We are now at a crossroads in Libya where a military solution is temporarily off the table, as factions and their external allies wrangle over oil revenues–the distribution of which will now decide when the pumps are turned back on and force majeure lifted. For the first time in seven years, there is a light at the end of the Libyan tunnel, but with open and backdoor talks being brokered by various external allies, sorting rumor from fact and wishful thinking is tricky.
What we know for sure is this: It’s all about leverage, and the Turkish-backed GNA doesn’t have nearly enough to call the shots on this one despite recent territorial gains in and around Tripoli against General Haftar.
Now, with Egypt stepping up to the plate and drawing a red line in Sirte, the strategic gateway to the Libyan oil facilities, the potential for oil revenue negotiations is emerging.
Haftar controls the oil, but not the revenues, and if everyone now has the right balance of leverage for talks to proceed, he could turn the pumps back on in return for a different setup for the distribution of oil revenues.
Right now, all the revenues go to the central bank in Tripoli, where Haftar has no access.
Depending on the source, talks are going on behind the scenes that would split up these revenues before they hit the central bank in Tripoli.
According to the Guardian, “proposals in the talks include that the revenues be split between as many as three banks representing different regions, with an agreement not to use them for military purposes. Eastern tribal leaders are being consulted on the plans.”
This version of events is also being spread about through various other media, and the National Oil Company (NOC)–a neutral source in all of this–takes issue with the scenario as presented.
While the NOC confirms that talks are in progress and that it is optimistic that the result will be to turn on the taps and remove the force majeure on exports from the Hariga, Brega, Zueitina, Es Sider and Ras Lanuf ports, it denies there is any talk of splitting revenues in the manner described above.
Related: Saudi Arabia Eyes Total Dominance In Oil And Gas“We categorically deny all the rumours about opening new accounts and distributing those revenues to three regions by percentage. Those rumours are spread by people who are not involved in the negotiations and only reflect their personal points of view. NOC adheres to Libyan laws and procedures”, said NOC chairman Mustafa Sanalla.
The NOC claims that all oil revenues will continue to go to the “same accounts of the corporation”, but will be “preserved for a specific period of time during which two parallel tracks are launched”. In other words, the oil revenues will be dealt with differently, but the NOC says they will not be divided up into three regions by percentage.
The NOC defines those “parallel tracks” as one that will “ensure financial transparency” (which was lacking) and one will “focus on the restructuring of security arrangements to protect oil facilities”.
“Our position consists of working to resume production in order to preserve the wealth of the Libyan people and serve its interests, and to avoid war at oil sites. We subscribe to the unity of Libya. We are against anything that would harm its unity and sovereignty and we will not be part of any action against that”, the NOC chairman added.
But the devil, as always, is in the detail. Both are essentially saying the same thing, but one sounds less controversial. It’s similar to the logic of not negotiating with terrorists. If a deal is cut to redistribute oil revenues away from the Tripoli Central Bank and into the hands of a bank controlled by Haftar, then Haftar’s hijacking of the country’s oil facilities effectively worked–and would work in the future.
So any solution concerning oil revenues needs to be structured–and worded–very carefully in order to avoid the NOC’s biggest fear: That the oil facilities will continue to be used for political capital, which means they will always be under threat.
That notion becomes even clearer with the arrival of Russian mercenaries at the giant Sharara and El-Feel oilfields, on behalf of General Haftar. That’s another move by Haftar to secure his leverage, and is meant to prevent the NOC from restarting production until there is a revenue deal in place–in his favor.
The move follows the NOC’s brief attempt to resume production at the 300,000bpd field last month–an event that sparked a massively exciting flurry of trading speculation only to be scuttled in a matter of days when it was forced to shut down again and reinstitute force majeure.
Major alliances such as NATO and the European Union mean nothing in this conflict.
On the sidelines, the European Union is suffering a bit of an existential crisis over Libya. Divided, and picking sides based on oil prospects, the European Union itself is not a player, which means it’s largely leaving things up to Russia on the Haftar side and Turkey on the GNA side. And Libya is far too close geographically for the EU to so dangerously ignore.
NATO “allies” are also on different sides in this war.
And now, France, having gone head-to-head with Turkey over Libya, is pulling out of a NATO security operation in defiance after Turkey was caught violating the arms embargo against Libya.
France’s ruffled feathers won’t matter much. The only thing that matters here is the oil money, and the kingmakers are clearly Russian and Turkish.
By Charles Kennedy for Oilprice.com
