Source: New Europe
Feb 12 2022
By James Wilson
In the past the long-term export of petroleum products allowed Libyans to maintain a high standard of living for several decades, outpacing most African countries in economic development. Libya has the largest oil reserves in Africa and the ninth largest known reserves in the world.
Impressive oil reserves allowed Libya to implement many infrastructure projects and opened doors to the stage of international politics, giving Libyan authorities the ability to influence the decisions of other countries. But the situation has now completely changed. Fluctuations within the Libyan political landscape have a direct impact on the country’s oil production and revenues.
Is oil to blame?
Libya’s ex-leader, Muammar Gaddafi, used the country’s oil wealth to lobby his interests in Europe by sponsoring political parties and candidates.
It was also oil that became one of the main reasons for the fall of the Libyan state in 2011. Attempts to establish a new unified system of power in Libya were unsuccessful. It resulted in a protracted and deep crisis that disrupted the oil supply chain.
During the Libyan civil war, oil became even more important as an expensive valuable resource. The confrontation between the Government of National Unity in western Libya and the House of Representatives in the east stems largely from disagreements about oil production and revenue sharing. Control over oil fields provides a constant stable income which can be easily used to purchase weapons and to conduct military operations. The party controlling the oil flows has a significant advantage over their opponents.
Libyan oil magnate
The success of Field Marshal Khalifa Haftar, one of the key figures in the modern Libyan political landscape, owes much to his oil revenues. Formally acting on behalf of the House of Representatives and defending the eastern region of Libya, Haftar has long conducted an independent policy, positioning himself as the sole head of this region in the country.
The Libyan National Army under his leadership has controlled the oil terminals of Ras Lanuf and Es Sider for 7 years. Before the escalation of the political crisis, Haftar observed the status-quo, trading oil through an intermediary, represented by the National Oil Corporation office in Tripoli, thus sharing the proceeds from sales. It is estimated that Haftar’s forces helped to maintain official production at the level of at least 1 million barrels per day.
But these agreements on the sharing of oil revenues were disrupted by Haftar’s failed march on Tripoli in 2019. The offensive allowed him to finally gain full control over oil flows in Libya. Haftar justified his claims for oil by the fact that the National Oil Corporation located in Tripoli and affiliated with the Government of National Unity, did not fairly take account of the needs of eastern Libyan citizens when they distributed revenues. All the money remained in Tripoli. Similar accusations were regularly made by Haftar’s supporters, despite the fact that National Oil Corporation representatives regularly
transferred funds to eastern Libya.
Khalifa Haftar during a meeting in Athens, Greece.
Leverage
Sole control over the oil industry in Libya gave Haftar the opportunity to manipulate and blackmail in the domestic and international political arena. In an attempt to strengthen and legalise his position, Haftar signed a document allowing him to monopolise the country’s oil sector for 10 years and create a parallel company that ignored the National Oil Corporation. Although this arrangement is completely strictly illegal, Haftar has stubbornly insisted on following it.
There are 5 major oil terminals in Libya: Brega, Ras Lanuf, Hariga, Zuwetina and Es Sider. All of them are located in the so-called oil crescent – a region which extends from Ajdabiya town (southwest of Benghazi) to the eastern outskirts of Sirte. With the growth of income and opportunities, Field Marshal Haftar’s political ambitions have become stronger, albeit against international pressure and the threat of sanctions.
Haftar exerted pressure on the international oil market in an effort to influence international political decisions regarding Libya. An example of this was when the main oil terminals of the country, which were under the control of the Libyan National Army, stopped working on January 18, 2020, before international negotiations in Berlin on the normalization of relations in Libya. As a result, Libya’s entire oil infrastructure, from the extraction of raw materials to sales, was paralysed. The stoppage, which lasted about six months, was Haftar’s political challenge to foreign politicians who, as he believed, threatened his position and intended to remove him from power.
Haftar’s illegal structure for the sale of petroleum products violates international agreements, disrupts the global oil supply system, and causes significant damage to Libyan citizens, who have to endure poverty, hunger and a humanitarian crisis. Haftar and his entourage use the profits from their illegal sales to purchase weapons and luxury real estate. Investigative journalists have alleged that relatives and associates close to Haftar have invested millions of dollars in luxury mansions in France, Italy, Canada and the US.
Tobruk Bay
Libya’s oil resources attract foreign traders who are interested in taking a margin on mediation and oil resales. It has been alleged that Haftar has sold oil through several intermediate companies registered in the United Arab Emirates.
Haftar’s illegal oil trade does not go unnoticed. Even if the navigation information systems of oil tankers arriving in Tobruk are disabled, the vessels are clearly visible on satellites. Their arrival in Tobruk Bay is confirmed by numerous eyewitnesses. Data on these vessels have stopped entering the tracking system since the beginning of January.
Oil tankers continue to arrive at the port of Hariga every few days. For example, on January 27, about 1,000,000 barrels of crude oil were shipped to the tanker Elandra Osprey. About 600,000 barrels were granted to buyers from Singapore, another 400,000 to an unnamed Dutch company. It is also known that on February 3,600,000 barrels were loaded onto the oil tanker Captain Astellas owned by Arabian Gulf Oil and located in the same port of Hariga.
Such actions impact global oil prices, allowing Haftar and his supporters to increase their profit margins, bypassing international markets and internal Libyan restrictions. Daily oil production in Libya is 1.2 million barrels, but the exact amount of oil supplied to the black market is not known. Haftar’s approximate monthly income, if at least 5 million barrels per month are shipped, would be about 450-500 million dollars per month. This is easily sufficient to enable Haftar to promote his military and political agenda. Libya has the largest oil reserves in Africa and the ninth largest known reserves in the world.
International reaction
Although Haftar’s actions violating Libyan and international laws have not gone unnoticed, the reactions of the UN, the US and the EU have been weak. US State Department representatives have informed Haftar of the threat of sanctions. Haftar is a naturalized American citizen, but if prosecuted he would be dealt with in accordance with local laws.
A representative of the US Department of State noted that Washington has called on all parties in Libya to reject any attempts to militarise the energy sector, divide the country’s economic institutions and subordinate the most important infrastructure facilities to foreign interests. However, these words have fallen short of action. In this context, it should be remembered that some illegal oil supplies may even be resold to the American market.
The lack of proper coordination of an international reaction to condemn Haftar’s actions has had a negative effect on the international oil market and on the lives of millions of Libyan citizens. As long as Haftar exploits his illegal sources of income, he will avoid any political compromise and refuse to comply with agreements that would otherwise contribute to national reconciliation in Libya and the establishment of a unified stable centre of power in the country.
* James Wilson is Founding Director of the International Foundation for Better Governance, a not for profit organization dedicated to promote, protect and defend the fundamental rights of citizens, human rights, democracy and the rule of law.
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