News / Middle East

Strikes And Political Instability Threaten Libya

The Zueitina oil terminal, about 120 km west of Benghazi, Libya, is one of several that has been closed down by labor strife.
The Zueitina oil terminal, about 120 km west of Benghazi, Libya, is one of several that has been closed down by labor strife.
New clashes at key oil terminals in Libya this week and a daring robbery of the European Union ambassador in Tripoli are raising new concerns about economic and political chaos in the North African nation.
 
The government had hoped to re-open several key oil terminals this week that had been closed by striking guards from the recently formed Petroleum Facilities Guard, or PFG. The group is largely made up of militia fighters who helped to topple Moammar Gadhafi two years ago, but have been operating largely outside government control. 
 
But clashes at the ports of Brega and Zueitina, where PFG forces fired on protestors, made it clear that the on-going labor dispute is far from over.  Another issue that came up during the labor dispute was that the striking port workers were apparently selling Libyan oil illegally. This came to light when the Libyan Coast Guard prevented a tanker from entering the terminal at Es Sider, where it was believed to be heading to pick up an illegal shipment of oil.
  
The biggest export terminals at Ras Lanuf and Es Sider, which has an export capacity of 350,000 barrels a day, remain closed. The leader of the strike – a former PFG commander – is based at Es Sider.
 
Libyan oil officials such as Mohammed Hattab of Waha Oil say some terminals have reopened.  “The Brega port is open, one tanker there is loading” said Hattab, who added that the terminal at Hariga is also back on line. 
 
Oil issue leads to political instability
 
Even so, pressure is mounting on Prime Minister Ali Zeidan to do something about the strike. He had warned earlier that oil exports had plunged by 70 percent, a devastating setback for Libya, which relies on oil exports for nearly all of its foreign revenues. 
 
Resumption of shipments from the Brega terminal will only add 90,000 barrels a day to the roughly 500,000 barrels a day Libya is currently exporting, well under half of what the country was exporting before the rebellion that ousted Gadhafi.
 Libya exports its oil in a partnership agreement between the National Oil Corporation (NOC) and oil companies such as Occidental Petroleum, which has a major stake in Libya.
  
That partnership appears to be fraying.  On August 18th, the National Oil Corporation invoked force majeure clauses on export contracts of crude and refined products, legally excusing itself from contractual deliveries because of events beyond its control.  
 
Libyan oil official Ibrahim Al Awami told Bloomberg News that the NOC hoped to cancel the force majeure declaration soon, but sources say that would be unlikely as long as the country’s two major terminals, Es Sider and Ras Lanuf, remain closed.  NOC officials were meeting with some of their long-term oil company partners in Istanbul in a bid resolve the issue.
 
Libya’s Oil Minister Abdelbari al-Arusi says the disruption so far has cost the country $1.6 billion in lost revenue. He warned that not all customers “who have gone to other markets for their oil” will come back.  Industry sources say Nigeria has been the biggest beneficiary of disruption of deliveries from Libya.
 
The Es Sider incident this week, in which the coast guard stopped a tanker suspected of trying to illegally export oil, has raised fears that some strikers will speed up moves to sell oil themselves.  Those fears, led Prime Minister Zeidan to threaten that any unauthorized tankers trying to ship illicit shipments “will be bombed from the air and the sea.”
 
Libyan Prime Minister Ali Zdidan, shown here shaking hands with U.S. Secretary of State John Kerry March 13, 2013, is under pressure to stop the crippling oil industry strikes.Libyan Prime Minister Ali Zdidan, shown here shaking hands with U.S. Secretary of State John Kerry March 13, 2013, is under pressure to stop the crippling oil industry strikes.
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Libyan Prime Minister Ali Zdidan, shown here shaking hands with U.S. Secretary of State John Kerry March 13, 2013, is under pressure to stop the crippling oil industry strikes.
Libyan Prime Minister Ali Zdidan, shown here shaking hands with U.S. Secretary of State John Kerry March 13, 2013, is under pressure to stop the crippling oil industry strikes.
With the export terminals’ storage capacity filled up, oilfields have had to shut down their wells, cutting exports and production to their lowest levels since the civil war in 2011.
 
The oil standoff has added to the woes of the fragile Zeidan government, which is built on an uneasy coalition of Islamists, Gadhafi-era holdovers and some longtime Gadhafi opponents. It has teetered from one crisis to another and has been unable to persuade revolutionary militias to disband and help build up an effective national army.
 
To make matters worse, some of the national military units are dominated by militiamen from the towns of Misrata and Zintan and heed their commanders’ orders rather than instructions from the central government.

Lawlessness spreads
 
The resulting lack of a truly national military has allowed lawlessness to take hold in parts of the country.
 
On Monday (August 19), a group of gunmen attacked a convoy carrying the EU ambassador to Libya, Nataliya Apostolova. The assault outside the Corinthia Hotel in central Tripoli was not far from the prime minister’s main office. The gunmen robbed the EU delegation at gunpoint before shooting at passing cars and making their escape. Policemen outside the hotel did not intervene, according to the EU diplomats.
 
There has also been a series of targeted killings in the eastern city of Benghazi in recent days. The Associated Press reported that a senior security investigator was shot and killed Friday, a day after street clashes by rival factions in the city.
 
But the Tripoli government’s problems go well beyond street crime and lawlessness. Political leaders in the east of the country have been agitating for less centralized governing structure since the overthrow of Gadhafi. Now these leaders, known in Libya as federalists, are threatening to break away from Tripoli.
 
The federalists have close ties to the striking oil industry guards in the area and are accusing the central government of having overly close links to the Muslim Brotherhood. Increasingly, they are trying to portray their cause to break away from Tripoli as similar to the struggle between secularists and Islamists in neighboring Egypt.
 
But analysts say the current factionalism in Libya is more complex than simply a struggle between secularists and Islamists.
 
“What we are seeing are shifting coalitions involving militias and different political groupings jostling as much over short-term economic interests as anything to do with political ideology,” says a political risk analyst who advises international oil companies and who asked not to be named.
 
Another risk analyst, Henry Smith of the Control Risks consultancy group, told Reuters the troubles may be too deep and widespread for the government to control.
“Libya is essentially beholden to local and regional interests groups,” Smith told the news agency. “The government doesn’t really have the coercive capacity to be able to stop them.”

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