What began as a technical anomaly has metastasized into something far more revealing: a case study in how parallel power structures can capture a state’s most vital asset while maintaining a veneer of legality. The “Arkenu affair” is a window into how Libya’s oil economy has been re-engineered, piece by piece, into a hybrid system where official institutions coexist with, and often serve, illicit networks.
At its core, Arkenu was not an outlier. It was an evolution.
Founded in 2021, the company emerged at a moment when Libya’s post-war political settlement prioritized stability over accountability. That trade-off created the perfect environment for hybrid entities — commercial on paper, political in function — to embed themselves within the oil value chain. Arkenu’s significance was in how it did not operate outside the system, but through it, leveraging contracts, access, and institutional blind spots to channel oil revenues away from the state.
The mechanics were neither novel nor crude.
Libya’s oil and fuel economy has long been vulnerable to arbitrage. Subsidized fuel priced at a few cents per liter domestically can fetch over a dollar once smuggled across borders. That price differential, sometimes exceeding 40 times the official rate, has sustained a sprawling illicit economy for decades. What changed after 2021 was scale and coordination.
By 2024, Libya was importing roughly 37 million liters of fuel per day while domestic consumption needs hovered closer to 24 million. The missing fuel did not just vanish into thin air. It was diverted. At prevailing market values, this translates into approximately $6.7 billion annually in lost fuel alone. Overlay this with crude oil diversions, opaque swap arrangements, and underreported exports, and the cumulative leakage becomes staggering.
Arkenu fit seamlessly into this architecture.
It reportedly handled millions of barrels within months of operation, generating hundreds of millions in export value. Yet a significant portion of these revenues bypassed the Central Bank. Between late 2024 and early 2026, estimates suggest that over $3 billion may have been diverted through channels linked to its operations. This was not theft in the conventional sense. It was extraction — systematic, institutionalized, and shielded by layers of formal legitimacy.
The enabling conditions for this level of control were territorial, bureaucratic, and financial. In eastern and southern Libya, networks aligned with the Haftar family consolidated authority over ports, transport corridors, and key nodes of part of Libya’s oil distribution. This allowed them to operate a dual system. Officially, they oversaw fuel distribution and security. Unofficially, they taxed, redirected, and re-exported fuel flows at scale.
Maritime routes saw entire tanker shipments re-exported, sometimes via ship-to-ship transfers in international waters, obscuring origin and ownership. A single vessel could carry tens of millions of liters, making maritime smuggling the backbone of large-scale diversion. On land, the system was more granular but equally effective. Checkpoints imposed informal taxes, distribution quotas were manipulated, and artificial shortages were engineered to push fuel into black markets.
This is where Arkenu’s role becomes clearer, not just as a participant in this system, but also a facilitator of its financial layer. By operating as a private entity with privileged access, it created a bridge between state-controlled production and private offshore revenue channels. In doing so, it helped transform a fragmented smuggling ecosystem into something closer to an integrated shadow economy.
The question then is not why this persisted, but why it took so long to confront.
That answer lies in Libya’s political equilibrium. Since 2021, governance has rested on a tacit bargain: distribute rents widely enough to prevent renewed conflict. Thus, it meant tolerating, and at times enabling, illicit revenue streams that sustained armed groups and political coalitions. Efforts to disrupt these flows risked upsetting a very fragile balance.
Prime Minister Abdul Hamid Dbeibeh operated within these constraints. His administration oscillated between rhetorical commitments to reform and selective enforcement actions that stopped short of dismantling entrenched networks. In some cases, enforcement was reversed altogether, reinforcing perceptions of complicity or, at best, political caution.
Against this backdrop, the intervention by Mohamed al-Menfi, the Chairman of Libya’s Presidential Council, increasingly stands out, not as a reaction to crisis, but as part of efforts to reassert institutional coherence in a fragmented political landscape. In a system long defined by competing centers of power and transactional governance, his approach seeks to reposition the presidency as a guarantor of accountability and national balance.
By early 2026, the Arkenu issue had crossed a critical threshold. Public scrutiny intensified, fiscal losses became harder to obscure, and international attention raised the stakes. Yet what distinguishes al-Menfi’s role is not simply that he acted, but how he framed the intervention. Rather than allowing the issue to remain confined to technical or bureaucratic channels, he elevated it into a question of sovereignty, public trust, and the integrity of Libya’s economic governance.
It is a remarkable shift as al-Menfi increasingly positions himself as a convening figure willing to engage across Libya’s political divides while also signaling that certain lines, particularly around the management of national wealth, cannot be crossed. In doing so, he has begun to carve out space for a more assertive presidency, one that does not compete with other institutions so much as it seeks to anchor them.
His earlier decision to initiate a comprehensive audit of contracts across the oil and electricity sectors dovetails rather well with his handling of the Arkenu affair. Rather than a narrow administrative measure, these were early strategic steps in building the institutional tools required to confront entrenched practices. In a context where opacity has often been the norm, such deliberate moves toward transparency carry outsized political weight.
The pressure exerted on the executive authority, including Prime Minister Abdul Hamid Dbeibeh, must also be understood within this framework. What might once have endured as a managed controversy was instead pushed toward resolution. It sparks a much-needed recalibration driven by the growing expectation that major economic files cannot be indefinitely deferred or politically contained.
Beyond the suspension of Arkenu’s operations, al-Menfi’s maneuvering also fired off new political signaling. Simply put, such high-level interventions — when anchored in institutional legitimacy and public accountability — can alter the trajectory of even deeply embedded systems.
Importantly, al-Menfi’s approach has avoided the pitfalls of overt confrontation in an already polarized environment. Rather than framing the issue in factional terms, he has emphasized principles: transparency, legality, and the protection of Libya’s shared resources. This has allowed him to engage the issue without further entrenching divisions, an approach that aligns with his parallel efforts on national reconciliation.
In this sense, whether through quiet diplomacy between rival factions or through institutional initiatives aimed at restoring oversight, al-Menfi appears to be advancing a model of leadership that prioritizes gradual consolidation over abrupt disruption. It is not a dramatic break from Libya’s past, but it does represent a departure from the inertia that has often characterized Libya’s notoriously flawed governance.
There are limits, of course. The structures that enabled Arkenu remain resilient, and attempts at circumvention, such as the emergence of new entities seeking to replicate its role, tease the swift adaptability of entrenched networks. Yet even here, the significance of al-Menfi’s intervention lies in raising the political cost of such maneuvers. What once operated in relative obscurity is now subject to heightened scrutiny at the highest levels of the state.
This matters for a country navigating overlapping transitions — political, economic, and institutional. Leadership in Libya has often been defined by short-term balancing acts. What is beginning to emerge is an effort to pair that balancing with boundary-setting: to maintain stability while gradually reclaiming the authority of the state.
The Arkenu affair, then, is not only a test of governance. It is also an early indicator of whether Libya’s leadership can move beyond reactive crisis management toward a more deliberate, reform-oriented posture. In this regard, al-Menfi’s actions, measured, but increasingly assertive, offer a signal that such a shift, while far from guaranteed, is at least underway.
Smuggling Sovereignty: What Arkenu Reveals About Libya’s Fragmented Oil State
By Hafed Al Ghwell
Middle East & North Africa
Libya’s oil wealth is not just mismanaged but is being systematically diverted through networks that blur the line between state authority and illicit activity. The so-called “Arkenu affair” reveals how these hybrid structures operate within official systems, quietly draining billions while preserving a façade of legality. At stake is more than lost revenue: This dynamic entrenches political fragmentation and weakens any path toward stable governance. Yet recent moves by Mohamed al-Menfi suggest a potential shift toward accountability, raising the question of whether Libya can begin to reclaim control over its most critical resource.
What began as a technical anomaly has metastasized into something far more revealing: a case study in how parallel power structures can capture a state’s most vital asset while maintaining a veneer of legality. The “Arkenu affair” is a window into how Libya’s oil economy has been re-engineered, piece by piece, into a hybrid system where official institutions coexist with, and often serve, illicit networks.
At its core, Arkenu was not an outlier. It was an evolution.
Founded in 2021, the company emerged at a moment when Libya’s post-war political settlement prioritized stability over accountability. That trade-off created the perfect environment for hybrid entities — commercial on paper, political in function — to embed themselves within the oil value chain. Arkenu’s significance was in how it did not operate outside the system, but through it, leveraging contracts, access, and institutional blind spots to channel oil revenues away from the state.
The mechanics were neither novel nor crude.
Libya’s oil and fuel economy has long been vulnerable to arbitrage. Subsidized fuel priced at a few cents per liter domestically can fetch over a dollar once smuggled across borders. That price differential, sometimes exceeding 40 times the official rate, has sustained a sprawling illicit economy for decades. What changed after 2021 was scale and coordination.
By 2024, Libya was importing roughly 37 million liters of fuel per day while domestic consumption needs hovered closer to 24 million. The missing fuel did not just vanish into thin air. It was diverted. At prevailing market values, this translates into approximately $6.7 billion annually in lost fuel alone. Overlay this with crude oil diversions, opaque swap arrangements, and underreported exports, and the cumulative leakage becomes staggering.
Arkenu fit seamlessly into this architecture.
It reportedly handled millions of barrels within months of operation, generating hundreds of millions in export value. Yet a significant portion of these revenues bypassed the Central Bank. Between late 2024 and early 2026, estimates suggest that over $3 billion may have been diverted through channels linked to its operations. This was not theft in the conventional sense. It was extraction — systematic, institutionalized, and shielded by layers of formal legitimacy.
The enabling conditions for this level of control were territorial, bureaucratic, and financial. In eastern and southern Libya, networks aligned with the Haftar family consolidated authority over ports, transport corridors, and key nodes of part of Libya’s oil distribution. This allowed them to operate a dual system. Officially, they oversaw fuel distribution and security. Unofficially, they taxed, redirected, and re-exported fuel flows at scale.
Maritime routes saw entire tanker shipments re-exported, sometimes via ship-to-ship transfers in international waters, obscuring origin and ownership. A single vessel could carry tens of millions of liters, making maritime smuggling the backbone of large-scale diversion. On land, the system was more granular but equally effective. Checkpoints imposed informal taxes, distribution quotas were manipulated, and artificial shortages were engineered to push fuel into black markets.
This is where Arkenu’s role becomes clearer, not just as a participant in this system, but also a facilitator of its financial layer. By operating as a private entity with privileged access, it created a bridge between state-controlled production and private offshore revenue channels. In doing so, it helped transform a fragmented smuggling ecosystem into something closer to an integrated shadow economy.
The question then is not why this persisted, but why it took so long to confront.
That answer lies in Libya’s political equilibrium. Since 2021, governance has rested on a tacit bargain: distribute rents widely enough to prevent renewed conflict. Thus, it meant tolerating, and at times enabling, illicit revenue streams that sustained armed groups and political coalitions. Efforts to disrupt these flows risked upsetting a very fragile balance.
Prime Minister Abdul Hamid Dbeibeh operated within these constraints. His administration oscillated between rhetorical commitments to reform and selective enforcement actions that stopped short of dismantling entrenched networks. In some cases, enforcement was reversed altogether, reinforcing perceptions of complicity or, at best, political caution.
Against this backdrop, the intervention by Mohamed al-Menfi, the Chairman of Libya’s Presidential Council, increasingly stands out, not as a reaction to crisis, but as part of efforts to reassert institutional coherence in a fragmented political landscape. In a system long defined by competing centers of power and transactional governance, his approach seeks to reposition the presidency as a guarantor of accountability and national balance.
By early 2026, the Arkenu issue had crossed a critical threshold. Public scrutiny intensified, fiscal losses became harder to obscure, and international attention raised the stakes. Yet what distinguishes al-Menfi’s role is not simply that he acted, but how he framed the intervention. Rather than allowing the issue to remain confined to technical or bureaucratic channels, he elevated it into a question of sovereignty, public trust, and the integrity of Libya’s economic governance.
It is a remarkable shift as al-Menfi increasingly positions himself as a convening figure willing to engage across Libya’s political divides while also signaling that certain lines, particularly around the management of national wealth, cannot be crossed. In doing so, he has begun to carve out space for a more assertive presidency, one that does not compete with other institutions so much as it seeks to anchor them.
His earlier decision to initiate a comprehensive audit of contracts across the oil and electricity sectors dovetails rather well with his handling of the Arkenu affair. Rather than a narrow administrative measure, these were early strategic steps in building the institutional tools required to confront entrenched practices. In a context where opacity has often been the norm, such deliberate moves toward transparency carry outsized political weight.
The pressure exerted on the executive authority, including Prime Minister Abdul Hamid Dbeibeh, must also be understood within this framework. What might once have endured as a managed controversy was instead pushed toward resolution. It sparks a much-needed recalibration driven by the growing expectation that major economic files cannot be indefinitely deferred or politically contained.
Beyond the suspension of Arkenu’s operations, al-Menfi’s maneuvering also fired off new political signaling. Simply put, such high-level interventions — when anchored in institutional legitimacy and public accountability — can alter the trajectory of even deeply embedded systems.
Importantly, al-Menfi’s approach has avoided the pitfalls of overt confrontation in an already polarized environment. Rather than framing the issue in factional terms, he has emphasized principles: transparency, legality, and the protection of Libya’s shared resources. This has allowed him to engage the issue without further entrenching divisions, an approach that aligns with his parallel efforts on national reconciliation.
In this sense, whether through quiet diplomacy between rival factions or through institutional initiatives aimed at restoring oversight, al-Menfi appears to be advancing a model of leadership that prioritizes gradual consolidation over abrupt disruption. It is not a dramatic break from Libya’s past, but it does represent a departure from the inertia that has often characterized Libya’s notoriously flawed governance.
There are limits, of course. The structures that enabled Arkenu remain resilient, and attempts at circumvention, such as the emergence of new entities seeking to replicate its role, tease the swift adaptability of entrenched networks. Yet even here, the significance of al-Menfi’s intervention lies in raising the political cost of such maneuvers. What once operated in relative obscurity is now subject to heightened scrutiny at the highest levels of the state.
This matters for a country navigating overlapping transitions — political, economic, and institutional. Leadership in Libya has often been defined by short-term balancing acts. What is beginning to emerge is an effort to pair that balancing with boundary-setting: to maintain stability while gradually reclaiming the authority of the state.
The Arkenu affair, then, is not only a test of governance. It is also an early indicator of whether Libya’s leadership can move beyond reactive crisis management toward a more deliberate, reform-oriented posture. In this regard, al-Menfi’s actions, measured, but increasingly assertive, offer a signal that such a shift, while far from guaranteed, is at least underway.
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