China eyes Libya as Gulf crisis reshapes global energy flows

A significant yet understated shift in global trade policy is unfolding, with Libya emerging as a country to watch amid changing economic dynamics.

Libya is poised to benefit from a major shift in global trade dynamics after China unveiled a sweeping tariff policy that could significantly expand the country’s economic reach, as reported by Libya Alahrar and agencies on March 23. The move, described by observers as one of the most consequential developments in China–Africa relations, is expected to come into force in May and may reshape how Libyan goods compete internationally.

Chinese President Xi Jinping announced in February that China will eliminate tariffs on imports from 53 African countries, including Libya, covering 100% of customs lines without exception. The policy grants these nations unrestricted access to the Chinese market, home to around 1.4 billion consumers.

China has recently signalled stronger diplomatic backing for Libya, urging the international community to safeguard the country’s frozen overseas assets and prevent any loss of funds, in a move that highlights deepening engagement between the two nations.

For Libya, the change to China’s tariff policy marks a notable shift. Until now, countries classified as middle-income economies, such as Libya, faced tariffs ranging from 10% to 25% when exporting to China. The removal of these duties places Libyan producers on equal footing with competitors from countries that previously enjoyed preferential access.

The immediate impact is likely to be felt in key export sectors. Crude oil, petrochemical products, and raw materials, cornerstones of Libya’s economy, can now enter China without additional costs, potentially improving price competitiveness and demand.

Amid escalating instability in the Gulf following the US–Israeli strikes on Iran, China has intensified efforts to diversify its energy supply chains and reduce exposure to regional disruptions. The conflict has highlighted Beijing’s heavy reliance on Middle Eastern oil, with roughly half of its crude imports originating from the region, much of it transiting through the vulnerable Strait of Hormuz.

In response, Chinese firms have begun shifting procurement towards alternative suppliers while drawing on strategic reserves, with supply security and price stability taking precedence. The crisis has reinforced a longer-term strategy centred on diversification, stockpiling, and expanding non-Gulf energy partnerships, as Beijing seeks to insulate its economy from prolonged geopolitical shocks.

The longer-term implications for Libya of China’s tariff removal may extend beyond exports. Analysts suggest the policy could position Libya as an attractive base for industrial investment, with companies using the country as a production hub to access Chinese markets. Lower operating and labour costs in Libya may further enhance its appeal in this regard.

A report published in January by the Brookings Institution noted that African economies could capitalise on such policies, particularly at a time of heightened geopolitical tensions and ongoing trade disputes. The report characterised the shift as a rare opportunity for countries like Libya to strengthen their role in global trade flows.

Libya Alahrar and agencies, Reuters, Maghrebi.org