Gaddafi 'Isn't Running Out Of Oil', Say MoD

Suggestions Libyan leader Muammar Gaddafi will soon run out of oil are wide of the mark, according to intelligence being handed to Britain's military chiefs.

Sky News understands daily MoD reports on the oil situation give a markedly different view of just how long the loyalists can keep fighting.

One source told Sky: "Essentially they say 'Contrary to what you may have read elsewhere, there is no prospect of Gaddafi running out of oil for military purposes any time soon.

"Just because the people can't fill their tanks doesn't mean Gaddafi can't fill his."

An article in The Economist in June cited the fact that drivers in Tripoli faced queues of more than a mile and prices 50 times that in the eastern city of Benghazi as evidence of dwindling stocks - yet loyalist forces have maintained the tempo of their anti-rebel campaign.

A fortnight ago, US intelligence reports claimed that the Gaddafi regime would soon face major cash and oil shortages.

Certainly there is a shortage of hard currency available to the loyalist government, and increasingly they have been forced to issue credit notes instead of cash to pay debts.

And the rebel push into the Nafusa mountains places at risk the flow of crude oil to the loyalist al Zawiyah refinery.

Yet MoD analysts suggest that the situation is not as bleak for Gaddafi as some have suggested - and with the Nato mandate due to run out at the end of September this has served to focus minds on a diplomatic solution.

Another Whitehall source told Sky: "Politically it's been decided that the Libyans have to be seen to do the major heaving and lifting on this one.

"It's important for the rest of the Arab world for it to come across that the Libyans are winning their own freedom, for the demonstration effect.

"But things have consequently moved more slowly than expected. It's no coincidence that there is now a real push to find a political way forward."

Speaking at a press conference, William Hague said Gaddafi was facing fuel difficulties, but that they were not necessarily fatal.

"Certainly it appears that fuel supplies are becoming more difficult for the Gaddafi regime," the Foreign Secretary said.

"It is known, it has been publicly reported, that opposition forces in the (Nafusa mountains) have been able to interdict the operation of the pipeline leading to the al Zawiyah refinery.

"That does affect fuel supplies to the West.

"I can't say whether that will be a decisive factor but clearly it makes things more difficult for the Gaddafi regime."

Sky's foreign affairs editor Tim Marshall revealed that Libyan embassy staff will now be expelled from London and the rebel National Transitional Council NTC recognised as the legitimate representative of the Libyan people.

However, the nine diplomats will leave "over the course of the summer" according to Foreign Office officials - preserving a vital communications link to Col Gaddafi and the possibility of valuable defections, for now at least.

Earlier this month, Saif al Gaddafi confirmed that his father would accept elections overseen by international observers in return for a ceasefire.

The Foreign Secretary has indicated he would be happy to see Col Gaddafi remain in Libya.

"It is for the Libyan people to determine their own future. Whatever happens, Gaddafi must leave power," he said on Monday.

"He must never again be able to threaten the lives of Libyan civilians nor to destabilise Libya once he has left power.

"Obviously, leaving Libya itself would be the best way of showing the Libyan people they no longer have to live in fear of Gaddafi.

"But as I have said all along, this is ultimately a question for Libyans to determine."

Sources said Mr Hague was not denoting a shift in British thinking because ministers have maintained from the start of the military action in March that the future of Libya will be decided by its own people.

However, a political solution was not pursued until it became clear that a rebel assault on Tripoli was, if not impossible, then highly unlikely, and with little guarantee of success.