Libya Tribune

By Leo Kabouche

The recent turmoil in Libya’s Oil Crescent – a region which stretches along the coast from Sirte to Ras Lanuf, and which extends down to the Jufra district – has underscored the competition for the control of state revenues, as Field Marshal Khalifa Haftar’s Libya National Army (LNA) has intensified its attempts to seize key national institutions ahead of the December 2018 presidential elections.

PART ONE

Seven years after the fall of the Gaddafi regime, Libya remains locked in a cycle of offensives and counter-offensives between militias loyal to rival political groups.  

Although oil production experienced a significant increase in 2017, continuing insecurity and the vulnerability of oil infrastructure to disruptions from armed groups and local protesters still largely constrain Libya’s oil potential.

A fragmented political landscape

According to the BP Statistical Review of World Energy 2018, Libya has the largest proven crude oil reserves in Africa, with 48.4bn barrels. The hydrocarbons sector constitutes the backbone of Libya’s economy: oil exports typically provide more than 90% of government revenue and over 95% of export earnings.

The battle for the control of oil resources is at the center of a conflict pitting the country’s two rival administrations against each other, with armed groups fighting to strengthen their grip over the fragmented political landscape. Among all actors, the most important one is Marshal Haftar’s LNA. Other key actors include:

  • The UN-backed Government of National Accord (GNA), headed by Fayez al-Sarraj and which has been based in Tripoli since March 2016. The GNA was born out of the signing of the UN-brokered Libyan Political Agreement (LPA), signed in December 2015. Despite being internationally recognized as Libya’s legitimate political entity, the GNA has failed to extend its authority much beyond its base in Tripoli.

  • The Tobruk-based House of Representatives (HoR), Libya’s legislative authority under the LPA, and which has refused to hold a vote of confidence in the al-Sarraj government. Instead, the HoR has endorsed the rival administration of Abdullah al-Thinni, which operates from the eastern city of al-Bayda.

  • The Libyan National Army (LNA), an anti-Islamist armed group formed in May 2014 and composed of several dozen local militias of eastern Libya (including the Zintani Revolutionaries Military Council, the Tripoli Revolutionary Council, the Qa’qa Brigade, al- Madani Brigade and the Sawa’iqa Brigade).

The LNA is led by Field Marshal Khalifa Haftar, a retired Gaddafi-era general, who launched an military campaign named ‘Operation Dignity,’ targeting Islamist militias operating in eastern Libya. The LNA is sometimes described as the armed branch of the al-Thinni administration, although Haftar has his own political agenda, modeling himself after Egypt’s Abdel Fattah Al-Sisi, and figuring to play a key role in any settlement between Libya’s main political parties.

On June 28, 2018, LNA announced the capture of the city of Derna, after defeating remaining militants from the al-Qaeda-affiliated militia Derna Protection Force. With the capture of Derna, the LNA now has effective control over all of eastern Libya as well as part of the south.

  • The Benghazi Defense Brigades (BDBSaraya Difaa al-Bengazhi) – a coalition of anti-Haftar fighters, which describes itself as a group of revolutionary fighters (thuwar) opposing the LNA in eastern Libya.

The BDB comprises armed factions with connections to Ansar al-Sharia, an Islamist militia calling for the implementation of strict Sharia law across Libya, and was originally formed to support the Islamist Shura Council of Benghazi (ISCB), an umbrella of Islamist militias.

The groups within the ISCB have varying degrees of affiliation with al-Qaeda in the Islamic Maghreb (AQIM), however their primary goal has been to resist Haftar.

The exacerbated competition for the control of oil revenues

Libya’s oil production has been subjected to fluctuations due to the volatile relationship between rival authorities in Tobruk and Tripoli.

The country’s oil infrastructures have been separated, with different government factions and armed militias controlling the oil terminals. The National Oil Corporation (NOC) — a Tripoli-based state-run entity that has legal control over most of Libya’s oil resources — has expressed neutrality in the conflict, but its ability to manage the flow of exports was dented after eastern authorities established a rival NOC in 2014, which has begun to operate from the city of Benghazi.

Although it never gained international recognition, the eastern NOC has made attempts to sign exploitation contracts with foreign firms. In August 2015, it sent invitations to several oil majors to attend a conference in Dubai, with the aim of “discussing legally signed agreements and contracts.” However, at the time of writing there have been no documented examples of oil sales from NOC east into the international oil market.

In April 2016, the dispute between the rival NOCs led to a three-week blockade of the Marsa el-Hariga port, a standoff which costed Libya $10 million a day.

After particularly acute tensions following the el-Hariga blockade, the rival eastern and western branches of the NOC were unified in July 2016, in an attempt to avert a financial crisis, as Libya’s foreign reserves were growing dangerously depleted.

According to the World Bank, between 2013 and 2016, Libya’s foreign exchange reserves fell from $109 billion to around $70 billion, considerably constraining the GNA’s financial position, and threatening the government’s ability to pay state-sector salaries.

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Leo Kabouche – International affairs and political science graduate with experience in risk management and business development.

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