Federalism and Libya’s Oil

Ibrahim Jadran seemingly has every advantage. With the help of like-minded guards, the rebel turned federalist leader took over three of Libya’s most important oil terminals last summer. His men control 600,000 barrels of daily export capacity — about half of Libya’s total. If full, the storage tanks at these facilities could hold up to 17.5 million barrels of light, sweet crude oil worth nearly $2 billion. For its part, the elected government in Tripoli hasn’t dared to retake the terminals, in spite of repeated threats. Jadran mocks the government for these and other failures from his office in Brega and home base in Ajdabiya, south of Benghazi.

Jadran’s revolutionary credentials are impressive. Although his father was a well-known colonel in the civil defense force, Ibrahim, then 23, was arrested in 2005 for organizing an armed group to oust Muammar al-Qaddafi. He spent the next six years in Tripoli’s brutal Abu Salim prison with his four brothers. In February 2011, just before Libya’s revolution boiled over, the regime tried to buy itself time and goodwill by releasing prisoners, including the Jadran brothers.

Long denied his chance to fight back — and detained and tortured in the interim — Ibrahim joined the uprising. He later led the Petroleum Facilities Guard force in the central region, which gave him the men, firepower, and perfect opportunity to take over terminals in July and August 2013. His call to action was simple: For too long, eastern Libya was neglected and never saw its proper share of the region’s oil wealth. Tripoli’s influence must be rolled back; federalism must become law. Jadran, unlike many militia leaders, is really an activist with a small army.

While other oil fields and facilities were shut by protests last year, Jadran is unique for his ambition and media savvy. His oil blockade costs Libya about $60 million every day; his leadership of an aspiring regional government makes him the most recognizable thorn in the government’s side; and his youthfulness, immaculate suits, and talking points make the 32-year old look and sound like a serious politician. He is successful insofar as he remains unchallenged, although rookie mistakes have hurt his brand lately. Six months into the oil crisis he precipitated, Jadran has not budged — but he also has nothing to show for it.

That’s not for lack of trying. Twice now, Jadran’s self-appointed Cyrenaica Transitional Council has tried to sell oil outside of official channels. The first attempt was in mid-August 2013 just days after Jadran appeared at a conference in Ras Lanuf announcing that a regional government would be established. Libya’s modest navy intervened, however, before a bankrupt shipper could dock a tanker at Es Sider. Federalists formed the official-sounding Libya Oil and Gas Corporation in November in an effort to attract buyers. That may or may not have convinced another tanker to approach Es Sider on January 6, 2014. It too was turned away by warning shots.

Jadran’s reaction to the most recent failed oil sale was whiplash-inducing. Federalists denied that the ship was headed for the terminal. But a day later, they promised to protect any tanker that might try to load oil in the East. More embarrassing were comments made by a controversial Canadian lobbyist for the regional government. "My reaction was ‘What the hell are you doing?’" Ari Ben-Menashe complained on January 9. "Sneaking in a tanker … isn’t something that’s going to work."

According to documents he filed with the U.S. Department of Justice, Ben-Menashe has a $2 million contract with the council to arrange oil deals and secure recognition, arms, and support from Moscow. The story raised eyebrows in Libya. As he did with the oil deal, Jadran shot off a quick denial, swearing he did not hire the "notorious" lobbyist. But his poor handling of these setbacks may have already alarmed potential oil customers. His constituents also have reason to be disappointed. In December 2013, tribal leaders made headlines when they claimed to have reached a deal ending the blockade. But Jadran backed out.

Jadran is learning the hard way that Tripoli still has the advantage when it comes to oil exports, even if it hasn’t yet mustered the force to assault the terminals. Libya’s navy, though unimpressive by world standards, is active in the Gulf of Sidra, where all three of Jadran’s ports are located. And Prime Minister Ali Zeidan, however shaky at home, still maintains good relations with NATO members that helped oust Qaddafi. There is no doubt these commercial and legal heavyweights would come to his aid if necessary. A pirated cargo of Jadran’s oil could be legally attached in just about any Mediterranean port.

Recently, Jadran and Abd-Rabbo al-Barassi, the federalist "prime minister," have made a series of humbling admissions. On January 14, 2014 Jadran told CNN that his men believe in the cause but haven’t been paid for months. Barassi was quoted on January 28 saying the regional government’s 23 ministers "don’t have work. We wait for oil exports or a budget." He also acknowledged that the federalist oil and gas company is an empty shell. "We’ve only appointed a director for the firm," Barassi said.

Libya’s upcoming budget fight will only make life harder for Jadran’s group. Its blockade has cost the country tens of billions of dollars and forced the government to dip into cash reserves. Going forward, Jadran will be blamed personally for budget shortfalls in 2014, with the potential to impact the entire country, including the East. Jadran’s limited reach and diminishing support base may open a window for reconciliation soon. Negotiations are underway.

Ending the oil crisis and reopening terminals might require a face-saving deal. In order for Jadran to climb down, the government in Tripoli will probably have to hold the ladder for him. Barassi, says Tripoli has responded positively to two of the federalists’ three demands: the government is ready to investigate corruption in the oil industry and give provinces a role in oversight. The third demand — instituting a pre-Qaddafi revenue sharing law — is a major obstacle, however.

Zeidan is in no position to satisfy that demand because it would represent a de facto recognition of federalism as the form of government. Defining Libya’s institutions — as well as their relationships and responsibilities, including budgetary tasks — is up to the constitutional draft committee, elections for which will be held on February 20. Zeidan should not back down because the constitutional process is too important.

Simply rejecting this demand is not enough. Zeidan could do more to tackle the grievances that underpin Jadran’s appeal. The prime minister could seek out regional councils to choose local development projects. He could also work with members of the General National Congress to shape the budget and prioritize infrastructure, while emphasizing that ambitious projects can only be pursued if the oil crisis ends. Libya’s rehabilitation will take years. But explicit commitments from Tripoli could make it easier for Jadran to quit now — and harder to resist pressure from local tribes.

After several tense weeks and a few failed no-confidence votes, Zeidan is desperate for a chance to display leadership. Reports today suggest the government is ready to use force and soon. But Jadran might still walk away if given the chance to claim two key demands were met and that the government was finally committed to developing Cyrenaica. A settlement like this would be less satisfying than arresting and trying Jadran. But given the weakness of Libya’s security forces and legal system, it may be the best option, even if it risks setting a terrible precedent.

Matthew M. Reed is a Middle East specialist at Foreign Reports, Inc., a consulting firm in Washington, D.C. Follow him on Twitter: @matthewmreed.