Libyan condition is becoming a never-ending abyss. On December 5, several explosions were heard around two security points less than two miles from the Tunisian border crossing of Ras Ajdir. The blast, part of the bombing campaign of Haftar’s militias against the Islamists is just one of the aspects of instability that are affecting Libya during these months. Oil facilities are at the center of the main conflict; on December 14, the largest oil logistics in the country, Sidra Port, has been closed due to the fighting between the two rival government forces. Fighters from the GNC (General National Congress) are trying to take the control of the oil fields from the internationally recognized government of Al Thinni, still entrenched in Tobruk.
Haftar’s troops are miserably experiencing the limited effects of air bombs against Islamists in Western Libya and Benghazi, where “Operation Dignity” is battling against the Tripoli’s establishment of “Operation Dawn”.
Oil is the very core of Libyan formal and informal economy. The revenues pay public institutions, the fragile army and the vital subsidies. Therefore, the present falling of oil prices is a serious risk for the African country, more and more a “no-where place”.
Decline of crude oil prices has been around for six months, producing a fall of more or less 45% of the total amount. It is the obvious result of the Organization of Petroleum Exporting Countries (OPEC) meeting in November where Saudi position has been inflexible, about the need of cutting the production. Riyadh firmly opposed any reduction. To be honest, price decline is both supply and demand driven but Saudi Arabia’s refusal, as OPEC largest producer, to eliminate the glut of about one million barrels has exacerbated the trend.
Libya, as OPEC member as well, is suffering the Saudi choice to try to obstacle Iran’s policy in the region, by gaming with it is break-even point of balance between profit and loss. Saudi break-even (that measures the level of budget that can be covered by the oil price, is far less dependable to a high condition of the price itself, thus stimulating Riyadh to use oil as a power play tool.
Tripoli, therefore, is collapsing due to the rivalry between Teheran and Riyadh, and Saudi fear of the future convenience of shale oil.
Desperation in Libya is evident when we talk about oil price decline and bank account. The internationally recognized government is seeking to take the control of oil revenues and thus it is trying to stop any payment made by Tripoli bank, currently independent but under the menace of the Islamists. It is quite curious and emblematic that both the rival governments are tempting to run the National Oil Corp (NOC) and the bank in order to channel oil revenues. Tobruk aims to cut Tripoli out of the oil business; for the moment the central bank is keeping the revenues apart from salaries and subsidies. One of the problem is still represented by the filtering of money on both the fronts, into uncertain hands, thus alimenting insecurity and undermining even more any economic future for the fragile state. Libya’s oil production recovery in 2012 seems so far. Present unrest, even worse than the civil war, for certain aspects, is not able to take a rise, even if the oil ports blockade by Jidran’s Petroleum Facilities (in Ras Lanuf, Sidra, Marsa Harig and Zuetina) has been ended in June 2014.
Oil in Libya is both a trade value and a power tool in the race for achieving the control of what remains of the Country. Protests, fighting, deterioration of the security environment as well as power supply difficulties are transforming oil from being a possible useful resource in being one of the main actor of the disintegration.
Research Fellow at “Iran Progress”