The escalation of civil conflict in Libya has led to delays in the export of oil, which has in turn had an impact on imports of basic food items and medicines. The central bank is running short of cash and faces a serious challenge to pay the salaries of tens of thousands of public sector employees.
The Libyan National Oil Corporation (NOC) in Tripoli announced a major decline in production, with heavy fighting in the oil crescent area, home to more than 60% of all the oil in Libya, most of which is exported to Europe.
The oil crescent and its four ports handling exports are disputed between Field Marshal Haftar’s forces in the east, and forces loyal to Fayez Al-Sarraj, Chairman of the internationally supported Presidential Council of the Government of National Accord, in the west. For the last four years, instability has had an impact on Libya’s oil production.
Forces loyal to Tripoli attempted to take over the oil rich region in June but were quickly defeated by Haftar’s army; Haftar then refused to hand over administration of the ports to Libya’s National Oil Corporation in Tripoli.
Just a few days before this recent outbreak of fighting, oil production in Libya had increased to nearly one million barrels a day, but then fell abruptly as exports were temporarily suspended with growing disputes over who was entitled to export oil or enter into contracts with overseas-based import companies.
Haftar says the NOC in Tripoli hands oil income to the central bank in the capital, and millions of dollars are then passed on to extremist groups fighting his army.
The parliament, which supports Haftar’s forces, had previously dismissed the governor of the central bank and appointed a new leader. However, the decision to appoint new leadership was not confirmed either by Al-Sarraj’s government or the relevant international banking authorities.
The parliament has operated from Tobruk in the east since 2014, away from areas controlled by armed militias. It has been working recently to persuade the international community of the legitimacy of Haftar’s decisions on oil exports.
A bank source said oil revenues had been distributed amongst the competing governments and their forces, which include the Government of National Accord led by Al-Sarraj in Tripoli, the National Salvation Government led by Khalifa Al-Ghawi in Misrata and Libya’s provisional government in the east supported by the parliament.
It is unclear how those oil revenues are distributed among Libya’s rival governments, but the accounting authorities said Al Sarraj’s government has spent more than a quarter of a trillion US dollars since taking office at the end of 2015.
The accounting authority found high levels of corruption within the ministries of Al-Sarraj’s government; the head of media at the NOC in the east said that a few hours after high ranking army officers loyal to the government in Tripoli were accused of corruption and funding terrorist groups, the supporters of Haftar marched in the east of the country to support the army’s decision in returning NOC premises to Benghazi.
Protesters in the east called for the oil fields to be shut down if the NOC in Tripoli takes over oil revenues again and hands them to the central bank led by its dismissed governor Kabir. The media spokesperson said the people knew that oil revenues supported the militias and criminal gangs that had killed innocent civilians.
Amongst the protesters, the leader of one of the Zwetina tribes said “the ports and oil plants belong to the people, not to the militias of the Muslim Brotherhood and extremist groups”.
Last week, the French, Italian, British and US governments signalled their concerns about developments in Libya with regard to oil exports and asked all the armed groups to cease hostilities and immediately withdraw from the oil plants without causing more harm.
The Government of National Accord demanded the UN Security Council ban any illegal sales operations. Al-Sarraj’s government sees any organization that is not loyal to it as an illegal organization.
The conflict around oil between the east and the west of Libya, has sucked in many countries that depend on Libyan oil exports. The British Ambassador to Libya, Frank Baker, said Britain does not wish to engage in the conflict between Haftar and the NOC in Tripoli. The leadership in Tripoli was disappointed by the UK position; the NOC in Tripoli believes that the EU will not buy oil from Haftar, or specifically from the NOC in Benghazi.
Al-Sarraj’s conversations with AFRICOM commanders indicated that the US forces wanted the Presidential Council in Tripoli to enter into dialogue with Haftar rather than launching military operations against him.
Ambassadors from Britain and France headed to the parliament in Tobruk, and expressed understanding of Haftar’s decision. One of the presidential advisors said even Russia and China were against the use of force to reclaim the oil ports in Tripoli.
Even if the international community ignores issues around oil production in eastern Libya, it is unlikely to sustain the same production rates as before, especially given the abundance of oil on the international market.
The oil export facilities were badly damaged in recent military operations; one estimate is that repairs will cost more than US$4 billion.