Libya’s Oil Ultimatum

Libya’s Oil Ultimatum

Times are getting even tougher for Libyans. The security situation continues to deteriorate. Civilians are taking on the armed militias that are largely blamed for the security vacuum in the country, leading to bloodbaths in the streets. The country also continues to face a looming threat to its financial security as armed militias blockade oil terminals to underline their demands for greater regional autonomy.

The second problem is focused on the eastern region of Cyrenaica ("Barqa" in Arabic), where so-called "federalists" have been pushing for considerable powers to be devolved from Tripoli to local governments. The central government is understandably reluctant to resolve the issue by using force against the federalist militias that are blocking the oil terminals, fearing that this could spark civil unrest. The Tripoli authorities have also failed to rally local support for a confrontation with the militias there.

On Nov. 11, the Libyan Prime Minister Ali Zeidan issued an ultimatum to the militias that have been blockading oil terminals and fields for more than three months. The Barqa Political Office, the self-proclaimed governing body of Barqa, was quick to mock Zeidan’s ultimatum, observing that the prime minister does not even have the force to protect himself from abduction by the armed militias that control the capital and hold the government ransom. As a gesture of defiance, the Barqa government also announced the formation of its own oil and gas corporation, the Libyan Oil and Gas Corporation. The Barqa government appointed Saleh al-Mesmari (a veteran of the oil industry in Libya and former president of the Arabian Gulf Oil Company) as the company’s head.

The deadline for the ultimatum passed on Nov. 21, yet the prime minister appeared to have no real plan of action to address the issue. Zeidan then held a meeting with local elders and tribal leaders and asked for their help in finding a peaceful resolution to the crisis. As long as the government continues to rule out the use of force, the only realistic option remaining is to craft a solution that relies on the help of local notables. Moreover, a long-term solution will require negotiations leading to a comprehensive political deal, which in turn would require compromises from all parties involved. But so far the central government has little to show for its efforts in this direction.

The federalist’s self-proclaimed government, led by Ibrahim Jathran, seems to have succeeded where the central government has failed. Jathran has actively engaged with key local players and tribes to clarify the federalist position and present their argument for blockading the oil terminals. Such efforts could explain why local people have remained so apathetic toward the militias that are blockading the oil terminals. If the central government wants to win local support for reopening the terminals, it has to seriously reengage with local communities and counter the arguments presented by the federalists.

In the meantime, the federalists are taking some practical steps to market and sell the oil on its own. As legal justification for this effort, the Barqans are citing the pre-Qaddafi constitution and the subsequent oil-sharing arrangement between the central and regional governments during that era. The head of the recently appointed Barqa regional government, Abdraba al-Barrasi, announced the installation of new metering systems at different oil terminals under their control. The oil export metering systems were damaged during the war, but the successive post-revolutionary governments failed to install new ones, prompting widespread speculation about corruption in the marketing and sale of Libya’s oil. Jathran and his government have effectively capitalized on the government’s lack of transparency in this respect.

Al-Barrasi promised to reopen the oil terminals and start exporting oil by the end of this month. It is hard to see how the federalists can actually fulfil such a promise, however. Oil traders and buyers would be taking a huge risk by choosing to deal with the Barqa government — an entity that Tripoli describes as "illegal and illegitimate," and to which it denies any form of recognition. The government in Tripoli has also vowed to intercept any vessels attempting to dock at the oil terminals without permission from the National Oil Corporation in Tripoli.

The oil crisis in Libya is reportedly costing Libya $140 million in oil and gas revenues each day. Government officials estimate the total loss since the militias started targeting oil wells and terminals at more than $7 billion. This is likely to result in a deep deficit in the next budget, and the government is already feeling pressure to dip into its reserves to cover its spending plans for this year.

Looking ahead, Libya has two options to deal with the continuing problems in the oil sector. The first option is the use of force. This could result in serious damage to the gas and oil infrastructure as well as disturbing the precarious social piece in the East, including the possibility of serious civil unrest. The second option is a peaceful resolution achieved with the backing of local communities and local notables that would require compromises from the parties involved. This could result in a much-needed agreement to end the current standoff. What is clear is that the current situation is no longer sustainable.

Mohamed Eljarh is the Libya blogger for Transitions. Read the rest of his blog posts here.