On 13 November, the international conference on Libya organized by the Italian government in Palermo, Sicily, came to an end without any major breakthrough.

• The final statement approved by the conference, in which all the major Libyan political actors participated, reaffirmed the Libyan Political Agreement (LPA) framework and the UNSMIL Action Plan but recognized the difficulty to hold a general election on 10 December 2018.
• The postponement of the election until 2019 would guarantee the preservation of the current status quo, with the militias' alliances continuing to shift as militia leaders seek to position themselves in a better bargaining position.
• Political stability will continue to be undermined by rival armed groups seeking to control and monetize oil infrastructure and other strategic assets, although east-west fighting is unlikely to resume on a significant scale in the six-month outlook.

On 12 and 13 November, Libya and international partners met in Palermo, Italy, under the auspices of the United Nations and in the wake of the conference held in Paris in May 2018, in which the leaders of Libya's two main factions had agreed to hold elections by the end of 2018. The conference gathered all the major Libyan political actors, including the prime minister of the western UN-backed Government of National Accord (GNA) Fayez Serraj, representatives of the eastern-based House of Representatives (HoR) and the Libya National Army (LNA), and delegates from Chad, Egypt, France, Qatar, Russia, Saudi Arabia, Tunisia, Turkey, the UAE and the US among others. The conference was part of the plan of the new Italian government to take the lead on diplomatic efforts aimed at ending Libya's political crisis and bring its political rivals to the same negotiating table , chief among them was Prime Minister Serraj and Khalifa Haftar, the self-proclaimed Field Marshal and leader of the powerful LNA.

The final statement approved by the conference reaffirmed the main elements of the Libyan Political Agreement (LPA) framework and the UNSMIL Action Plan. The LPA was signed in December 2015 and it created a nine-member Presidency Council and the GNA, with the intent to hold new elections within two years. Under the terms of that agreement, the HoR was maintained as a legislature and a new advisory body, the High Council of State, was also formed. At the Palermo conference, the participants called for a Libyan-led inclusive National Conference to be held in the first weeks of 2019 in Libya with the aim of proceeding with the unification of their institutions, and the electoral process. The final statement acknowledged the difficulty of holding a general election on 10 December 2018 in light of the ongoing split in governance of the country between the governments in the east and the west, as well as the GNA and HoR's failure to adopt a new constitution and electoral law. Instead, spring 2019 was proposed as a new potential electoral date. The final document also included a generic call to all parties to pursue a new security arrangement in Tripoli based on the redeployment of regular army and police forces with the aim to replace armed groups.

The shortcoming of the Palermo conference

Despite the Italian government and the UN presenting the Palermo conference as a success, the Italian government initiative suffered from the same shortcomings that undermined previous diplomatic efforts. The conference, once again, demonstrated the existence of different political blocs inside Libya based on geographical, ideological, and tribal differences, but failed to present a framework to manage and bridge those differences. LNA leader Haftar, for instance, did not really participate at the conference, and only held a single meeting on the sidelines with Italian authorities to protest against the presence of Qatar and Turkey (accused by Haftar of supporting the Islamist components within the GNA and various Islamist factions in Libya). Moreover, few representatives of the Libyan militias, the real powerholders in Libya, were invited to Palermo, whereas the Turkish delegation left even before the conference had begun on grounds that they were not invited to the first meeting with Sarraj.

Haftar, the western bloc inside the HoR, and representatives of the Bunyan al-Marsous (the powerful alliance of Misratah militias that dislodged the Islamic State from the northern city of Sirte in December 2016) have all released statements underlining the failure of the Palermo conference for the vagueness of its proposals. The conference concluded without a clear plan on the proposed National Conference, which will risk becoming yet another reason for the competing Libyan factions to postpone the electoral process.

Outlook and implications

Despite limited progress in the UN-backed peace process, fundamental obstacles remain between Libya's main factions, which the conference in Palermo has failed to address. IHS Markit assesses that the postponement of the elections until an unspecified date in 2019 would guarantee the preservation of the current status quo, with militias' alliances continuing to shift as militia leaders seek to secure a better bargaining position for themselves. Although key actors such as Haftar and the Misratah militias have shown an increased willingness to engage in diplomacy, likely due to pressure from their foreign backers, their engagement will remain explicitly on their terms. Moreover, no substantive concessions have yet been made by either side, and they likely will not have any reason to, given that they are still in a strong position to influence facts on the ground.

This and fundamental disagreements over the future balance of power and institutional make-up of the country (particularly in how the military is reconstituted) mean that there is little chance the political crisis will be resolved in the six-month outlook. Governance will likely remain split between the east and west, although the central bank and National Oil Corporation will continue to ensure that it remains 'business as usual' in the oil sector as oil production continues to grow and remains a key source of revenue for all sides. The mobilization of LNA-affiliated militias or Islamist militias in western Libya would be a key indicator of hard-line militias' intentions to spoil the even minimal outcome of the Palermo conference and a key indicator of an increasing risk of intra-militia infighting in the capital Tripoli.