It’s the economy, sheikh

After Tuesday’s London meeting on the Libyan crisis, two news stories dominated coverage: the pendulum swings of rebel victories and losses, as the rebels were driven back yet again, and the international coalition’s attempt to undermine Muammar Gaddafi’s power base from within. Nothing has so far been said, however, how the economy might lead to a twist in both stories.

Several reports have indicated that several of Col Gaddafi’s brigades are concentrated around Tripoli, focused more on guarding against internal threats than external ones. Rather fewer reports have detailed the economic measures taken to keep ordinary people, especially youth, on side.

Grants of 500 Libyan dinars for each family have been distributed by banks. House loans have been made more easily available (an important consideration for young men seeking to get married). The prices of new cars have been heavily subsidised and gasoline was slashed to 15 Libyan cents per litre.

All of these measures were given prominence on Libyan state TV: showrooms with Suzuki cars, people drawing money from the bank, shoppers avowing that shelves were full and life was normal. In fact, the take-up from the banks was so good that there was one occasion when, right while the state TV cameras were filming, one bank ran out of cash (although that was a temporary blip).

So, when the news comes out that drivers are queuing up in the night in the forlorn hope of filling up their car, it has implications beyond transport within the city – important though that is on its own for the city’s economy.

It signifies as well the nullification of an attempt to address the political crisis by reaching into the state’s deep pockets.

Subsidising consumption, cars and housing are tried and tested measures taken by Col Gaddafi in previous years. This time, however, the measures may have actually exacerbated the problem.

Increasing the money supply at a time of low consumer confidence in shops’ capacity to stock up has led to a run on the shops. Tripoli appears to be stricken with inflation. According to informal reports I have had, the price of a sack of flour has risen around nine-fold.

In the 1990s, during the international sanctions, when prices also shot up, a safety valve was provided by the possibility for young men to sail to Malta, buy goods here and resell back in Libya. It is doubtful this is today possible.

It is not just that war may have made such travel unsafe. Banks have strong doubts about whether the Libyan dinar has any value. When, earlier in the crisis, masses of Tunisian workers (and other nationalities) returned to Tunisia with Libyan dinars to be converted into Tunisian ones, the Central Bank (at least initially) refused.

In contrast with the 1990s, therefore, it may be far more difficult this time for ordinary people to acquire foreign currency, even on the black market. In any case, the going rate of the euro in relation to the dinar has already doubled.

Other problems have to do with the social aspects of the economy. There is currently a bread shortage to do with the absence of bakers – many of them Tunisians who have returned home. Benghazi had a similar problem when the largely Egyptian bakers left Libya. However, whereas in Benghazi the crisis was accompanied by a great show of social solidarity in many areas of life, and there were several volunteers available to learn to how bake bread, it is not clear that the state of affairs in Tripoli would make such a solution possible (although the state might plausibly press, say, army conscripts into service).

The effect of the crisis on ordinary people in Tripoli appears to have been to make them keep their head down and retreat, as much as possible, into their individual homes. That might change, however, if the economic crisis is exacerbated to the point where food supplies break down.

In one scenario, we might see food riots, combined with a political uprising, in the very heart of Col Gaddafi’s stronghold. If such riots need to be put down with great force, and on a massive scale, the balance of public sentiment may swing decisively against Col Gaddafi. All the large tribes that have so far not declared themselves on the conflict have many relatives in Tripoli.

A clampdown that necessarily left many victims may draw the tribes of the interior into the conflict.

In another scenario, however, things may develop along more expected lines. Notoriously, international sanctions that lead to shortages in staple goods tend to strengthen the regimes they are meant to punish: people become much more dependent on the regime for centralised distribution.

It happened in Libya in the last round of international sanctions. It may happen again.

ranierfsadni@europe.com