Haftar be going now: the balance shifts in Libya

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Hello and welcome to the Intelligence on Economist Radio. I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. South Korea keeps calling, but no one's picking up the phone. This week North Korea isolated itself further, but by closing off communication with its neighbor, it's probably a diplomatic distraction from big problems brewing in the north. And there's a lot of pent up demand for flat pack furniture and possibly meatballs. Customers are flocking back to Ikea. Past downturns have tended to be good.

For the Swedish firm in the long.

Run, and this time looks to be no different. First up, though, The battle to control the fractured country of Libya seems to have reached a turning point. It's been riven by factional fighting and jihadist groups since an uprising with Western support toppled and killed the autocrat Muammar Gaddafi in 2011 during the Arab Spring. For more than a year now, the warlord Khalifa Haftar has waged a battle to take the capital Tripoli, from a fragile government that's backed by the U.N. though the fighting has destroyed parts of the city, neither side had the upper hand for long, but now Mr. Haftar and his allies are on the run.

Khalifa Haftar has really been one of the few constants of Libyan politics for the last 50 years.

Nicholas Pelham is the Economist's Middle East Correspondent.

He was there with Colonel Gaddafi when the Libyan revolution under Gaddafi was first launched in 1969. He split from Gaddafi in the mid-1980s and defected after a defeat in Chad to the United States, where he worked closely with the CIA. And then in 2011, after Colonel Gaddafi was overthrown, he returned to and there was a vacuum in the aftermath and he has tried to fill that vacuum. He does this very much as a general, as a military man who believes that he can take Libya by force. And it's really been a dramatic failure.

And what effect have Mr. Haftar's efforts had on the country in general. And on Tripoli in particular, if there.

Was one centre of gravity that this kind of vast country had, it was the capital, Tripoli. All roads led there, all the waterways from the great man made river led there. It was the centre of power. A sense it was just kind of reduced to a sort of 10 kilometer city state by siege. And much of the rest of the country, including its oil fields, were in Hafta's hands. I was there last summer and as always, I was struck by the enormous resilience that Libyans have. They've been through absolute hell over the past nine years and they've managed to keep their sense of humor, the joie de vivre. The streets were full in the heart of Tann, but you only had to go a couple of kilometers away from the center of town and the population really began to thin out. And then if you went two or three more kilometers towards the front lines, it was, you know, this is a population which, where there are more military vehicles on the roads than there were civilian cars, people had largely kind of retreated into the center of town. I remember sort of being on the tarmac and waiting for the plane to take off. We sort of waited for an hour or two before takeoff and we knew that there were kind of drones overhead and that planes were being struck. This was really a sort of place where you took your life in your hands and you lived for the moment because you didn't know what the next one would bring.

So what changed?

There was a real danger that Tripoli would in fact fall to Mr. Haftar for a while, and now he is on the run. As you say, what's different now?

What's different is that when there's a vacuum in Libya, external forces rush in. The UN backed government in Tripoli was desperate. It really felt that Khalifa Hafta's offensive could succeed, that they might fall. And they, in their desperation, turned to Turkey. And as of last December, Turkey has been, I think some would see it as essentially kind of running Tripoli's show. They've put a lot of forces into the game. They've put their drones into the sky, they've stationed warships offshore. They've really kind of overpowered Hafta's forces and those of his backers.

But how are all those different powers divided? Who is it that backs Mr. Haftar and why? And who is it that backs the.

Government in Tripoli and why?

Many of Libya's neighbors are afraid of anarchy, of a kind of complete breakdown of order. Indeed, at one point, Islamic State was in control of the city over which the forces are now fighting Sirte, midway between the east and west of Libya. And Egypt in particular is concerned to try and push that Islamist threat as far away from its borders as it can. And it saw HAFTA as a convenient tool to do that. So Egypt has been shoring up HAFTA in an attempt to try and push kind of these different tribal and Islamist militias away from its borders. The Emiratis were on board with that because they've been fighting their own struggle against the Muslim Brotherhood, which they saw as having a stronghold in Tripoli. And indeed, Turkey was very supportive of what at one point looked like an Islamist wave that was sweeping the Middle east after the Arab Spring in 2011 and wanted to shore up its supporters in Tripoli.

But as you say, Mr. Haftar has his international backers and now Turkey is very much dominating the scene. Why are so many countries involved in Libya's strife?

Libya has a relatively small population, perhaps 6 million, many of whom themselves have left the country and its strife over the past decade. But it's got phenomenal natural resources. It's got Africa's largest oil reserves, they're very closely located to Europe. It's got plentiful gas, and it's also got over 1700km of strategic coastline of the Mediterranean, which gives any power that controls Libya a lot of international sway. And there's been in many ways a battle going on for influence across the southern rim of the Mediterranean, all the way from Syria down through Egypt, with its changes of power across into Libya, into Tunisia. And Libya in many ways is pivotal to who controls the southern Mediterranean. And that's why so many forces are rushing in to contest control over that space.

But given all of those different vested interests and all of the people who are already on the ground in Libya, is there any chance that the end of this story is a united Libya, a peaceful one?

Libya has been, see, soaring back and forth now for nine years. The civil war has been waging where the sort of ping pong constantly kind of goes from east to west and back again. And the longer this goes on, the more, the stronger the identities in the east become and the stronger the identities in the west become. There are many in the east who really want now to have nothing to do with Tripoli, who see their paths as having diverged, who are very nervous of the forces of Tripoli coming back to Benghazi, the main city in the east, and imposing what they see as a kind of Islamist agenda over the East. They have the bulk of the oil reserves and together with Egypt and, and the Emirati supporters would very much like to stand up, if not outright independence, some form of self rule. There is a huge desert that separates the population centers in the east from the population centres in the west. So it's very hard to see how any one ruler, particularly after the defeat of Hafta, can aspire to absolute control over the country again and without some major form of devolution. It's hard to see how Libya as a single state is going to stick together. Indeed, there are many who think that de facto partition is likely to be the way forward.

Nicholas, thank you very much for joining us.

Jason, thank you for having me.

For a lot more analysis like this, subscribe to the Economist. To find the best introductory offer wherever you are, just go to economist.com intelligenceoffer it's as simple as picking up the phone, or in the case of North Korea, not Yesterday, the country said it was halting all communication with South Korea, including two daily calls that were the only regular contact between the two nations since the north closed its border in January due to COVID 19. State television said North Korean officials had decided there were no issues to discuss with the south, as the country had only aroused our dismay. But there's more to it than crossed wires.

So the apparent reason or the reason they've given is that they're angry over the sending of leaflets by defector groups from South Korea.

Lena Shipper is our Seoul bureau chief.

So there's a few groups in South Korea that send things like USB sticks, bags of rice, bibles, leaflets against the North Korean regime in balloons that they launch across the border. And North Korea said this is an exceptional the real reason is probably that they're trying to manufacture a crisis. It's a good domestic distraction because there's been escalating economic distress. They probably also have a coronavirus crisis, even though they still claim that there are no cases. And there's no way of telling whether they do or not.

I mean, it was already an isolated country before.

Yes. So it's been a fairly isolated country for years, decades, whatever you want to call it, really. But at the end of January, North Korea shut down the border with China completely to prevent the import of any cases of coronavirus. Imports from China have dropped below $200 million in the first couple of months and below 20 million in March, which is essentially nothing. There's also been reports that were little private smuggling that was almost completely stopped by harsher enforcement.

And presumably with the border closed, things have got even worse. The Times look even leaner.

Yes, that is broadly correct. I mean, it's very difficult to tell the exact impact of this move to close the border with China, because obviously the restrictions along the border have also reduced the flow of information in and out of the country, which was already pretty small anyway. There's no signs yet of an acute shortage of food. Prices have been very unstable. So if you look at the border town of Hyesan, for instance, which is in the sort of north of North Korea on the Chinese border, a kilo of rice became more than 20% more expensive between January and April. There are also regional differences in prices that suggest that there may have been restrictions on domestic movement, which again suggests that there are problems with coronavirus that they're not telling us about. And all of this is compounded by the fact that late spring is already the lean season in North Korea because the winter stores are running low. There are a few crops that are ready to harvest at this point in early April. The Rodong Sinmen, which is the Workers Party newspaper government mouthpiece, actually missed it that there were hardships in the country that people were suffering. So that's a fairly explicit admission for their usual tone.

But that hardship, though, doesn't just extend to the people of North Korea. It must also be fairly troubling for the government to be so closed off from the world. Do we have any sense for how the government is essentially funding itself during this time?

Yeah, so there are a few indications that the government is also struggling to pay for the kinds of things that are like, spending money on, like, new holiday resorts for the elites of the classic white elephant prestige products that regimes like to make to please their cronies. And it seems to be trying to tap into reserves held by businesses. It's apparently joined a bond issuing program which it says it wants to finance more than half the annual budget, which seems unlikely, but there have been reports of some firms compelled to use their foreign currency reserves to purchase that government debt. That would be a sort of reasonable thing to do for a government that had a record of repaying its debt and treating its businesses fairly. But that is not the North Korean government. They have a very patchy record on repaying debts, and apparently they also have quite dodgy methods for persuading people to take part in this bond buying program. So there's been one report, for instance, of a mining boss who was reportedly executed for refusing to purchase these bonds. So it's essentially a sort of polite form of expropriation.

But even that has a bottom to it. Right. If everyone is suffering, then there's only so much you can extort from the business owners.

Yes, that's very true, but it might also be part of a wider strategy to restore state control over the economy. Early on in the Kim Jong Un era, it seemed to be the case that big state enterprises were allowed to accumulate their own currency supply. But apparently that's no longer the case. Maybe the government has decided that that actually furnishes business people with too much power and that control over money is something that they want back. The other thing is that we're seeing over the past few weeks some restrictions on the border apparently easing. So there's been reports that they've opened some border crossings again. There's a bit of ship and vehicle traffic going on again and some goods getting through. So apparently the government has decided that closing itself off completely is not going to be sustainable in the long run.

And I know it's got to be hard to know this, but do you.

Think any of this stems from domestic unrest?

North Korea is a dictatorship, and there's a very expansive view of what the government can get away with without people really protesting against it or being able to speak up against it. But there are still interest groups within the country that need to be kept happy because the regime depends on them to some degree. And it's very possible that some of the business people in the country, for instance, have said, look, we can't be dealing with this stuff in the long term. We want to get back into business. There's definitely a degree to which even a regime like North Korea is responsive to those kinds of complaints or rumblings.

So all that would suggest that this refusing to pick up the phone when the south calls is nothing more than a distraction, a means of whipping up a bit of patriotism.

Yeah, it's very plausible that the regime took a look at domestic issues, you know, thought, we've got all these problems that are causing us a headache, and what could we do to distract from that and to sort of motivate people to have a bit of patriotic feeling that will distract them from shortages and higher prices and all that kind of thing. And maybe manufacturing a bit of an artificial crisis with us or the neighbors is just the ticket.

Lena, thank you very much for your time.

Thank you very much, Jason.

They may not be serving meatballs or.

Selling Billy bookcases, but IKEA stores haven't.

Been entirely idle during lockdowns.

The end of last month, an IKEA parking lot welcomed hundreds of Muslims for a prayer to mark the end of the holy month of Ramadan. And I think it's the first time that IKEA became a place of worship. And the reason was of course, the requirements of social distancing.

Wendelin von Bredo is the Economist's European business correspondent.

And the local Muslim community asked the boss of IKEA in Wetzlar whether they could use the parking lot. It was in a way a very friendly gesture, but also a brilliant PR coup. And photos went across the world of the Muslims praying against the backdrop of a blue and yellow IKEA shop.

So aside from instances of worship then, are people keen to get back to IKEA as it's not known for being a calm and sparsely populated kind of shop?

Yes, interestingly enough, people are returning to IKEA in droves. During the height of the lockdown, as much as 80% of all IKEA shops were closed all over the world. But people decided to make home improvements. They cooked more, so they suddenly wanted kitchen utensils and anything they needed to improve their homes. So first of all, in China they hit the reopened ikeas and many bought big ticket items like a wardrobe or kitchen table. And in Germany, Austria and Switzerland too, there were long lines in front of the shops because of course there's only a certain amount of people allowed into a shop. At the same time, I think one queue in Britain was more than a thousand people and they just patiently, as the British tend to do, waited for their turn.

So why aren't people heading online to get all of this stuff?

I mean, some did. Online shopping increased a lot and during certain times or certain weeks of the lockdown, they jumped to 60% of all sales, which is much more compared with last year when on average sales represented 10% of total. But I think many people just still enjoy to go to Ikea and so as soon as it was possible, again they hit the shops rather than buying online.

So all told, do you think the pandemic experience will change the way IKEA does things? Has this shifted their plans in any way?

Yes, it has certainly solidified pre existing trends. One is of course the shopping online. So they expect the level of online shopping to continue to be higher than predictable pandemic. There are maybe two other things they are continuing which was also a pre Covid plan. One is they experimenting with different, what they call touch points. So that's smaller size IKEA mostly. For instance, they will open next January a mini shop in West London. They're also planning, interestingly at this time to expand and to buy more shopping malls in America, they will always have an Ikea store as an anchor, but of course commercial property is probably priced at a bargain at the moment. So they are hoping to snap up good locations all over America. The other thing Ikea has done actually for 10 or even more years, but they are increasing their efforts to be greener. They are planning to be climate positive by 2030, which means that they want to reduce greenhouse gas emissions by more than their supply chain, em, so they think that it makes good business sense to be green because shoppers expect it and wish it and it's something that makes them popular with their clientele.

So will Ikea be able to ride out the pandemic, do you think?

The company is in sound financial health. It has no debt, it's thrifty by nature. Sales will certainly slump this year. It won't be as good a year as last year, but after the financial crisis the same thing happened. Sales slumped, but then it increased its market share. And that's of course what is hoping to recreate this time.

Bendelin, thank you very much for your time.

Always a pleasure, Jason.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple Podcasts and see you back here tomorrow.