Libyans swap jewelry for medical treatment as crisis bites

A man displays Libyan Dinar banknotes in a jewelry store in the old city of Tripoli, Libya October 26, 2017. Picture taken October 26, 2017. (Reuters/Ismail Zitouny)
Updated 16 November 2017

Libyans swap jewelry for medical treatment as crisis bites

TRIPOLI: In a square behind Libya’s central bank, black market dealers, some of them armed, carry small plastic bags filled with dollars and larger ones with dinars in and out of one of many informal exchanges.
Traders buy food and other goods from abroad at the official rate and sell them at the unofficial one, pocketing vast profits; others make equally large sums by smuggling out heavily subsidised fuel.
In the back streets of the old city meanwhile, ordinary people have resorted to selling jewelry or dollars hidden at home as six years of post-dictatorship chaos take their toll.
“I haven’t been paid for four months,” said Fatima, 40, from the southern city of Sabha as she sold three small gold charms to pay for diabetes treatment for her sister, Hasina, who added: “We’re helpless, there’s nothing else we can do.”
In other signs of rising poverty, elderly women beg motorists for cash on Tripoli’s streets and families queue for charity food handouts. The UN estimated that about 1.3 million people in Libya need humanitarian assistance this year.
Their situation took another turn for the worse in the past two weeks after the black market rate of the dinar, which has long languished at record lows, slid again, fueling inflation that is already around 25-30 percent.
The central bank blamed the audit bureau and the UN-backed government for restricting letters of credit that fund basic supplies to a divided country where a security vacuum and smuggling networks have destabilized the wider region.
Officials had come across suspect requests — one to import tuna worth $120,000, more than the country consumes in a year, according to a Libyan entrepreneur who declined to be named, fearing retribution from Libya’s powerful armed groups.
Just $2.5 billion of an expected $7.4 billion of credit has been allocated, the trader said, helping knock the dinar from around 8.5 to 9.25 against the dollar on the black market. Its value has fallen by more than 600 percent since early 2014.
The economy ministry was not immediately available for comment on a complex credit system that passes through commercial banks and where the audit bureau had documented earlier abuses and lack of oversight.
“We’re talking about an extremely bad economic and financial situation,” Central Bank Governor Sadiq Al-Kabir said in a rare news conference on Tuesday. “Everyone, whether legislative or executive, holds responsibility equally.”

Elusive peace
Traders and economists say political uncertainty is a major factor weakening the currency, with UN talks to broker a deal between rival factions currently suspended.
Libya is struggling to fund food imports and defend its foreign reserves, which the World Bank estimates will stand at $67.5 billion at the end of this year, compared to $123.5 billion in 2012.
International experts say the only way to resolve the issue is to devalue the dinar from the official exchange rate of 1.37 to the dollar, but agreeing an economic strategy in a country dominated by armed factions with rival governments and no budgets is no simple task.
A powerful or well-connected minority who are profiting from a flourishing shadow economy have little interest in change.
The central bank did not comment on devaluation, but economists and diplomats say the bank is reluctant to devalue without a policy plan in place to deal with the resulting shock.
Libya managed this year to lift oil production to about 1 million barrels a day, but output is stuck well below the levels before the 2011 uprising that toppled Muammar Qaddafi.
Revenues that normally account for about 80 percent of gross domestic product are largely used to pay salaries, including those of armed factions added to the state payroll for their role in the uprising. Subsidies include a $4 billion-plus annual fuel subsidy that is among the most generous in the world.
Premiums on the official exchange rate and subsidised fuel make Libya “a criminal and terrorist cross-border funding paradise,” said Husni Bey, chairman of HB Group, one of Libya’s biggest private firms.
“Most instability in Libya today is of a criminal nature... due to the lack of equitable exchange rate for the Libyan dinar and the subsidies that must be changed from goods to direct cash contributions.”
Last year Libya spent around $26 billion, but earned just $6 billion. “This year we estimate that revenues should increase to around $14 billion, but spending will likely be more than double this,” said Mark Griffiths, Libya Mission Chief for the International Monetary Fund. “This is not sustainable.”
The government has sought to reduce the public salary bill by 5 billion dinars annually, clamping down on abuse by removing some 100,000 people who had been claiming several salaries, according to a finance ministry report.
Libyans became used to plentiful public jobs and state handouts as Qaddafi sought to buy loyalty like other Middle Eastern oil producers. Migrant workers used to do the manual work, now Libyans without contacts have taken their place.
Salman Rashid, a public servant, said he had received just three months-worth of pay in the past year. “It’s not enough for basic needs,” he said. “Now I work on construction sites and in buildings maintenance.”
Entrepreneurs have withdrawn deposits from banks for fear of employees leaking word of them to kidnappers and others also prefer to keep money at home.
In a second shop in the old city, a woman who gave her name as Karima was changing 500 euros. “I need to go to Tunis for surgery and am selling my foreign currency holdings,” she said. “Times are very difficult now.”
Shop owner Salahedin Zarti, 52, said up to 10 people come in daily to sell necklaces, bracelets and rings.
“In the beginning it was every day, but now I think people are starting to run out of jewelry,” he said.

From tourism to terrorism: How the revolution changed Iran

Shah Mohammed Reza Pahlavi with his third wife Farah and their son Reza (left). Ayatollah Ruhollah Khomeini (right). (AFP)
Updated 16 January 2019

From tourism to terrorism: How the revolution changed Iran

  • Forty years ago on Wednesday, the shah went into exile and less than a month later, Ayatollah Ruhollah Khomeini assumed power
  • His departure paved the way for the establishment of an Islamic republic hostile to Arab Gulf states

DUBAI: Forty years ago today, Iran’s then-shah, Mohammed Reza Pahlavi, fled the country after a 37-year reign, in the first stage of a revolution that would replace 2,500 years of monarchy with an Islamic republic.

Prior to the revolution, Iran very much resembled Western countries, with a flourishing economy and tourists flocking to the country for its breath-taking landscapes, beaches and various activities, including hiking and skiing. 

The shah’s departure, prompted by mass protests, paved the way for Ayatollah Ruhollah Khomeini to return from exile in France, assuming power on Feb. 11, 1979. 

It was “a genuine social revolution against tyranny, domestic and foreign — the first represented by the shah and the second by… the US,” said Dr. Albadr Al-Shateri, politics professor at the National Defence College in Abu Dhabi.

“The revolution went awry when religious leaders dominated the government, imposed its version of Islam and eliminated their partners in the revolution, including Iranian nationalists.”

Not long after Khomeini took over, the world got a taste of the new regime. Fifty-two American diplomats and citizens were taken hostage on Nov. 4, 1979, and were held for 444 days, after a group of Iranian students who supported the revolution took over the US Embassy in Tehran. 

The Iran-Iraq war, which began in 1980 and lasted for eight years, contributed to the deterioration of Iran’s situation. 

“Fear of the new regime’s attempt to export the revolution to a Shiite-majority neighbor led Iraq to initiate the war,” Al-Shateri said. 

“However, Iran’s insistence on continuing the war until the toppling of the regime of Saddam Hussein exacted a heavy cost on both countries in human and economic terms,” he added. 

“Iran had legitimate grievances against the US, but the way it tried to redress these gripes was counterproductive.”

The shah was considered one of the best customers of the US defense industry. But his Western-inspired reforms sparked turbulent social change that aggravated the clergy, while his consolidation of power and the secret police gave him the reputation of a dictator.

Opposition to his reign and corruption among Tehran’s elite created an influential alliance of radical Islamists. 

Although Pahlavi tried to modernize Iran, driving up oil prices in the early 1970s and implementing reforms in education and health care, he became alienated among Iranians and angered the conservative clergy, who helped drive his exile. 

“Iran changed significantly from before the revolution to after, from a more civil, open and decent Iran to a closed, aggressive and sectarian one,” said Abdulkhaleq Abdulla, former chairman of the Arab Council for Social Sciences. 

“Post-1979 Iran is deeply sectarian, and is not only responsible for sharpening the Sunni-Shiite divide, but also wholly responsible for politicizing and militarizing it,” he added.

Iran “has funded and armed Shiite militias, and has done everything possible to strengthen them so they can challenge the nation-state, Lebanon being a clear example.” 

Post-1979 Iran does not “play by the rules of the game,” Abdulla added. “It became radical, revolutionary and sectarian, and was about to become nuclear, which is deeply destabilizing.”

He said: “Gulf states have lived with Iran for thousands of years, and they knew how to deal with it all along. They had the best possible neighborly relationship, but it has always been a difficult Iran, whether under the shah or Khomeini.”

Abdulla added: “We’ve never seen an Iran that has become the number-one terrorist country in the world except in the last 40 years.”

Mark Katz, professor of government and politics at the Schar School of Police and Government at George Mason University in the US, said: “Unlike the shah’s Iran, the Islamic Republic of Iran sought to export its revolution to other Muslim countries, especially the Arab Gulf ones.” He added: “Still, it must be remembered that the shah’s Iran was also fairly aggressive. It seized Abu Musa and the Tunbs (islands) right when the British were leaving the Trucial States and the UAE was being formed. It had also laid claim to Bahrain.” 

Furthermore, while the shah’s troops helped defend Oman against a South Yemeni-backed Marxist insurgency in the 1970s, Katz said the presence of those Iranian troops in Oman was unsettling to Saudi Arabia in particular. 

“The shah had also got the best of Iraq in their border rivalry — something that Saddam Hussein sought to reverse after the Iranian revolution,” he added. 

Before the revolution, the shah’s Iran often behaved “aggressively toward its Arab neighbors, but its close cooperation with the US against the Soviet Union, which Iran bordered and the Gulf Arab states didn’t, meant that Washington wasn’t willing to act against the shah for doing so,” Katz said. By contrast, the rise of an anti-American government after the revolution led to the US working with Arab Gulf states against Iran. 

“Because the Islamic Republic behaved in such a hostile manner, both toward the Gulf Arabs as well as the US, the 1979 revolution led to the isolation and containment of Iran for many years,” Katz said. 

“Although it may seem counterintuitive, Iran may have posed a far greater problem for the Gulf Arabs if the… revolution hadn’t taken place, because if it hadn’t and Western investment in Iran continued or even grew, there would’ve been a tendency for Tehran to assert — and the US to value — an Iranian effort to be the leader in the Gulf in collaboration with the US.”