016 and 2019 to $9bn in 2024.

That is precisely the problem Libya has begun to solve. In May 2026, the National Oil Corporation reached a final agreement with its former Emirati partner, Trasta, to return the Ras Lanuf complex to full Libyan ownership.

Ras Lanuf is the country's largest refinery at 220,000 barrels per day and has sat idle since 2013 for legal rather than technical reasons. The NOC has allocated around $60m for the maintenance needed to restart it, anticipating 200,000 barrels per day within the next year.

Few individual assets anywhere carry that kind of leverage over a national balance sheet. Every barrel refined at home is one that doesn't need to be purchased from abroad with foreign currency.

It is also an advantage that rests on crude the country already produces, giving it an advantage over others in the region. Recovering Ras Lanuf turns a drain on foreign exchange into domestic industrial capacity at the exact point in the chain where Libya has been losing the most value.

The same logic is visible further along that chain. Across Libya, the heavy industrial base needed to sustain a refining sector is growing.

There are signs that some of the conditions required are taking shape, namely reliable power and gas, functioning ports, supply chains that hold, contractors willing to put people on the ground, and a state solvent enough to pay them. A country that can build a steelworks can rebuild a refinery.

The clearest evidence sits outside Benghazi, where Tosyalı of Türkiye and Ahmed Gadalla's Libya United Steel Company are building a direct reduced iron complex billed as the largest of its kind anywhere, with a total planned capacity of 8.1 million tonnes a year, the first phase of which is a 2.5-million-tonne plant already under construction.

Gadalla has also outlined plans for a port to handle the exports.

Nearby, the same group's Zulfa food processing plant is being built in collaboration with Swedish packaging giant Tetra Pak. Although a smaller project than the steel complex and a less obvious one, it shows the business case being borne out in a different sector.

Food processing is an industry that turns a commodity into a product with margin attached, and it is exactly the sort of industry required for an oil nation looking to diversify. The partnership of a European multinational also demonstrates that early movers are recognising Libya's enormous potential.

Taken together, these projects show a nation intent on refining and packaging what it produces to grow its export potential.

Europe, meanwhile, is moving the other way. Energy-intensive manufacturing is contracting under high power costs, with heavy industry closing or running below capacity.

Libya's position in that shift is unusually favourable. It has gas in abundance, a coastline close to southern Europe, and, in direct reduced iron, a product European steelmakers need to meet ambitious decarbonisation targets.

The opportunity is not to undercut European industry but to supply it. That is a more durable proposition than solely relying on the export of crude. It works only if Libya stays on the path it has started: keeping the budget unified, getting Ras Lanuf into production, and building the infrastructure industry needs.

Libya's political division is being managed rather than resolved. The country's revenues remain dependent on a single commodity.

However, the heavy industry base currently under construction will change that. For over a decade the question about Libya was whether it could hold together at all.

The question now is about how to turn relative stability into an industrial base, and how best to execute it. For businesses that have spent fifteen years watching from a safe distance, that shift is a signal worth heeding.

The advantage will sit with early movers.