The Fight to Divvy Up Libya's Oil Spoils

Splitting the Libyan Spoils

by Inside Intelligence with Southern Pulse - Oilprice.com

29th April 2016

Politics, Geopolitics & Conflict

Let’s get Libya out of the way first. It should not be necessary to mention this, and in general we find it inadvisable to comment on foreign policy issues brought up by the campaigning of Donald Trump; however, because the U.S. intelligence community has seen fit to respond, we will note only that the Islamic State (ISIS) is not known to be selling Libyan oil. It has not made it that far.

There is also the question of what ISIS would actually do with a major oilfield. It can manage small ones, but does not have the capacity to run a big one.

Right now, their tactic is to threaten the big fields in order to use that as leverage to throw a wrench in unity government negotiations.

Moving on to what’s really going on in Libya, control of the country’s oil reserves is indeed in question. ISIS is not the biggest threat in this respect. The eastern “government” in Tobruk is using its own branch of the Libyan National Oil Company (of Benghazi) to attempt to export oil unilaterally. It has in fact sent out its first cargo, bound for Malta; however, Malta is not allowing the cargo to dock and the UN has blacklisted the tanker carrying it.

It’s since been ordered back to Libya, but it’s not going to offload its precious cargo without direct orders from the UN.

The other Libyan government (the second of three) based in and controlling the capital, Tripoli, had vowed to block this export move. So far, it’s winning this phase of the battle. Whoever controls Libya’s oil, controls the government because its revenues are almost entirely dependent on oil.

Right now, Libya has three governments and two National Oil Companies and two Central Banks—one each in Tripoli and Tobruk. That leaves the third government—the UN-backed Government of National Accord (GNA)—in a tight spot because it needs the support of both in reality, for any stability to emerge.

On 30 March, the GNA’s UN-backed Prime Minister-designate, Serraj, showed up in Tripoli feeling a bit overconfident after the US and a handful of European countries recognized it as the legitimate government of Libya. They did this without any endorsement from the eastern government based in Tobruk, and without any support from the military factions of Libya. So basically, the GNA and the UN tried to move into Tripoli without any real backing, but they have made some headway (what price they paid for that, we’re not sure).

On 25 April, the GNA took over the Foreign Ministry in Tripoli (and seven other ministries). In the meantime, the government in Tobruk has still not endorsed a GNA cabinet. So Tobruk’s move to export oil was immediately thwarted.

The GNA, then, has largely won over the Central Bank and the NOC in Tripoli, and somehow managed to get past the Islamist-leaning government in Tripoli along the way, but the previously favored government in the east (the internationally recognized one) is playing hard to get and its own NOC is trying to export oil alone.

Where the media-reading public probably gets confused is in the alliances here, which are anything but black and white and everything about divvying up the spoils. Readers tend to assume that the eastern NOC is the “good guy” in this scenario because, after all, it was the eastern Tobruk-based government that was “internationally recognized”, while Tripoli was being controlled by an Islamist-leaning government, which everyone in the West immediately associates with the “enemy” in a knee-jerk reaction. However, it with the NOCs and the Central Banks that it gets trickier.

The Tripoli-based NOC and Central Bank have remained recognized as the legitimate branches of these institutions despite Libya Dawn’s control over the capital city, which did not extend fully into the NOC or Central Bank. Tobruk overstepped by trying to make an independent go at oil exports through a parallel NOC.