Malta has reportedly seized $1 billion worth of Libyan currency bound for the war-torn country from Russia. The U.S. claimed it was counterfeit money, a charge vehemently denied by Moscow.

The U.S. State Department said on 29 May that it "commends" the seizure of $1.1 billion of "counterfeit Libyan currency" by the Maltese government.

The banknotes printed by Goznak, a Russian state-owned company, were ordered by an "illegitimate parallel entity," Washington said in a veiled reference to Libya's eastern military commander Khalifa Haftar.

"The Central Bank of Libya headquartered in Tripoli is Libya's only legitimate central bank.  The influx of counterfeit, Russian-printed Libyan currency in recent years has exacerbated Libya's economic challenges," the State Department said.

"This incident once again highlights the need for Russia to cease its malign and destabilizing actions in Libya," it added.

Russia hit back on 30 May, pointing out that Libya has two central banks, one in the capital Tripoli and another in the eastern city of Benghazi.

Libya has had to contend with with two centers of power jostling to rule the oil-rich North African country.

"So, that's not the dinars which are counterfeit, but America's statements," the Russian ministry said.

Moscow added that Goznak had shipped the currency notes to the central bank's address in Tobruk, as per an agreement signed in 2015.

Goznak also responded to the U.S. accusations.

"Banknotes made as part of the delivery under discussion are a modified series of previous banknotes, and have visual differences compared with them. 

"Samples of these banknotes were approved by representatives of the Central Bank of Libya in the prescribed manner, as a result of which the use of the term 'fake' in relation to these banknotes is unreasonable and unlawful," it added.

The company said the shipment was confiscated in September 2019 and no explanation was forthcoming from the Maltese customs authorities for several months until recently.