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Page added on April 7, 2015
One of Libya’s Rival Governments Moves to Control Oil Revenue
One of the two factions battling for control of Libya took steps on Sunday to divert incoming oil revenue away from the central bank and into its own new account, a steep escalation in the contest over the country’s vast wealth.
Libya’s oil and money are the prizes that have driven much of the competition among militias and factions in the nearly four years since the overthrow of Col. Muammar el-Qaddafi, and as the fighting on the ground has slashed oil revenues, the legal and political battle for control of Libya’s assets has become overt and intense.
Over the past nine months, the many local militias that sprang up around Colonel Qaddafi have now broken into two warring coalitions, each with its own provisional government. Officials of the Central Bank of Libya, which holds the country’s roughly $90 billion in foreign reserves and receives the income of the National Oil Corporation, say they have tried to stay neutral, continuing to pay government salaries and consumer subsidies in the territory controlled by the rival governments.
But the faction that is recognized internationally as Libya’s legitimate government, now based in the eastern cities of Tobruk and Bayda, has repeatedly sought without success to exert control over those assets. On Sunday it fired the latest salvo in that battle.
That government’s prime minister, Abdullah al-Thinni, issued a directive for the National Oil Company to stop passing incoming revenue to the central bank and instead to direct those funds to its own bank account in the United Arab Emirates, a major backer of Mr. Thinni’s government and its faction.
The move could now set off a host of sweeping consequences, potentially including a breakup of the bank, a drastic rebalancing of what has appeared to be a stalemate in the day-to-day battle between the two factions or a Western intervention to seize and manage the bank’s foreign reserves.
But how the situation might play out is difficult to predict, in part because the prime minister’s directive appeared to contradict the position of the Western powers toward the status of the bank and the larger Libyan conflict.
Financial institutions in the United States, Britain and other Western powers hold much of Libya’s foreign reserves, so they may play a critical role in the disposition of those assets.
Mr. Thinni’s directive also comes as the Tobruk-Bayda government is experiencing an acute shortage of cash. With oil revenue down, the central bank has paid only for salaries and subsidies.
In recent interviews, military leaders and other officials supporting the Tobruk-Bayda government have complained that they desperately need military supplies and medicines, saying that the government had even turned to local commercial banks for a loan, possibly as much as $3 billion, because it could not obtain the funds it needed from the Libyan reserves.
“Our ammunition is running out; our light weapons are running out,” said Saqr al-Jaroushi, chief of a small air force of bombers and helicopters aligned with the Tobruk-Bayda government.
Supporters of that government contend that the bank’s posture of neutrality benefits the other side of the conflict, based in the cities of Misurata and Tripoli. That faction includes both moderate and extremist Islamists as well as some regional militias, and supporters of the Tobruk-Bayda government accuse their Misurata-Tripoli rivals of collaborating with Islamist terrorists like Al Qaeda and the Islamic State, also known as ISIS or ISIL.
But while they recognize the Tobruk-Bayda government as legitimate, the United States, Britain and other Western powers have given it only qualified support.
They recognize it as legitimate because it includes a Parliament elected last year (although only a slight majority of its members continue to meet there), but they are wary because it is aligned with an unpredictable military commander, Gen. Khalifa Hifter. Last year he promised to purge Libya of both moderate and extremist Islamists, and he now appears to dominate the Tobruk-Bayda government.
Instead of backing General Hifter and the Tobruk-Bayda government, the Western powers and the United Nations have sought to broker the formation of a single unity government that could reconcile the moderates from each side.
In part because of that stance, the West has also resisted the Tobruk-Bayda faction’s attempts to take control of the bank. The Tobruk-Bayda government has already tried to replace the bank’s chairman, Sadiq Omar el-Kabir, in an effort to assert its control.
But the United States, Britain and other governments have continued to recognize the bank’s current management. American officials have even applauded the management for its efforts to stay neutral and avoid either the breakup of the bank or the squandering of Libya’s assets.
Separately on Sunday, the Islamic State claimed responsibility for a suicide bombing that killed at least four people and wounded many others at a checkpoint near Misurata. Although the Misurata-Tripoli coalition includes some Islamist extremists, a militia from Misurata has recently clashed with fighters from the Islamic State who have taken control of the city of Surt.
6 Comments on "One of Libya’s Rival Governments Moves to Control Oil Revenue"
Plantagenet on Tue, 7th Apr 2015 10:39 am
Obama’s illegal war in Libya has turned out to be disastrous for the Libyan people. Ditto Obama’s deone wars in Yemen, Syria, Iraq, Somalia, etc.
http://www.nytimes.com/2011/06/21/opinion/21Ackerman.html?_r=0
Plantagenet on Tue, 7th Apr 2015 10:40 am
make that: Obama’s….DRONE wars in Yemn, Syria, Iraq, Somalia, etc.
Cheers!
Speculawyer on Tue, 7th Apr 2015 1:52 pm
France took the lead on Libya. They are the ones that felt it was a good mission.
BobInget on Tue, 7th Apr 2015 2:13 pm
Reposted here from IV:
The EIA has released a quite bullish short term outlook:
Non-OPEC supply estimates for 2015 were reduced by 30% to 700K barrels from 1m barrels estimated last month, and 2016K supply growth was reduced from 500K barrels to 400k barrels.
Non‐OPEC Petroleum and Other Liquids Supply. EIA estimates that non-OPEC production grew by 2.2 million bbl/d in 2014. EIA expects non-OPEC production to grow by 0.7 million bbl/d in 2015 and by 0.4 million bbl/d in 2016, in part because of lower projected oil prices. The slower growth in total non-OPEC supply is largely attributable to slower production growth in the United States and Canada and declining production in Europe and Eurasia. After remaining relatively flat in 2015, production in Eurasia is projected to decline by more than 0.1 million bbl/d in 2016. The projected decline reflects reduced investment in Russia’s oil sector stemming from low oil prices and international sanctions.
Global demand estimates were left unchanged for 2015 at 1m barrels, but increased by 10% for 2016 to 1.1m barrels:
Global Petroleum and Other Liquids Consumption. EIA estimates that global consumption grew by 0.9 million bbl/d in 2014, averaging 92.0 million bbl/d for the year. EIA expects global consumption will grow by 1.0 million bbl/d in 2015 and by 1.1 million bbl/d in 2016. Projected global oil-consumption-weighted real gross domestic product (GDP), which increased by an estimated 2.7% in 2014, is projected to grow by 2.6% in 2015 and by 3.1% in 2016.
I believe the EIA will revise its 2015 demand estimates higher in the next few months as increased global demand data is increasingly undermining that 1m growth in demand estimate.
The large cut in supply estimates for 2015/2016 and the increase in demand estimates for 2016 has forced the EIA to reduce its global inventory expectation for 2015 from 2.9B to 2.88B barrels and to reduce 2016 inventory expectations from 2.92B to 2.87B barrels. This is quite meaningful since instead of a growth in inventories in 2016 the EIA is expecting draw-down as of now. These numbers do not include the potential impact of increased supplied from Iran in 2016.
Over the next 7 quarters the EIA expects world consumption growth to outpace non-OPEC production growth:
If it was not for OPEC maintaining production, the world be experiencing a significant supply deficit by Q4/2015.This is a strong confirmation that current oil prices are not sufficiently high for global supply to meet global demand without the contribution of low cost (and politically unstable) supplies from OPEC.
The latest estimate from the EIA and their impact on global petroleum inventories (a key price predictor) are eerily similar to what took place in 2009 with inventories expected to peak in Q3 and decline in Q4, the only difference is the magnitude with OECD inventories peaking at 2.77B in Q3/2009 compared to an estimated peak of 2.9B in Q3/2015 or 4.6% more. However once we factor in the difference in demand between 2009 and 2015 (84.88m compared to 93.87m) we notice that inventories in 2015 are actually lower at 30 days in forward demand in 2015 vs. 32 days in forward demand in 2009.
If it was not for Iran potentially increasingly supplies in 2016, this report would have confirmed a complete recovery in oil prices to the new marginal cost of global supply of $75 to $85 by 2H-2016. Iran notwithstanding, the oil market fundamentals are the healthiest I have seen them since this collapse has started, and future disruptions in supplies (economic or geopolitical) will have a material impact on global inventories and thus prices, and likewise for any major changes in demand due to low prices or better economic growth, such changes will also have a material impact on prices.
The worst is likely over for the oil market, and the WTI is right on queue with my projected move to $55+ in Q2 and thus the bottom for energy stocks is likely behind us.
Regards,
Nawar
Sources:
April 2015 STEO: http://www.eia.gov/forecasts/steo/pdf/steo_full.pdf
March 2010 STEO: http://www.eia.gov/forecasts/steo/archives/mar10.pdf
BobInget on Tue, 7th Apr 2015 2:31 pm
Posted note:
Due to cancer spreading outward from Syria,
extra-legal military efforts will be made by principal oil producers in the region to prolong systems that too long prevailed.
IOW’s shit has hit the fan.
No one can unring this bell.
Oil prices must continue rising at this point,
for a dozen good reasons not withstanding
the good data posted above.
I previously called for $220 @ barreled inter-day and a year end closing price of $140.
In light of recent developments, I’ll revise higher. Year end closing NYMEX price
of $156.00 . Brent higher.
(can’t see how international price controls
could function with maxed out KSA in tatters)
Care to wager, shortonoil? HRH?
Plantagenet on Tue, 7th Apr 2015 5:22 pm
@speculawyer:
You want to blame France. Others blame Susan Rice
http://www.thenation.com/blog/159346/obamas-women-advisers-pushed-war-against-libya
But the facts are clear—-Obama ordered the US attacks on Libya. And, if you add up the number of bombs and drones that France dropped on Libya vs the amount that Obama ordered to be dropped on Libya, the USA would be FAR FAR the leader in Obama’s illegal war on Libya.
And, no matter who is to blame, the end result hasn’t turned out good, unless you think throwing a country into chaos and empowering ISIS and other Islamist militias is good.