Two Bets, One War: How the Iran War Will Decide Libya's Fate

Libya's $20 billion Western oil bet and $4 billion Pakistan arms deal represent two incompatible survival strategies. The Iran war will determine which half wins.

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Libya’s $4 billion arms deal with Pakistan is stalling for the same reasons the Sudan deal collapsed. Saudi does not trust Haftar. British-made components in the JF-17 fighter jet trigger export controls that Islamabad cannot override. China’s reluctance to supply advanced systems to embargoed states adds another layer of obstruction. Pakistan’s own industrial pipeline is congested, with confirmed orders for Azerbaijan and active negotiations with Bangladesh, Indonesia, and Saudi. The deal, signed in December 2025 in Benghazi and celebrated as one of Pakistan’s largest-ever defence exports, was always more ambitious than deliverable. But the delay matters less for what it says about Pakistan than for what it reveals about Libya. The country is running 2 competing strategies for survival, and the war with Iran will determine which one prevails.

In January 2026, one month before the first US and Israeli missiles struck Tehran, the western government in Tripoli signed over $20 billion in oil development agreements with TotalEnergies and ConocoPhillips at the Libya Energy and Economic Summit. A senior adviser to the US president attended. Chevron signed an MOU for its return to Libya. A separate deal was concluded with Egypt. The projected revenues over the 25-year life of the TotalEnergies-ConocoPhillips agreement exceed $376 billion. The additional production capacity targeted is 850,000 barrels per day. This was transactional statecraft in its purest form. Tripoli wagered that the return of the current US administration had fundamentally altered the terms of engagement in the region, that economic outcomes now mattered more than democratic credentials, and that anchoring Libya’s oil future to Western capital would buy the political legitimacy that elections had failed to deliver. That wager now sits inside a war.

Libya produces approximately 1.4 million barrels of oil per day and holds Africa’s largest proven reserves at 48 billion barrels. It is exempt from OPEC+ quotas because of its political status. Oil and gas account for 95% of government revenue and exports. In 2025, total revenue reached 136.9 billion Libyan dinars, roughly $21.7 billion, of which 99.6 billion came directly from oil sales and 17.2 billion from royalties. The National Oil Corporation has set a target of 2 million barrels per day by 2028, with 1.6 million targeted for 2026 or 2027 through the Strategic Programs Office. In Libya’s first licensing round since the fall of the old regime, 37 companies out of 44 applicants pre-qualified to bid on 22 offshore and onshore blocks. Among them are some of the West’s largest energy firms alongside QatarEnergy, Turkey’s TPAO, and several Chinese operators.

The Iran war has transformed Libya’s energy position overnight. With the Strait of Hormuz effectively closed, global oil markets short by at least 10 million barrels per day as of mid-March, Brent above $100, and QatarEnergy declaring force majeure on LNG contracts, every barrel produced outside the Gulf gains a strategic premium. Libya sits on the Mediterranean, with direct pipeline and tanker access to Europe. Its crude is light and sweet, matching European refinery configurations. Its proximity to Italy, its largest buyer, means shipping costs are a fraction of what long-haul alternatives require. While the Gulf burns, Libya pumps. The question is who benefits.

Two bets, one war

Tripoli’s $20 billion deal and Benghazi’s $4 billion deal are not complementary strategies. They are competing bets on which version of the post-war order will hold. The west has anchored itself to US and French capital, to production-sharing contracts that carry weight in international arbitration, and to the logic that whoever can deliver barrels to Europe under legal certainty will hold the stronger hand when the war ends. The east has anchored itself to Saudi, Pakistan, the UAE, and Russia, to military partnerships that function as proxies for sovereignty, and to the logic that whoever controls the physical infrastructure where oil is produced holds the real power regardless of what Tripoli’s central bank says on paper.