Erdogan’s Egypt Visit and Libya’s Oil Production
Localised agreement on a more stable Libya benefits both Türkiye and Egypt, with commercial opportunities in Libya increasing as a result.
Commercial Summary: Egypt and Türkiye have significant disagreements, but it may suit both sides to develop Libyan energy, potentially jointly, in a bid to reduce their dependence on Gulf Arab states, secure their energy supplies and coordinate their positions in support of Hamas.
Analysis:
The Israel – Gaza War and the Ukraine – Russia War has awakened regional players, including Türkiye and Egypt, to at least several points:
Israel is much weaker than it seems. It is unable to defeat Hamas and is clearly deterred by Hezbollah.
Israel is not permanent or stable. It is internally in crisis, deeply divided between secularist and religious currents.
Israel is incapable of making peace. With 10% of Israel’s population living in the West Bank in settlements considered illegal under international law, and that would have to form part of a future Palestinian state, there is no way for a two-state solution. The only way for a nation state to relocate 10% of its population is through massive military defeat.
The US is an unreliable security partner. China and Russia are better partners for Türkiye and Egypt.
The West as a whole is incapable of defeating Russia in Ukraine, due in part to its inability to muster the funds or the arms production. And yet the West wants to confront China over Taiwan.
Iran has grown far too powerful, as seen from its ability to dominate Syria, Iraq, Lebanon and Yemen, and from its impressive arsenal of drones and missiles.
The Gulf is incapable of standing its own defence capabilities, as evidenced by Iran’s success in deterring Gulf Arab states from allowing the US to conduct strikes against Iranian proxies using its territories.
Furthermore, Egypt and Türkiye are both struggling economically. The Egyptian pound is at 64EGP/USD, compared to an official rate of 30.8EGP/USD. The trajectory of the Turkish currency has been similarly abysmal.
This economic weakness has driven both countries into the arms of the Gulf Arab countries. However, the Gulf states are too close to the US, even as they attempt to turn away from it.
Türkiye and Egypt are also the main players in Libya. That country is sitting on a sea of oil and gas. The oil fields are in the East, under the control of pro-Egypt General Khalifa Haftar. The political control, however, and the legal right to sell oil and award oil contracts, resides in the West, in the capital, Tripoli, under Turkish influence.
There is therefore room for agreement among the two sides. This is confirmed by the recent re-opening of the Turkish consulate in Benghazi, in eastern Libya. Agreement on Libya would help Türkiye and Egypt would help them improve their energy security, increase their foreign currency earnings and reduce their dependence on the Gulf. These factors would in turn allow them to improve their position vis-à-vis Iran. The Libyans, for their part, are extremely anti-Israel, and this may enable Türkiye and Egypt to use Libya as a vehicle through which to support Hamas and other factions. This would enable them to undercut Iran, continue weakening Israel and the West, boost their relevance to the West by causing it trouble, and maintain plausible deniability.
Commercial Impact:
It is unclear, at this stage, what the impact of an agreement in Libya would be in the long term. In terms of oil and gas output, Libya could be producing several multiples what it currently produces. This would improve Egyptian and Turkish energy security. However, this is a multi-year process, at least.
In the short term, it is very likely that opportunities for Egyptian and Turkish companies in oil, gas, infrastructure, construction, healthcare and education are very likely to increase. A more stable Libya would be able to absorb much higher numbers of Egyptian expatriates, helping boost remittances to Egypt. However, Egypt’s economic troubles are severe today, and the risk of devaluation, currency controls and similar measures is severe today. Benefits from a stable Libya would take years to materialise for both countries. However, both countries would both benefit from Libyan stability. This does not mean that Türkiye and Egypt are now allies. Rather, like Türkiye and Iran, the two countries will compete in some arenas and cooperate in others.