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Friday, 16 April 2021

Libyan oil production to resume

Control over Libyan oil production, shut down 162 days ago, is a key question amid efforts to ground a comprehensive political, economic and security solution to the Libyan conflict

Kamel Abdallah , Tuesday 30 Jun 2020
Libyan oil production to resume
Libya’s tribal leaders announcing the resumption of oil production
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Views: 2038

On Monday, the Movement of Libyan Cities and Tribes (MLCT), which includes figures supporting the Libyan National Army (LNA), declared that the tribes have agreed to resume oil production. They also delegated the army leadership to communicate with the global community and the UN to reach agreement “for solutions to prevent oil revenues from reaching the hands of terrorist militias”. The National Oil Corporation (NOC) said there have been talks in recent weeks with the Government of National Accord (GNA), the UN, US and regional countries to restart oil production.

In a statement read at Al-Zuwaytinah oil port, tribal leaders stated that, “oil production and exports were halted to call on the international community and UN to put in place a mechanism that guarantees oil revenues do not fall into the hands of terrorist militias, which has raised the price of food and exchange rate of the dollar, and resulted in the government’s inability to pay salaries.” They asserted that oil belongs to all Libyans and it is the people’s right to reap the benefits from these revenues to improve their living conditions and move ahead with national reconstruction.

The MLCT expressed gratitude and respect for LNA commander General Khalifa Haftar “for working with the movement in handling the crowds that gathered to close down the oil, and issuing orders to protect oil facilities and the lives of citizens, and standing by the people”. They condemned Turkey’s role, which they accuse of greed and aiming to seize the funds and wealth of the Libyan people since it intervened militarily and supports the GNA.

The announcement by the LNA that ports and oil production will resume was expected, due to progress in negotiations over recent months by the UN Support Mission in Libya (UNSMIL) and the US with the NOC, GNA and countries supporting the LNA, according to a statement by the NOC Monday. For the first time, the NOC revealed it is in negotiations with international and regional parties to restart oil production, but accused foreign players of standing behind the shutdown and blocking production at an estimated loss of more than $6 billion since the closure 162 days ago.

The NOC statement hoped “these regional countries will lift the siege” and allow the company to restart operations because it needs to immediately resume production to save the sector’s infrastructure and Libyan economy. It added that the deal that will allow reopening ports and restarting oil production must be transparent, and that oil revenues achieve social justice for all Libyans. It continued that NOC wants the agreement to also “include solutions to protect oil facilities, to make sure they are not used as a military target or a political bargaining chip once again.”

A few days earlier, on 26 June, the NOC condemned the presence of elements from the Russian paramilitary firm Wagner Group in Al-Sharara oil field in southwest Libya, the largest in the country, after a military caravan composed of dozens of cars entered the oil field on 25 June and met with representatives charged with guarding and securing the field. The NOC said many countries have benefited from the absence of Libyan oil on the global market, and regretted Libya’s inability to restart oil production. It added that these countries “are doing their utmost behind the scenes to support the forces responsible for the shutdown”.

NOC Chairman Mustafa Sonallah rejected any attempts by any foreign countries to block the resumption of oil production, adding they do not need “Russian mercenaries or any other foreign mercenaries in Libya’s oil fields. Their only concern is to prevent the resumption of production.” What they need, he continued, is “professional independent national security forces to facilitate the return of production to benefit all Libyan citizens, fair distribution and transparency of oil revenues across the country.”

The US, UNSMIL and EU reiterated their support for the NOC and demanded that all foreign combatants and mercenaries leave the country to allow Libyans to relaunch the UN-sponsored political process based on the Berlin Conference held in the German capital 19 January. Libyan sources told Al-Ahram Weekly that the deal to restart production came after intense talks between the US and UNSMIL, as the main mediators between France, UAE, Egypt and Russia, as key supporters of the LNA on the one hand, and the GNA led by Fayez Al-Sarraj and the NOC on the other.

Sources close to Parliament Speaker Aquila Saleh in Tobruk said the new deal meets the demands of the LNA since the production closure; namely, to open an overseas bank account to divide oil revenues among the three provinces in Libya (Barqa, Tripoli and Fezzan) in unequal amounts, until the condition of the Central Bank is reassessed and its ranks are unified through negotiations on the economic track of the Libyan dialogue. The source added that Saleh made this suggestion until an agreement is reached on a mechanism to distribute oil revenues among the three provinces.

A source in Tripoli said the agreement suggested Sonallah, who is currently strongly supported in the West and seeks to fortify his position as NOC chairman and gain the confidence of the people in East Libya, especially the Azweya tribe whose land is home to most oil fields, especially in the south east. He confirmed that a new bank account for oil revenues was opened in Switzerland, which will be managed and supervised by UNSMIL.
Although there is still discord about the deal between forces inside and outside Libya, one cannot ignore the anticipated financial crisis in east Libya which UN experts believe will impact the authorities in eastern Libya in the coming month due to the war in Tripoli, and lack of financial resources for the interim government that is not recognised globally. This means the deal was made to save them from bankruptcy and collapse.

Oil production has been shut down since January, and the interim government was unable to find other financial resources after the GNA in Tripoli halted most fund transfers to the East at the behest of the US, because Russia entered Libya and is trying to establish a foothold in the south Mediterranean. There is also the matter of a confiscated shipment of Libyan currency printed in Russia.

The US asked Maltese authorities to confiscate $1.1 billion worth of Libyan currency printed by the Russian government-owned Goznak company headed for the Central Bank of Libya in Benghazi. Washington claimed the notes are “counterfeit”, ordered by “a parallel illegitimate entity”, according to a statement by the US State Department and US Treasury issued 30 May. However, this money order was approved by the chairman of the Presidential Council to be printed in Russia for the coffers of the Central Bank since 2016, according to a report by a UN expert team.

Meanwhile, the status quo on the ground in Sirte continues despite the determination of the GNA, which is backed militarily by Turkey, to regain control of the city where Russian-backed LNA forces are still present.

*A version of this article appears in print in the 2 July, 2020 edition of Al-Ahram Weekly

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