ISIS is creating another 'resources-rich stronghold' in the Arab world -- and it's bad news for Europe

While the world has had its eyes glued on Iran, Saudi Arabia, and Syria, ISIS has been creeping into another chaotic state: Libya.

And analysts think that this is going to be a major stress point for Europe going forward.

“One of the most concrete geopolitical risks for Europe in the near future will be the complete or partial takeover of Libya by the militias of the so-called Islamic State,” writes Citi Research’s Tina Fordham.

“While the world’s attention was absorbed by the war in Syria, IS systematically increased its presence there in 2015. Their goal is to establish another resources-rich stronghold in the Arab world, thereby creating another stepping-stone towards the erection of a ‘new Caliphate,'” she added.

Although initially it may seem like Libya’s problems are kind of removed from Europe, Fordham points out two big reasons why ISIS’ presence in the state will be a big risk:

  1. The Arab Spring’s only success story could be ISIS’ next target. Once ISIS builds their stronghold in Libya, they are likely to try to exploit the political and economic weakness of the only success story of the Arab Spring: Tunisia. (For what it’s worth, Libya’s new, shaky government has been meeting in Tunisia.) “The West will have to dedicate considerable resources to the stabilisation of Tunisia over the next few years,” argues Fordham.
  2. A presence in Libya serves as an “ideal base” for organising further terrorist attacks on European soil. “The chances of the West of getting involved in a military intervention in Libya over the next year or two is very high,” warns Fordham.

Notably, things have been extremely chaotic in Libya since Muammar Gaddafi was overthrown in 2011, as two rival governments and numerous armed groups have been competing for power.

But back in mid-December, delegates from the various Libyan factions signed a deal to form a national unity government.

Some analysts think this could be a major turning point for the country and, subsequently, could mean that its oil may soon get back on the market — but others think that this just colours Libya’s whole situation with even more uncertainty.

“With over a million barrels currently shut-in due to the ongoing security and political challenges, it remains one of the few OPEC countries that could theoretically put substantial quantities of additional oil on the market this year,” an RBC Capital Markets team led by Helima Croft wrote.

However, “despite the progress, it is excessively soon to start penciling in the return of large quantities of additional Libyan barrels in the near term.”

Interestingly, Croft cites two reasons that somewhat overlap with Fordham’s aforementioned analysis as to why she and her team do not think that Libyan barrels aren’t going to flood the zone anytime soon: 1) the new government didn’t actually meet in Libya, but rather in Tunisia; and 2) the Islamic State has been keen on damaging Libya’s energy infrastructure.

In short, putting both Fordham’s and Croft’s arguments together, Libya’s looking like a huge geopolitical risk for Europe going forward — in terms of oil, security, and even political ideology.

NOW WATCH: This one ingredient is making a lot of Americans fat

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.