The impacts of international economic embargoes on Libyan banks, financial institutions and its economy

International economic embargoes (IEEs) against nation states have become one of the most contested issues in the world because of the complex relationship between global politics and national economic systems. Such embargoes have been imposed six times on Iran, Iraq, North Korea and Cuba and eight times on Libya by the United States (US) from 1981 to 1991, and from the United Nations (UN) from 1992 to 2003. The aim of this research is to investigate the effects of the IEEs on the Libyan economy in general, with special reference to Libyan banks and financial institutions over the last three decades (1980 to 2010). This research answers two main questions. First, have the IEEs achieved their intended goals? Second, given Libya's position as a Third World nation that was under IEEs for 12 years, have such economic restrictions had any significant effects on the activities and performance of the Libyan banking sector and Libyan financial institutions, and if so, what strategies has Libya used to deal with such embargoes?

In this study, empirical research was conducted to investigate the effects of IEEs on Libyan banks and the Libyan economy. In general, the IEEs had a negative effect on the exchange of modern technology and services in the Libyan economy. This implies that most of the transactions between the local banks were very slow due to weak infrastructure and inadequate communication systems during economic sanctions. Moreover, the sharp decline in oil prices during 1993 to 1998 had an overall negative effect on the Libyan economy during the IEEs. To cope with the crisis, many positive monetary and financial policies were implemented by the former Libyan government-including attempts to reform the banking sector, such as controlling the interest rate, encouraging privatisation and controlling the exchange rate.

More specifically, the key findings indicated that the effect of United Nations sanctions had direct negative effects on the Libyan banking sector, including the areas of the banking staff experts, technological equipment, and foreign business. In terms of the impact of IEEs on the Libyan economy, it had more adverse effects on other sectors of the economy, such as education, health, tourism, and agriculture.

With regard to coping strategies used by the Libyan government against the IEEs, these strategies reduced the harmful effects of embargoes on the Libyan banking sector and its economy. It can be said that during international embargoes, there were successful trading relations between Libya, the European Union (EU) and neighbouring countries.