Struggle for control of Libya's oil threatens to deepen conflicts

Patrick Wintour, Diplomatic editor
An oil refinery in Zawia in Libya. Photograph: Ismail Zetouni/Reuters

A power struggle for control of Libya’s oil is threatening to deepen splits in the country and undermine the fragile authority of the UN-backed Libyan Government of National Accord, the GNA.

The battle has forced the politically neutral chairman of the Libyan National Oil Corporation (NOC) to warn the GNA that it has overstepped its authority both by closing the oil ministry and by trying to take over some of the NOC’s role.

The attack by Libyan oil boss Mustafa Sanalla’s may weaken already fraying international support for the Tripoli-based GNA led by Fayed Al Serraj. In a deeply divided country, Sanalla is one of the few public figures treated with respect by all sides.

Ambassadors from the five countries with permanent seats on the UN security council issued a rare joint statement on Saturday siding with Sanalla and warning all sides to show retraint, stressing that “the petroleum infrastructure, production and export revenues belong to all the Libyan people and must remain under the stewardship of the NOC”. The ambassadors regard the retention of an apolitical functioning national body responsible for administering Libya’s vast oil revenues as critical to preventing the breakup of the country.

The statement was unusual since it did not assert that the GNA was the sole legitimate government in Libya. The GNA has had the support of western powers for more than a year, but its power base has never extended widely, even within Tripoli.

In a statement, Sanalla said he had asked the GNA “to withdraw its recent resolution. It has exceeded its authority. Only the legislature has the power to make these changes.”

Sanalla insisted that the NOC had long supported the establishment of a genuine government of national accord able to speak for all Libyans. But he continued: “Until we have a settlement, our duty is to administer the country’s oil resources in trust for the benefit of the nation.”

Sanalla had been acting as de facto oil minister; Serraj’s closure of the department appears to bring part of the NOC under political control – a move that risks opening the door further to corruption and revenues being siphoned off for private or political use.

Under the GNA’s order, the prime minister’s office will assume the role of a traditional oil sector regulator, signing contracts, supervising investments, approving projects, developing new legislation and setting price policy. The NOC would be left to execute the prime minister’s plans.

The GNA statement claims that the NOC in future will monitor the production and exportation processes, and name Libya’s representatives to attend meetings and conferences after consulting the prime minister. It will also suggest giving or taking away investment licences, and specifying the daily oil and gas production.

Sanalla has for months urged Serraj to hand over extra cash to repair and restore the country’s damaged oil infrastructure.

Production has been increased from 700,000 barrels per day from 200,000 bpd, but is now slipping due to the renewed unrest, and in particular the closure of the pipeline from Sharara, Libya’s biggest field, based in western Libya. Pipelines are regularly shut as militias bargain for advantage. Sharara, which is run by Spain’s Repsol SA, had been producing 221,000 barrels per day. It only came back on stream in December after the pipeline had been shut for two years.

Sanalla had persuaded the group blocking the pipeline to desist in return for economic aid to the region, but there is a dispute over whether he has been able to fulfil what is essentially a political pledge.

Before the 2011 war, Libya produced 1.6m barrels per day and accumulated more than $100bn in reserves.

Innumerable efforts at political mediation by regional powers have failed as Libya struggles to make the political compromises necessary to form a unity government.

The NOC is one of the few functioning national institutions that has worked across a complex political divide including Serraj and the forces of Field-Marshal General Haftar, the leader of the self-styled Libyan National Army in the east. Western governments have been forced to acknowledge that Haftar, backed by Egypt and Russia, must be given a prominent position in a reconstituted government of national unity, but believe Haftar is intent on becoming a military dictator, rather than a military commander under a clear civilian command.

The foreign secretary, Boris Johnson, told MPs this week that Haftar must have a role, but not the only role.

But Mattia Toaldo from the European Council on Foreign Relations said “Russia’s increasing political backing and the anti-Islamist winds blowing in Washington have strengthened Haftar’s belief there is no point negotiating a political solution with the forces in western Libya.”

Toaldo has said that the diplomatic vacuum has been made worse by the effective end of the role of Martin Kobler, the UN Libyan special envoy. No new envoy has been appointed.

Sanalla has been slowly increasing Libyan oil production, and persuading foreign oil companies from Russia, Italy and the UK to have the confidence that Libya is a country in which it will be safe to invest.

But his case was badly damaged last month when the Benghazi Defence Brigades, with the covert support of figures in the Serraj government, sought to take control of of the major oil ports of Sidra and Ras Lanuf. The ports had been for months been under the control of Haftar, but he had ordered that the revenues from the terminals go to the Tripoli government.

The assault by the Benghazi Defence Brigades led to a revival of an Eastern NOC to rival the NOC and Sanalla, so potentially ending the NOC as the monopoly administrator of Libyan oil. A breakup in the distribution of revenues would probably hasten the disintegration of Libya itself.

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