February 17 came and went as Libya and its neighbour, Egypt, reeled at the brutal execution of 21 Coptic Christians, beheaded somewhere along the country's vast Mediterranean shore.

Those who took to Twitter to mark the occasion did so sombrely, with one tweet summing up the mood: "Proud of my involvement in #Feb17 uprising, though I know it's still a long way to go before we see the #Libya we dream of," activist and revolutionary rapper Ibn Thani wrote.

It has been Libya's story ever since the revolution, says Frederic Wehrey, a senior associate at the Carnegie Endowment for International Peace.

"There has been a breakdown of authority, even within the two loose coalitions that are fighting against each other," Wehry warns, referring to Libya's rival governments - one in Tripoli, one in Tobruk - and the militias that back them.

It is a long way from the high of August 2011, when Libyans – some still marvelling at their own bravery, others fierce with pride – emerged from six months of furious fighting to reclaim their country from 42 years of Gaddafi's oppression.

From the country's first democratic elections in July 2012 it took just two years for competing militia groups, heavily armed with supplies captured from Gaddafi's vast stockpiles, to take control of key centres such as Tripoli in the west and Benghazi in the east, effectively rendering any parliamentary authority obsolete. By August 2014, the internationally-recognised government of Libya had moved from Tripoli to the relative safety of Tobruk after a spate of kidnappings, arrests and killings.

This group is backed by Operation Karama ("Dignity"), the forces controlled by General Khalifa Haftar, a Gaddafi-era officer who only formed his army, made up of other Gaddafi-era soldiers, some tribal fighters and Zintan-based rebels, in May 2014.

The previous government, whose term ended with the June 2014 elections, remained in Tripoli, backed by Libya Dawn - a coalition of Islamist militias including former al-Qaeda militants, tribal fighters and those affiliated with Libya's Muslim Brotherhood movement.

By October 2014, around 300 Libyan insurgents returning from fighting with extremist groups in Syria and Iraq had pledged allegiance to the so-called Islamic State. They embarked on a campaign of kidnap and ransom demands now recognised as a hallmark of the terrorist group.

This week 21 of their hostages - mostly Christian labourers who attempted to escape the misery of lifelong poverty in Egypt by working in Libya - were led onto a beach and executed. The video of their beheading, released online, prompted almost immediate retaliation from the Egyptian military, backed by General Haftar's forces.

"You could argue the international intervention is exactly what the Islamic State wants," Wehrey says. "They were trying to provoke the Egyptians, trying to change the dynamic of the conflict . . . all it does is make it more of a magnet for jihadists.

"The solution of this conflict is ending the civil war, a ceasefire, a national unity government and addressing threats [from the Islamic State] with a cohesive security body."

Outside intervention is not helpful, Wehrey says – particularly as Egypt does not have good access to intelligence indicating exactly where IS cells are operating. Indeed, Human Rights Watch, while condemning the deaths of the Copts as a war crime, highlighted the fact that its initial investigations found Egyptian air strikes had killed six civilians, including a woman and her three children.

The United Nations is trying to advance peace talks, but so far their attempts have come to nothing. "I would hope this Islamic State threat might shake both sides up to reach a compromise," Wehrey says. "Otherwise the outlook is pretty grim."

Ben Fishman, a consulting senior fellow at the International Institute for Strategic Studies who worked on Libya at the US National Security Council from 2011 to 2013, says if Libyans agree on anything it is this: they are against foreign intervention in any form.

Egyptian President Abdel Fattah al-Sisi was under extreme domestic pressure to react to their slaughter, Fishman says. "Their deaths were horrific and they conveniently aligned with his side of the civil war," he says, referring to the regional divide of support for Libya's two competing governments.

Egypt - backed financially by Saudi Arabia - and the United Arab Emirates have been supporting the internationally recognised parliament in Tobruk via covert air strikes and other military action for months. Qatar and Turkey are backing the Islamist Libya Dawn.

"If you can take anything positive from this [IS action], it puts an enormous amount of pressure on the Libya Dawn coalition to declare themselves – to condemn the Islamic State and its brutality," Fishman says. "So far even their political leaders have been unwilling to do that."

There are also splits within the already fractured alliances that make up the two main militia groups: fissures that allowed IS to take hold over the last six months, Fishman says. In this, the powerful Misrata rebels are key. To date, they have been supporting Libya Dawn – they allowed Dawn to take control of Tripoli, he says, and now, as they turn away from Dawn, the big question is whether they will change sides: "The Misratans have distanced themselves from it all, but there is a difference between wavering and acting against the Islamic State."

It would not be surprising, says Mattia Toaldo, a policy fellow at the European Council on Foreign Relations, if Egypt conducted more air strikes in Libya – they have been doing exactly that for at least eight months without openly admitting it.

"The situation is very fragile and the big question is whether it will get any support from the US, Europe or other Western countries," Toaldo says.

Although Italy – just 350 kilometres to the north of Libya and the destination for thousands of refugees fleeing the Middle East and North Africa via Libya – is desperate for a solution to this situation and the security concerns it says go with it, it does not have the military capacity to go it alone with any kind of intervention in Libya, he says.

"For any intervention to be effective, you must have boots on the ground . . .  5000 Italian troops would be barely enough to control some key institutions in Libya, let alone challenge the Islamic State."

Since December, IS militants have been expanding their territory into Tripoli, Benghazi and Derna, Toaldo says. It would be unwise to underestimate the potential for IS to expand in Libya. "What surprised everyone was the extent to which the two coalitions [Libya Dawn and Operation Dignity] melted down in the last two months," he says.

"Libya Dawn has lost its control of Tripoli at significant expense, which is now controlled by a mix of local militia, organised crime . . . without a strong presence from Misratan forces, it has created a space for IS to enter the city."

The situation will continue to deteriorate, Fishman predicts, unless a UN-brokered political agreement between the Dawn forces and the Dignity forces succeeds, including an arrangement for a joint security apparatus. In this scenario, IS can be contained, he says. Otherwise, the West needs to consider a Plan B - and soon.

Libyans must understand "their country . . . is becoming an economic basket case, the critical infrastructure is already severely damaged and the oil resources are becoming less and less productive the more the war drags on".

But however dire the situation gets, military intervention does not need to be the only Plan B. Limiting air travel into and out of Libya and imposing an arms embargo while ensuring humanitarian aid enters the country would impose considerable costs on the warring factions, Fishman says.

Given the chaos and violence wracking Libya, is it fair to consider the NATO intervention in Libya led by Britain and France a failed intervention, despite the initial positive assessment?

"There were very positive moments, such as the 2012 elections," says Fishman, who was intimately involved in the US response in Libya over that period. "At that point the country was on a significantly different trajectory, it wanted to be democratic, the civil society and media blossomed initially – the problem was an inability to forge an interim security mechanism and that created a vacuum that eventually played into the scenario that we have today."