With Libyan strongman General Khalifa Haftar’s forces frustrated in their attempt to take control of Tripoli, a new front has opened in the fight over the North African country’s future.
The battleground is the economy of the oil-exporting country, with both sides seeking to weaponise resources under their control. Now analysts warn the internationally agreed arrangements which ensured the flow of Libyan oil despite division and war, appear threatened. Their unravelling would bring further political and economic chaos and could disrupt the supply of Libyan oil to world markets.
From his stronghold in eastern Libya, Gen Haftar and his self-styled Libyan National Army, have established control across a huge swath of territory seizing most oilfields, terminals and ports over the past two years.
He cannot, however, sell oil because under UN Security Council resolutions, the country’s National Oil Corporation is the only entity authorised to export crude. Proceeds are deposited in accounts controlled by the Central Bank of Libya which disburses funds across the country. The two institutions are based in Tripoli and are aligned with the UN-backed government there.
There has been a recurring pattern of the east trying to sell oil separately but previous attempts were blocked by Washington, said Jalel Harchaoui, research fellow at the Clingendael Institute in The Hague. After Donald Trump, the US president, phoned Gen Haftar 10 days into the Tripoli offensive and said he “recognised his role in fighting terrorism, the international climate may have changed to the disadvantage of the Tripoli government,” Mr Harchaoui added.
“We now have three permanent members of the Security Council [France, Russia and the US] that we know to be in favour of the Haftar camp,” he said. “So if in this environment people in the east try something that is not compliant with existing UN resolutions and the US stays silent, a sale of crude may be concluded in the market independently from Tripoli.”
Money has been crucial to Gen Haftar’s swift seizure of southern Libya earlier this year, analysts point out. They say the success of that offensive owes less to military prowess than to the forging of alliances with tribes and armed groups cemented with cash. Libyan dinars printed by Russia, another backer of Mr Haftar, have been used to bankroll the east and to augment Gen Haftar’s war chest, analysts said.
Some fear Gen Haftar is trying to militarise the oil facilities he controls.
He has seized a landing strip at the Es Sider oil port for military use and stationed a warship off the coast of Ras Lanuf, a port and refinery, prompting Mustafa Sanalla, chairman of NOC, to decry what he described as the “militarisation” of oil facilities. Mr Sanalla charged in an opinion piece published by Bloomberg that the military man has been trying to sell oil bypassing NOC.
“I have seen documentation proving that attempts are now being made to sell Libya’s oil illegally through parallel entities,” he wrote. Without doubt the breaking of NOC’s monopoly on exports would result in a prolonged civil war with an array of actors arming and funding themselves through oil money.”
Others predict disruption to Libyan oil supplies as fighting continues to rage on the battlefield and in the economic sphere. A report on Libya by Verisk Maplecroft, a risk consultancy, refers to an incident in 2018 when Gen Haftar tried to sell oil independently. It notes that “in response, the Tripoli-based NOC declared force majeure on loadings at the ports, taking 850,000 bpd off the market. Gen Haftar eventually backed down, but only after weeks of major disruption.”
Already, some foreign companies are feeling the heat as the economy gets dragged into the war. Ali Issawi, economy and industry minister in the Government of National Accord in Tripoli, has warned of measures against the business interests of countries which back Gen Haftar’s “brutal aggression against the capital”.
Total, the French oil company, and Siemens of Germany are on a list of forty group’s that have to reapply for licences to operate in Libya.
Mr Issawi told the Financial Times that governments’ political attitudes will determine how their companies will be treated. France has been a main backer of Gen Haftar, whom it views as an ally in the fight against jihadis in the Sahara. “Countries cannot do business and make money in Libya and at the same time [support] the killing of Libyans,” said Mr Issawi. “They will have to choose.”
The central bank in Tripoli has joined the fray. Citing the need to fight corruption, in late April the central bank imposed restrictions on foreign currency transfers to banks in the east.
“The timing can only suggest that it is a political decision,” said Mohamed Eljarh, head of Libya Outlook for Research and Consulting in eastern Libya. “They understand that the LNA relies heavily on the banking sector.”