Libya Struggles with Self-Made Oil Crisis

Wasted Economic Chance Despite Window for Security Relief

This file photo taken on September 24, 2020, shows the Brega oil port in Masra Brega, some 270Km west of Libya's eastern city of Benghazi. (Photo by AFP)
This file photo taken on September 24, 2020, shows the Brega oil port in Masra Brega, some 270Km west of Libya's eastern city of Benghazi. (Photo by AFP)

Libya Struggles with Self-Made Oil Crisis

In mid-April, the MENA growth forecast of the World Bank anticipated that the economies of Arab oil exporter countries “are expected to grow by 5.2% in 2022, the fastest rate since 2016, on the back of oil-price windfalls.” That is despite the uncertainty resulting from the ongoing war in Eastern Europe and its influence on global supply chains of food and energy, as well as the lingering economic consequences of the COVID-19 pandemic. Indeed, towards the end of April, the crude oil prices exceeded US$100 per barrel, with expectations to reach US$200 per barrel in the coming weeks as the Russia-Ukraine war continues.

“The disasters of some people are opportunities for other people;” a commonly used Arabic proverb says. While the Arab Gulf countries are making the best use of this rare situation to magnify their national wealth and expand their regional and international political influence, the north African oil-rich countries, such as Libya and Algeria, are losing on the ripe opportunity due to unending internal political disputes and security turbulences. 


This file photo taken on January 19, 2022, shows the Libya's National Oil Corporation (NOC) headquarters in the capital Tripoli. (Photo by Mahmud Turkia / AFP)


In theory, Libya should be living its best time in a decade. As grave as the Russian invasion of Ukraine is, this war offers many ripe opportunities that Libya should seize to achieve security, stability, and even economic prosperity, after ten years of political turmoil and civil wars. However, in practice, the renewed conflicts between the political elite, in eastern and western territories, under two parallel interim governments, are hindering Libya’s potential to seize the momentum, and are further feeding the arms and pockets of foreign and home-grown militia and terrorist groups.

From a security perspective, Libya is given a window of security relief that should prompt the political solution process, especially in regards to the efforts to dissolve militias and unify the divided eastern and western military forces. The foreign actors with the greatest influence on the political and security scenes of Libya – namely; Russia, Turkey, and France – are busy trying to control the consequences of the war in Eastern Europe and, thus, less invested in the tit-for-tat game that they have been playing for years inside Libya. The past three years, in particular, marked heated conflicts between the three foreign powers; that ranged from diplomatic disputes and media exchange of accusations, up to the mobilization of troops and mercenaries on the Libyan soil and sea.

In March, when the Russian President, Vladimir Putin, realized that his so-called “military operation” in Ukraine is going to take longer than initially planned, he publicly announced that he will make use of Russia’s affiliated mercenaries in MENA, whom he deceitfully titled as “volunteers.” Per Putin’s instructions, the Wagner Group started immediately to withdraw its affiliated Syrian and African mercenaries from Libya to redeploy alongside the Russian forces invading Ukraine.


Libya's Fathi Bashagha, who was appointed prime minister by the eastern-based parliament this month, speaks during an interview with Reuters in Tunis, Tunisia March 30, 2022. Picture taken March 30, 2022. REUTERS/Jihed Abidellaoui/File Photo


The Wagner Group, a private paramilitary corporate that is serving the Russian regime, has been operating in eastern Libya since 2017 in support of Khalifa Haftar and the Libyan National Army (LNA) that he commands, against the UN-recognized government working from Tripoli, the Government of National Unity (GNU) which is backed by Turkey. Wagner Group’s operations in Libya were mainly focused on recruiting and commanding thousands of Syrian and African mercenaries.

From an economic perspective, Libya is, allegedly, the North African oil exporter with the highest potential to achieve the economic growth, which the World Bank forecasted. Europe looks for Libya as one of the best alternative resources for oil and Natural Gas, in light of the uncertainty resulting from the Russia-Ukraine war. That is due to the high volumes of proven reserves of both petroleum products and the geographic proximity to the southern shores of Europe that Libya enjoys.

Libya is the country that possesses the highest volume of proven oil reserves, in the entire continent of Africa, and the second-highest volume in the Mediterranean, after Algeria. For decades, Libya has been successfully feeding Europe with Natural Gas via the Green Stream offshore pipeline (length: 540 km) extending from Mellitah Port in Libya to the shores of Sicily in Italy. Plus, Libya enjoys a unique strategic position in the southern of the Mediterranean, through which it can easily ship cargos of Liquified Natural Gas (LNG) to Europe.

Libya is already the fourth top exporter of Natural Gas to Europe and the 21st world producer of Natural Gas. These rankings should have dramatically improved after the eruption of the Russia-Ukraine war, as the majority of the European countries are determined to boycott Russia’s natural gas. Sadly, though, the extreme divisions among the political elite in the Libyan eastern and western territories are putting this rare opportunity to waste.

Once again, the conflicting political elite started to use the energy industry as a political weapon against each other. Although this is not the first time for Libyan oil and gas facilities to halt production under political and security pressures, the existence of two interim governments, at the moment, and the international community’s focus on Ukraine (away from Libya) is further complicating the issue.


Protesters gather in front of Libya's National Oil Company in February over halt in production Hazem Turkia/Anadolu Agency/Getty


Following the failure of holding public elections in December 2021, the Parliament Speaker, Aguila Saleh, in Tobruk planned with LNA’s Haftar, in Benghazi, and the former Minister of Interior, Fathi Bashagha, in Misrata to force GNU’s Prime Minister Abdul Hamid Dbeibeh out of power, making it impossible for elections to be held any time soon. Through keeping the country in a state of infinite division, the eastern squad can ensure keeping their powerful positions for as long as they can. So, they used the legislative power of the parliament to install a parallel government under the leadership of Bashagha. However, Dbeibeh refused to step down unless his term ends in June or an election is held. In response, the squad used the legislative power once again to suffocate Dbeibeh by declining to approve or release the annual budget of the GNU.

One of the sectors that has been badly suffering under the confrontation between the two parallel governments, is the energy sector. Around mid-April, the National Oil Corporation of Libya (NOC) has been halting the operations of major oil fields (Abuatufol, Al-Intisar, Anakhla, and Zueitina) and warned of “the start of a painful wave of closures at the time of the oil and gas price boom.” The NOC’s official statement justifying the closures noted that the fields fell under the status of force majeure as it was impossible to continue operations while protesters are sitting in and clashing with arms at the production sites.

Later, it was found that these protests were organized by militia affiliated to Haftar, with the purpose to prevent GNU’s Dbeibeh from using the oil revenues to finance his government, after the parliament refused to approve government budget. One week before the forced closure of oil fields, the NOC signed an agreement with Dbeibeh to transfer US$8 billion of oil revenues to the GNU. As soon as this agreement was announced, the Bashagha government publicly accused Dbeibeh of “wasting public money” for personal benefit.


Waves of mass displacement began with the 2011 uprising against Gaddafi (Hélène Caux/UNHCR)


In fact, the NOC has been screaming in pain long before the current collision between Dbeibeh and Bashagha governments started. Since January, militias have been controlling oil export terminals and blocking large pipelines. In March, the NOC reported that due to these activities, the production rate lowered from 1.2 billion to 97,500 barrels a day, causing a waste of approximately $3 billion dollars in revenue. Let alone the fact that the NOC has been working under unbearable security conditions and without a budget. Due to the recent closures of central oil fields, the volume of production has retreated to only 500 thousand barrels per day, bleeding tens of billions of dollars from prospected revenues.

In an official statement, the NOC Chairman stressed “the importance of neutralizing the oil sector and avoiding the political conflicts in the country, and warned against being dragged behind calls that do not serve the interests of the nation and the citizens.” He, then, clarified that maintaining the flow of oil to the international market is necessary at this time to “take advantage of the current price boom, all with the aim of promoting the country and repairing what has been destroyed by the wars.”

During her participation in Cairo Meetings of the Constitutional Base Committee, on April 13-18, Stephanie Williams, the Special Adviser to the United Nations Secretary-General on Libya, warned against “weaponizing the oil production” for political purposes. “We agreed that oil revenues, which serve as a lifeline for the Libyan people, must be managed in an entirely transparent and accountable fashion and be equitably distributed among all Libyans. I also emphasized the need to maintain absolute calm on the ground in light of the increasing political polarization in the country;” Williams tweeted.


A Libyan citizen soldiers sit on an armed vehicle flying their national flag in the coastal city of Benghazi (AFP Photo)


On April 27th, the Embassy of the United States in Libya issued a long press release expressing concerns with oil shutdown and its expected effect on other economic sectors, leading to more citizens’ suffering. The statement called upon all the political conflicting parties to act responsibly by focusing on resolving disputes rather than holding services hostage. “The continued oil shutdown is depriving Libyans of substantial revenue, contributing to increasing prices, and could lead to electricity blackouts, water supply problems, and fuel shortages. The damage the shutdown is causing to oil infrastructure will cost Libya additional millions, risks an environmental disaster, and could impact the country’s ability to utilize this infrastructure in the future to reach its full production potential.” The statement also warned that the NOC is protected by multiple UN Security Council resolutions.

Despite domestic and international calls to end the current blockade of the oil production, which is the most important pillar of the Libyan economy, the hope is minimal that this self-made oil crisis may be solved soon. Even after this current crisis over oil production is resolved, other future crisis in other critical sectors will be created as long as the country remains hostage to its political elite.

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