THE STORIES BEHIND THE HEADLINES

Abu Dhabi

London

New York

Tuesday 20th March 2018

Talks About Libyan Oil Resurface Amid US Sanctions on Iran

Politics

Abdelsattar Ibrahim - 7Dnews Tripoli

Wed, 07 Nov 2018 16:34 GMT

Oil has been the main topic of conversation in Libya, after US sanctions on Iranian oil exports came in to force. Out of 28 countries around the world, the United States has allowed Japan and seven other states to continue importing oil from Iran for a limited period.

A diplomatic source close to the US embassy in Libya told 7Dnews that in the past three months the United States has tried to orchestrate Libyan oil exports to compensate Japan and the other countries, including South Korea, for their reliance on Iranian oil, but there was insufficient time to achieve this.

The United States imposed heavy sanctions on Iran last Monday, targeting the oil sector, banks and industry. President Trump threatened to take additional measures to prevent Tehran from pursuing the export of oil, while Tehran denounced the move as an "economic war" and vowed to defy it.

The daily exports of Libyan oil amounted to 1.6 million barrels before 2011, a figure which was affected by the security unrest. At present, Libya's export volume is around one million barrels per day (bpd).

The diplomatic source said that the efforts to compensate for Iranian oil aimed at increasing Libya's production to 3 million bpd.

"The arrival of Libya's oil production at 3 million barrels per day is difficult to achieve in the foreseeable future," said Sherif al-Hilweh, an American economist and head of an energy company operating in the Middle East and Africa. “The production needs substantial investment in infrastructure, to help increase production, in addition to the security situation of course."

Libya is experiencing armed conflicts between several factions, while international parties, including the United Nations, vigorously seek to resolve the conflict between the adversaries.

Speaking from Tunisia, the diplomatic source said that the period in which Japan and the other countries are allowed to import Iranian oil, amounting to 180 days, may be sufficient for Libya to boost its exports.

It is widely believed that the United States appointed its former ambassador to Libya, Stephanie Williams, as deputy to the international envoy to Libya, Dr Ghassan Salama, to help resolve the Libyan crisis and prepare the country for a strong return to the oil market.

"I think that soon, Japan and South Korea will become Libyan oil customers," said Ezzedine Aqil, senior research and planning director at Mina Politics.

US Secretary of State Mike Pompeo has announced that the countries that are temporarily excluded from the decision to ban the purchase of Iranian oil are China, India, Greece, Italy, Japan, South Korea, Turkey and Taiwan. He added that more than 20 countries stopped altogether the import of Iranian oil.

As a result, oil prices have risen as sanctions bite against Iran. Iran produces about 3.8 million bpd, the third largest oil exporter after Saudi Arabia and Iraq. Japan imports about 130,000 bpd from Iran.

The idea of transferring oil from the Libyan market towards Japan began last June, when the forces of Marshal Khalifa Hafter, commander of the Libyan National Army, took control of oil ports in the east of the country.

European countries, led by Italy, already import Libyan oil. Libya's oil reserves are the largest on the African continent. It is believed that there is an old project dating back to the days of Colonel Muammar Gaddafi, about possible oil exploration that could increase Libya's oil production to 3 million bpd. Japan has imported oil from Libya reaching 400,000 barrels.

In the past, Japan was a consistent importer of Libyan oil, but stopped following differences between the Reagan administration and Gaddafi three decades ago.

"After relations between America and Libya went back to normal, the United States and its Western allies got what they wanted from Libyan oil, while Japan was unable to get back to its former share," said Akil, a Libyan diplomat.

Akil said: “The project to increase Libyan oil production to 3 million barrels per day, was developed by Shukri Ghanem, the late president of the National Oil Corporation.”

"The current infrastructure does not support production of more than 1.6 million barrels a day," he said. "It needs about $50 million urgently to maintain ports and oil pipelines and to reactivate wells that have been shut down. This is only to maintain the usual export rate of 1.6 million barrels."

The UN mission to Libya and international parties are making strident attempts to stabilise the country. Representatives of several countries will participate in a conference in Palermo, Italy, on the Libyan issue next week.

"I think there will be pressure for things to stabilise in Libya," Akil said, "including a conference in Palermo as well as other international efforts.”




Middle East Africa