Libya Joins North Africa’s Hydrocarbon Resurgence with $70 Billion Proposal
The Iran-Israel confrontation has heightened the struggle for oil dominance in the Maghreb.
On 9 July, US President Donald Trump announced a 30% tariff on imports from Libya and several other countries, citing a $900 million goods trade deficit with Libya last year. The move formed part of Washington’s wider tariff campaign aimed at strengthening the US dollar and fuelling a bull market. Just two weeks later, Libyan President Dbeibeh proposed a $70 billion economic partnership with the United States. The proposal targets Libya’s oil and gas sector, and coincides with Algeria’s recent opening to foreign direct investment (FDI) in its hydrocarbon and mineral sectors. These developments further signify a worldwide return to hydrocarbons, and the North African strategy to leverage it.
Pivot to Oil
President Trump’s tariffs, impacting $1.5 billion of Libyan exports to the US, aim to correct trade imbalances but risk exacerbating fiscal vulnerabilities in resource-dependent states. Libya, where oil constitutes over 90% of export revenue and ~60% of GDP, faces acute fiscal strain from the 30% US tariff on $1.5 billion of exports. This levy could reduce Libya’s trade surplus by an estimated 10-15%, exacerbating budget deficits already strained by post-conflict reconstruction. Dbeibeh’s $70 billion proposal, spanning energy, minerals, infrastructure, health, and telecommunications, leverages Libya’s 48 billion barrels of proven oil reserves to attract American FDI. A SWOT analysis reveals strengths in Libya’s untapped offshore blocks but highlights weaknesses in governance and infrastructure, which could undermine implementation.
Algeria’s parallel strategy, opening its vast hydrocarbon reserves to FDI, amplifies this regional pivot. Both nations are capitalising on a global return to hydrocarbons, driven by market volatility and geopolitical uncertainty.
Hydrocarbon Strategy vs. U.S. Tariffs
Following the Iran-Israel confrontation, oil markets experienced significant volatility, with Brent crude falling to $70.14 per barrel in April amid concerns over a tariff-induced global slowdown. This volatility has, counterintuitively, reinforced hydrocarbons’ appeal as a reliable energy source. Supply chain disruptions and the high upfront costs of renewables have driven nations to rely on oil and gas as a hedge against instability.
Libya’s $70 billion proposal aligns with U.S. interests in securing energy supplies and countering Chinese and Russian influence in North Africa. However, Algeria’s concurrent FDI reforms, targeting its 12 trillion cubic meters of gas reserves, foster regional competition, potentially weakening Libya’s negotiating leverage with Western firms. The pivot to hydrocarbons by Libya and Algeria represents a pragmatic response to U.S. tariffs and global energy market volatility. By capitalizing on their vast reserves and proximity to Europe, both nations seek to ensure economic stability and attract FDI.