Libya Oil Deal Allows Small Step Toward Healing Political Divide

(Bloomberg) - The political deal that allowed the restart of oil shipments from a port in eastern Libya provides short-term relief for cash-strapped authorities, but is only a small first step in a wider effort to unify the country’s rival factions.

Crude exports resumed from the port of Hariga after Mustafa Sanalla, chairman of Libya’s National Oil Corp., and oil officials based in the east reached an agreement in Vienna earlier this week. Speaking in an interview with local Ajwaa television channel on Friday, Sanalla said he hoped the agreement would lead to “the progressive reopening” of other oil ports including Ras Lanuf and Es Sider, the nation’s largest.

A deal on that scale would require Fayez al Serraj, prime minister of the new United Nations-backed unity government in Tripoli, reaching an understanding with authorities in the east. Hardliners there have prevented at least five votes of confidence in the new administration since a peace deal in December. At issue is the role played by General Khalifa Haftar, who leads Libya’s largest and most effective fighting force.

Es Sider and Ras Lanuf are controlled by self-appointed federalist leader Ibrahim Jadhran, who “has had to suspend negotiations with the Tripoli authorities due to increased military pressure from General Haftar,” Riccardo Fabiani, senior North Africa analyst at Eurasia Group, said in a note. “Jadhran is unlikely to reopen the ports against his will, which is dependent in turn on the eastern authorities reaching an acceptable compromise with the unity government.”

Political Instability

In the five years since the ouster of Muammar al-Qaddafi, Libya’s oil installations have been attacked and ports shut down as groups vie for influence. The nation’s output has slumped by about 80 percent from about 1.6 million barrels a day in 2011, leading to a sharp drop in foreign currency reserves and a growing fiscal deficit. The political instability in a country awash with weapons has spurred a wave of killings, kidnappings and smuggling, while Islamic State has seized control of the coastal city of Sirte.

Divisions within the international community about the implementation of the December peace accord may further delay the stabilzation of Libya, Fabiani said. While all major powers officially agree on supporting the unity government and the need for the eastern parliament to approve the new administration, “in reality there are considerable divergences on what measures are needed to overcome the current stalemate,” he said.

“The U.S., France, Italy and the U.K. are pressuring General Haftar and his main political backer, Aguila Saleh, to accept the unity government and are unwilling to amend the current agreement,” he said. “Egypt, the U.A.E. and Russia would like the peace process to accommodate General Haftar and Aguila Saleh’s concerns.”

The international community has been particularly alarmed by the rise in Libya of Islamic State, which has established its most important base there outside Syria and Iraq. By some estimates, the North African nation is home to between 3,000 and 6,500 fighters from the group. At a diplomatic summit on the Libyan crisis on Monday, also in Vienna, major global and regional powers backed the idea of providing weapons to Serraj to help fight IS and other jihadist groups, although it may only happen after the east endorses the unity government.

Tanker Loading

Since the oil deal was announced, the tanker Seachance loaded 660,000 barrels of crude in Hariga and sailed from the port on Friday, Tripoli-based National Oil Corp. said in a statement. The cargo was the first international shipment from the port since the regime in the east refused to let the tanker leave the port in early May.

The east is currently the biggest contributor to Libya’s oil industry. Reopening Hariga will allow crude production to increase to 180,000 to 200,000 barrels a day from 80,000 to 100,000 barrels a day during the standoff, according to Fabiani.

Sanalla, in the Ajwaa television interview, said the talks in Vienna marked the fourth time he met with eastern officials, and called on Serraj to help unite the country’s energy industry.

To contact the reporter on this story: Caroline Alexander in London at calexander1@bloomberg.net To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Dylan Griffiths