Fayez al-Sarraj’s attempt to take hold of NOC

O
n March 24 last, al-Sarraj dissolved his Petroleum Ministry and formally acquired direct control over the National Oil Company (NOC), namely the single Libyan oil company. Pending the very fierce civil war following the ousting of Gaddafi and his regime, NOC had remained substantially impartial and, despite the net decrease in oil extraction, it had managed to ensure part of proceeds to all the parties involved.

This happened also after Khalifa Haftar’s troops conquering the oil terminals of Es Sider and Ras Lanuf. According to the forecasts of the NOC Chairman, Mustafa Sanalla, the Libyan oil company could reach 1.25 million barrels / day late this year and 1.6 million barrels / day by 2022.In a recent conference in London, Sanalla said that all the existing contracts will be honoured by the structures of the Central Bank of Libya, which is aligned with al-Sarraj’s GNA.

Sanalla, however, made it clear that also the LNA government has a "key" to open the oil door and “both keys” - namely the key of al-Sarraj’s GNA and the LNA’s key - are needed to have access to funds. Clearly NOC is the only Libyan institution still believing in the future unity of the national territory.

Hence the choice of al-Sarraj - the only Libyan politician recognized by the United Nations and by the inept European Union who, however, does not even control the city where his government is based, namely Tripoli - is a choice reflecting the separation between the various parts of the old united Libya.

Indeed, division into three areas, namely Cyrenaica, Tripolitania and Fezzan, was the solution that Bevin and De Gasperi found in the aftermath of World War II - a choice that would have given the primary oil field, namely Tripolitania, to Italy, and Fezzan and Cyrenaica to France and Great Britain, respectively.

We would thus have avoided that real "war against Italy" which was the operation against Gaddafi.

Today, on the contrary, if the old Libya splits into its three traditional components, we will have Egypt in Cyrenaica, which is a primary strategic area for this country, Algeria in Fezzan and, in all likelihood, a mix of Great Britain and France in Tripolitania - hence Italy will be excluded from any game in Northern Africa.

As you make your bed, so you must lie on it.

Furthermore, at the end of last February, Sanalla had signed an agreement with Russia's Rosneft so as to raise - even in a complex situation as Libya’s - the funds required to invest in technological upgrading and repair of extraction and distribution networks.

That was NOC’s primary problem during the Libyan civil war.

Also the Austrian OMV, which is certainly not in line with the French-British strategic balance, has renewed an old contract of 2008 with NOC for oil exploration and extraction in the Murzuq field, south of Tripoli.

Al-Sarraj political choice is clearly a reaction to Sanalla’s autonomy and responds to the need for the Western supporters of the Tripoli-based GNA to exclude other competitors in the still rich Libyan oil region.

Mustafa Sanalla’s reaction to al-Sarraj’s attempt to control NOC on his own was clear. In fact, the Chairman of the Libyan oil company said that only the two Parliamentary bodies based in Tripoli and Tobruk could jointly decide on NOC, which indeed funded both sides, as well as General Haftar’s troops.

Nevertheless Al-Sarraj’s move, designed to withdraw all financial support from his opponents, was not successful.

On March 25 last, just one day after the declaration of the GNA leader, the five permanent members of the UN Security Council issued a joint statement in which Sanalla’s position in favour of NOC independence was maintained.

Hence, also for the traditional supporters of the GNA and its President, al-Sarraj, the latter is no longer the only possible counterpart in Libya’s political scenario.

Therefore Russia jumped at the opportunity: on March 30, after a meeting in Jordan between al-Sarraj himself and the Russian Vice-Foreign Minister, Bogdanov, Russia said: "We need comprehensive negotiations among all the parties concerned”.

Hence Russia stands as the only mediator and broker between all Libyan factions, so as to keep the country united (a primary interest for Russia) and fill the void that the inept and idealistic West has created by betting only on al-Sarraj.

Therefore the even more inept al-Sarraj lost the support of the only international body legitimizing him, namely the United Nations, and created an opportunity for Russia to mediate between all the parties involved, thus becoming the only arbiter of Libya’s future.

The European Union and Italy do not seem yet to have noticed the new situation which has emerged in Libya, while their only point of reference, namely the GNA leader, al-Sarraj, is losing power. Russia is entering onto the whole Libyan scene, not only the Cyrenaica region of the Tobruk-based government, already supported by it, but also directly into the "Operation Dignity" of General Haftar, whose forces are now trained and supported by Russia.

The two NOC old factions, namely Tripoli’s and the other one based in Al-Bajda, have always fought each other and the plan of al-Sarraj’s GNA to gradually reduce the weight of the Tripoli-based NOC and the Al-Bajda-based NOC has been lasting for long time.

Initially, the Tobruk-based government had planned to take control over all the three Libyan financial organizations based in Tripoli: NOC, the Central Bank of Libya and the Libyan Investment Authority.

Although the Tobruk-based government appointed new managers for the three major Libyan companies, they have all chosen the line of autonomy, so as to continue operating legally on international markets and avoid excessive costs arising from the support of one single armed faction.

Since the beginning of civil war, the Libyan National Bank has adopted the budget for the two main parties involved autonomously, by also refusing to consider the demands drawn up by the two governments.

Hence NOC has transferred its earnings only to the Central Bank of Libya, which pays almost all public salaries.

Furthermore, the Tobruk-based government has not tried to officially separate its Al-Bajda-based NOC from the Tripoli-based one, but it has tried in every way to bring in foreign companies and transport companies in Libya and later make the agreements be signed only by the Al-Bajda-based NOC.

In this way the "new" Tobruk-based NOC has honoured all the international agreements reached before March 2015, the date marking the informal separation between the two NOCs, but it does not accept any subsequent contract, such as the very important one signed with Glencore by the primary Tripoli-based NOC.

It is an agreement giving to the Anglo-Swiss company the rights on the crude oil extracted from the Sarir and Messla oil fields up to the Marsa al-Hariga oil terminal near Tobruk.

At that juncture, the political and industrial choice made by the Al-Bajda-based NOC was to extract oil on its own and make it reach oil terminals.

For the time being, there is only an agreement under discussion, with an Egyptian company, but the Al-Bajda-based NOC claims it has negotiations underway with at least 40 other extraction companies which, however, are all small companies located in the Middle East.

One of the problems to be solved was also the one relating to Ibrahim Jadhran, the former Commander of the Petroleum Defense Guards.

Now Haftar has definitely taken possession of the terminals in the Libyan "oil crescent" and it has knocked out Jadhran and his Petroleum Defense Guards but, in 2014, the Head of the Petroleum Defense Guards and of the "Cyrenaica Self-Defense Force" had tried to sell oil on his own, with the only tough resistance put up by the United States.

Moreover, from August 2013 to April 2014, the Al-Bajda-based NOC - at the time still formally united with the Tripoli-based one - had tried to block ports, thus finally receiving the guarantee - by the then President al-Thinni, the current Head of the Tobruk-based Parliament - to decentralize the joint NOC and move it eastwards.

Considering that currently al-Sarraj’s attack on the only NOC which realistically works, namely the Tripoli-based one, has failed, a new oil-based Russian policy is shaping in Libya.

It is worth recalling that Russia was already present in Libya, shortly before Gaddafi’s fall in 2011, with two companies, namely Gazpromneft and Tatneft.

Rosneft always works much in the Middle East and it has recently acquired major research activities in Iraq, as well as 30% of the offshore extraction activities of Zohr, in Egyptian waters.

Hence the Russian support to Haftar regards the ability of the "Operation Dignity" forces to effectively control the wells and the terminals of the Libyan "oil crescent".

With the likely presence of its special forces in Benghazi, Russia currently sees the real possibility of ensuring both the Libyan oil and its new presence in the Mediterranean basin, with a future military base in Cyrenaica.

Today we can only imagine to what extent the presence of a Russian military base on the Libyan coast would change the NATO strategy.

Conversely, if – as happened in Syria - Russia’s presence steps up the clash between factions in Libya, Europe's geopolitical destabilization is a matter of time.

Now that Haftar has taken hold of oil terminals, he may decide to keep on cooperating with the Tripoli-based NOC - as he did in the past - or manage the oil transit and sale on his own, by distributing the proceeds according to his political interests.

Sanalla has also asked for the creation of new independent “Petroleum Defense Guards” by "Operation Dignity", while the East-based Parliament has reaffirmed its clear non-involvement in al-Sarraj’s GNA.

Hence an ever more evident rift between Eastern and Western Libya with the oil network in the hands of Haftar, who is linked to the Tobruk-based government, but can easily become independent from both political camps, by playing exactly on control over oil terminals.

He is supported by Al Sisi’s Egypt, by the Russian Federation, the United Arab Emirates and Saudi Arabia. If Haftar won without the support and a sound agreement with the EU, they would kick most European companies out of the Libyan oil system.

Giancarlo Elia Valori

Advisory Board Co-chair Honoris Causa

Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York.

He currently chairs "La Centrale Finanziaria Generale Spa", he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group and member of the Ayan-Holding Board.

In 1992 he was appointed Officier de la Légion d'Honneur de la République Francaise, with this motivation: "A man who can see across borders to understand the world” and in 2002 he received the title of "Honorable" of the Académie des Sciences de l'Institut de France

 

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