Alexander Scipio
It is again tussling in Libya over control of oil , the main source of livelihood in Mu’ammar Gaddafi ‘s former Jamahiriya . General Khalifa Haftar , the strong man from Cyrenaica known in Italy for having kidnapped the 18 fishermen of Mazara del Vallo for a good 108 days , has launched an ultimatum : without a new (and more equitable) system for the distribution of oil revenues within on August 1, the Libyan National Army (LNA) will stop the wells.
A blockade with disastrous consequences for the population because the state subsidizes everything, from bread to fuel, but also a problem for Italy . According to the latest bulletinMinistry of the Environment and Energy Security, Libya covers about 15 percent of crude oil imports: in April, 6.067 million barrels of precious Libyan “sweet” oil with a low sulfur content (therefore easier to refine) at almost double the market price (up to $120 per barrel).
The Neverending Story
According to Leonardo Bellodi , an adjunct professor at the Luiss Business School, the distribution of oil revenues in Libya is a never-ending story. “Cyrenaica has always complained of receiving less than it deserves. Gaddafi kept these demands at bay, sometimes with unorthodox methods, which then exploded when the regime ended.
Just a few months after the February 2011 revolution, the transitional government in Benghazi presented a proposal for a new oil measurement system. Now we have this problem again with Haftar, but it’s not the first time he threatens to stop production ”, he explains to InsideOverBellodi, former executive vice president of ENI and senior adviser to the Libyan Investment Authority (LIA), the Libyan sovereign wealth fund.
Haftar’s bluff
The threats of the general from Cyrenaica could be a bluff or, better still, an attempt to have more leverage in negotiating control of the National Oil Corporation (Noc), the state oil body disputed by two powerful families: the Haftar in the east and the DabaibaWest. “I don’t expect any blockage to last very long. It could be a provocation. Haftar finds himself between a rock and a hard place: on the one hand he must show an iron fist, on the other he must be careful not to make enemies of all the regions of Libya, because a stop on exports would have consequences throughout the country”, he says Bellodi.
Before the 1969 coup, Libya produced up to 2.8 million barrels of oil per day. Then with Gaddafi, Libyan output had dropped to 1.8 million barrels. In the darkest post-revolution times of 2011, Libya had dropped below the threshold of 200,000 barrels per day. Now the member country of the OPEC oil cartelit produces about 1.2 million barrels per day, less than 1 percent of global production and about 7-8 percent of Europe’s imports.
The game of Russia
According to the former ENI manager, a new, possible oil blockade in Libya would have little impact on a global level: “Both because Libyan crude oil is scarce, and because the oil market, unlike the gas market, is liquid and particularly fluid”. If anything, adds Bellodi, the sudden lack of Libyan oil could push Europe to play in Moscow ‘s hands .
Despite being under sanctions, in fact, crude oil from Russiahowever, it ends up in the European markets through triangulations with countries such as China, India, Turkey, the United Arab Emirates and Singapore. “The other problem is domestic. 100 percent of the state budget is made up of proceeds from the sale of oil and gas. Since the entire Libyan population is subsidized by the state, a blockade could fuel social unease and unrest within the country”, explains the Luiss adjunct professor and expert on Libya.
It’s Italy?
Libyan oil, as mentioned, is particularly valuable because it is low in sulphur. It is considered by experts to be a “sweet” crude oil and particularly easy (and less expensive) to refine. The sudden shortage of six million barrels of oil would push Italy to buy from other markets, but at present it is difficult to predict what will happen. “I don’t see a supply problem for Italy, but if anything, prices .
If there were to be this blockade, we have to see how long it will last and what the reaction of the financed markets and of the big traders will be. I don’t see much risk of rising prices at the pump. At least for now”, concludes Bellodi.
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Alessandro Scipione, professional journalist, has been working for Agenzia Nova since 2010 , where he coordinates the North Africa and Middle East desk.
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