Alex MacDonald
Analyst says the vital National Oil Corporation, which became financially independent in 2020, is key battleground between political rivalries
A crisis is brewing at Libya’s state oil company after the organisation’s current head refused to give up his post following the appointment of his successor by the country’s Tripoli-based government.
Mustafa Sanalla, previously known for maintaining the National Oil Corporation’s relatively neutral stance in Libya during the tumultuous decade since Gaddafi fell, announced his refusal to be replaced, saying the mandate of the Tripoli government had “expired”.
“This institution belongs to all Libyans and not to you,” he said in a live video address to Abdulhamid Dbeibah, who was appointed as prime minister last year as part of a UN-backed peace process.
In February, the parliament based in the eastern city of Tobruk – which is backed by powerful military commander Khalifa Haftar – named Fathi Bashagha as new prime minister of the country, however, Dbeibah has refused to concede power.
Sanalla also accused the United Arab Emirates of being behind those attempting to oust him.
On Wednesday, Dbeibah made public a 7 July decree announcing that former central bank governor Farhat Bengdara and four others would make up the “board of directors of the National Oil Corporation,” ending Sanalla’s eight-year stewardship.
Bengdara had overseen the central bank during the reign of former ruler Muammar Gaddafi between 2006 and 2011, before he joined the uprising that saw the Libyan leader ousted and killed that year.
“It’s vitally important under the current conditions that Libya regains its oil and gas export capacity as quickly as possible,” Bengdara told reporters in Tripoli.
“The oil sector has fallen prey to political struggles, but we will work to prevent political interference in the sector.”
The US appears to have thrown its weight behind Sanalla in the current dispute.
In a tweet on Thursday, the US Embassy in Libya said it was “deeply concerned” about the power struggle at the NOC.
The NOC] is vital to Libya’s stability and prosperity, and has remained politically independent and technically competent under the leadership of Mustafa Sanalla,” they wrote.
“The reported replacement of the NOC board may be contested in court but must not become the subject of armed confrontation.”
A key battleground
The confrontation between the Tripoli government and Sanalla has been a long time coming.
The government’s Oil and Gas Minister Mohammed Aoun told AFP in April that Sanalla had been “exceeding his prerogatives” and ignoring laws governing the oil sector.
Jalel Harchaoui, an associate fellow at the Royal United Services Institute (RUSI), told Middle East Eye that the dispute dates back to September 2020 when Haftar lifted a months-long blockade on oil exports on condition that proceeds would be more evenly divided between the different power centres.
“Before September 2020, every penny, every dollar captured was only transiting through the bank accounts of the National Oil Corporation and the money would just flow to the central bank in Tripoli,” he said.
“After September 2020, the NOC became a financial actor – it became responsible for storing and accumulating the dollar revenues and its own banking accounts with the Libyan foreign bank. And that money, those billions of dollars, would be sent to the Central Bank of Libya only when the NOC decided on a case by case [basis] to do it.”
As such, the leadership of the NOC became a key battleground. Harchaoui added that the choice of Bengdara, who he said knew nothing about oil, indicated that Tripoli was more concerned with wealth extraction than energy extraction.
“By installing a person that he picked, Dbeibah has now good reasons to believe that he will be much more in control of the financial aspect of the NOC that was introduced in September 2020,” he explained.
The country’s oil and gas sector, one of the world’s largest, is a vital economic lifeline for the country.
Earlier this month ordinary Libyans took to the street to protest widespread power cuts across the country, which can often last up to 18 hours a day.
In the capital Tripoli and the second city Benghazi, protesters chanted “we want the lights to work”, while other demonstrators ransacked the eastern parliament in Tobruk.
The Beltrees youth movement, an activist group campaigning for better living conditions in Libya, said on 2 July that its activists would occupy city streets and squares until all the ruling political bodies “announce their resignation in public”.
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New chief at Libya’s key oil firm, US warns against confrontation
Hamza Mekouar & Paul Raymond
Libya’s government replaced the head of the key National Oil Corporation on Thursday in a dramatic move that prompted the United States to warn against any “armed confrontation” over the sector.
The North African country’s vast oil reserves have often been at the heart of political disputes, but the NOC had largely stayed neutral despite years of division since the 2011 toppling of dictator Moamer Kadhafi in a NATO-backed rebellion.
However, in a decree made public on Wednesday, the unity government of Abdulhamid Dbeibah appointed former central banker Farhat Bengdara to replace NOC head and veteran technocrat Mustafa Sanalla.
On Thursday morning, Bengdara took up office at NOC headquarters in Tripoli, where he gave a news conference.
“It’s vitally important under the current conditions that Libya regains its oil and gas export capacity as quickly as possible,” he told journalists.
“The oil sector has fallen prey to political struggles, but we will work to prevent political interference in the sector.”
‘Vital’ to stability
Dbeibah’s move against Sanalla follows months of rising tensions in Libya after the country’s eastern-based parliament appointed a rival government, led by former interior minister Fathi Bashagha and seen as backed by military strongman Khalifa Haftar.
Dbeibah has refused to cede power before elections, and Bashagha has so far failed to take office in Tripoli, raising fears of renewed conflict just two years after a landmark truce ending a ruinous attempt by Haftar to seize the capital by force.
The US embassy said Thursday it was following developments “with deep concern” and stressed that the NOC was vital to Libya’s “stability and prosperity”.
Since April, pro-Haftar groups have blockaded key eastern oil facilities to put pressure on Dbeibah.
As a result, Libya’s crude and condensate exports have fallen from around one million barrels per day in March to just over 400,000 so far in July, according to data intelligence firm Kpler.
The blockade has also contributed to crippling power shortages that sparked angry protests earlier this month.
The blockade also comes amid a supply crunch on global oil markets, rattled by the war in Ukraine, in turn prompting consumer nations to pressure other producers to ramp up output.
US President Joe Biden is expected to press Saudi Arabia on the subject when he visits the kingdom this weekend.
Blockade to end?
Libya sits on Africa’s biggest proven crude reserves, with easy access to European markets.
US Ambassador Richard Norland, who has been working on a mechanism to manage the highly disputed revenues from Libya’s crude sales, said Sanalla’s replacement “may be contested in court but must not become the subject of armed confrontation”.
However, the appointment of Bengdara, a Kadhafi-era central banker reportedly close to Haftar, has triggered speculation that Dbeibah made a deal with the military strongman to allow him to keep power in Tripoli.
Emadeddin Badi, a senior fellow at the Atlantic Council, said Bengdara’s appointment was “the product of a momentary convergence between Dbeibah and Haftar, but it could be the basis for a broader deal”.
“Dbeibah gets several things from it,” Badi told AFP.
“He regains access to state funds, it stymies the US financial mechanism or the momentum to implement it, and Haftar will presumably lift the (oil) blockade and limit, if not completely halt, his support for Bashagha.”
Sanalla, who has long mediated disputes to keep Libya’s crude flowing and positioned himself as an interlocutor with foreign states and oil firms, had told Dbeibah in a defiant video message on Wednesday that “this institution belongs to the Libyan people, not to you or the Dbeibah family”.
Aydin Calik, an energy analyst at the Middle East Economic Survey (MEES), warned that the new board was contested.
He told AFP that “uncertainty over who is in charge at NOC raises questions: Who can legitimately export oil? Will international oil companies recognise the new NOC board? What might this mean for their contracts?”
There was no immediate indication that the oil blockade would be lifted.
Anas El Gomati, of Libyan think tank the Sadeq Institute, noted that the blockade was “the work of the Wagner group”, a paramilitary group linked to the Russian government.
“Lifting it would require the agreement of three main actors: Haftar, who is protected by Wagner, the UAE, which pays for it, and the Kremlin,” he said.
“Given the current conditions, why would the Kremlin green-light lifting an oil blockade that’s hurting southern NATO countries?”
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