Libyan oil terminals back under NOC control

One of the big complaints in Libya is that foreign governments are dictating what should happen in the country and doing so in their own interests.
Sunday 15/07/2018
U-turn. A Libyan soldier walks next to damaged tanks and pipelines at the oil port of Ras Lanuf, on July 10. (Reuters)
U-turn. A Libyan soldier walks next to damaged tanks and pipelines at the oil port of Ras Lanuf, on July 10. (Reuters)

Libyan Field-Marshal Khalifa Haftar is not known for making major U-turns but he has found himself having to publicly back down over plans to sell oil from the east of the country on the international market.

Some two weeks after he handed the country’s eastern oil export terminals to the oil corporation set up in Benghazi by the internationally spurned administration in the east, he was forced to return them to the internationally recognised National Oil Corporation (NOC) in Tripoli, which is linked to the rival administration led by Fayez al-Sarraj.

Forces led by former oil blockader Ibrahim Jadhran, supported by the Islamist Benghazi Defence Brigades (BDB), seized the Ras Lanuf and Sidra oil terminals on June 14.

Or rather re-seized them. From 2013-16, Jadhran had held them but kept them closed, crippling Libyan exports and oil income. In September 2016, Haftar’s Libyan National Army (LNA) took them from Jadhran and Haftar handed them to the official NOC in Tripoli. It was a move that gained him international and national kudos.

However, on June 25, three days after the LNA ended Jadhran’s occupation of the terminals, it was to the Benghazi body that Haftar gave control of the terminals along with the other three facilities in eastern Libya.

His argument was that income from the NOC sales was being used to pay militias such as the BDB. He reckoned that the NOC in Benghazi could sell the oil with the income used to fund the LNA and civil administration in areas under LNA control.

Many Libyans liked the idea, agreeing that the funding of the militias needed to stop, but they, along with Haftar and the LNA, made that determination without taking into account the United Nations or key international players such as the Americans and the Europeans.

The United Nations insisted the terminals be returned to the official NOC. The United States, the United Kingdom, France and Italy fired off similar demands, noting that any attempt to sell Libyan oil without the NOC’s approval would be a breach of UN Security Council resolutions. The European Union threatened action against any tankers taking Libyan oil.

The threat of oil tankers being intercepted stopped tanker owners from allowing their vessels to be used to ship oil from eastern Libya. Eastern hopes that countries such as Egypt and Russia would ignore the UN ban and buy oil proved to be a fantasy.

Although nothing official has been said, there were reports that the Americans and French pressured Haftar behind the scenes to reverse his decision.

With no one buying, the result of Haftar’s handover was that Libyan oil sales — approximately 1 million barrels per day (bpd) at the beginning of June — plummeted to less than 250,000 bpd by the end of the month. The NOC estimated the country was losing $67.4 million a day in sales.

Haftar handed the terminals to the Tripoli NOC on July 11. The decision was announced by the NOC and only the following day did the LNA confirm it.

Not everyone is happy about it. People in Benghazi spoke of their deep disappointment. “We all thought it [the initial decision] was a good idea. The US forced him to change,” said one local journalist.

The issue has affected oil prices as well. After the first decision, they went up on the expectation that some 800,000 bpd of Libyan oil would no longer be available on the international market. That suited many producers, including Russia.

Handing the terminals back to the official NOC had an instant opposite effect, with prices falling steeply. The day the NOC announced the hand-back, the price of benchmark Brent crude dropped almost 7%, its biggest fall in more than two years.

The saga has been a serious misadventure for Haftar. Internationally, his credibility suffered from the first announcement. Not only was it bitterly opposed, it was seen by his allies as a serious political misjudgment. While the change of mind will ease the foreign pressure, the reasons for it are likely to be resented in Libya.

One of the big complaints in Libya is that foreign governments are dictating what should happen in the country and doing so in their own interests. Any Libyan figure seen as following foreign diktats is regarded with dislike.

The one person who comes out of this on top is the head of the official NOC, Mustafa Sanalla. It was significant, moreover, that in the NOC’s statement announcing the terminal hand-back and force majeure lifted, there were thanks to the LNA for recapturing Ras Lanuf and Sidra and commiseration at the number of soldiers who died in the incident.

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