Libyan conflict update

On 5 July, the general command of the Libyan National Army (LNA) led by Field Marshall Khalifa Haftar set five conditions to reopen the oil export terminals in the Oil Crescent and allow oil exports to resume.

• On 25 June, Haftar handed over the control of Ras Lanuf and es-Sider oil ports to the eastern National Oil Corporation (NOC), which reports to the eastern-based government, which is not recognised internationally. In response, the Tripoli-based NOC declared force majeure on loadings from Zueitina and Hariga ports on 2 July.
• Haftar's move is part of a broader LNA attempt to take control of key national institutions, including the Libyan Central Bank, with the aim of consolidating his position ahead of the December 2018 presidential elections.
• Haftar's move poses a high risk of triggering a new round of fighting between the western and eastern militias and forcing the collapsing of the ongoing attempt to achieve national reconciliation

Ras Lanuf and es-Sider were recaptured by Haftar's LNA on 21 June after the former leader of the Petroleum Facility Guards (PFG), Ibrahim Jadhran, had seized them on 14 June (see Libya: 18 June 2018: Renewed fighting in Libya's "Oil Crescent" highlights persisting opposition to LNA, undermining political reconciliation). On 25 June, Haftar announced the return of the two oil terminals to the eastern branch of the NOC, based in Benghazi, which is controlled by the eastern-based government - the House of Representatives - based in Bayda. Mustafa Sanalla, the chairman of the legitimate NOC that operates in Tripoli under the UN-recognized Government of National Accord (GNA), was quick to assert Haftar's move as illegal. Sanalla first declared force majeure at Ras Lanuf and es-Sider and, on 2 July, extended the decision to Zueitina and Hariga oil ports. According to the NOC, these moves have reduced total exports by around 850,000 barrels per day from an average of about 1 million reached in May 2018, whereas the Head of the Presidential Council (PC) Mohamed El Sallak stated that the reduction of oil exports was costing Libya more than USD67 million a day. Haftar's spokesperson, Ahmed al-Mismari, motivated by the LNA's decision to accuse the Tripoli-based NOC of not sharing oil revenues with the LNA, pointed out that without the latter's support such revenues could not have been generated in the first place. He also indirectly accused Sanalla of using oil revenues to finance militias.

Haftar's scheme

For the past four decades, the NOC has been the sole entity producing and exporting Libya's crude oil in partnership with foreign energy firms. The revenues streaming from the taxes that foreign oil companies pay on their oil sales or the fees that shipping firms pay to load NOC oil is always deposited in the Central Bank of Libya (CBL), which then distributes the revenues to funds government services, the public sector, and to pay the salaries of the whole spectrum of Libyan militias. The Benghazi-based NOC likely has the ability to arrange oil sales, given the fact that employees from the "official" NOC have joined its eastern equivalent, but it would need an alternative central bank based in the east to receive those payments or some shadow account in countries supportive of the LNA and the eastern-based government, most likely the UAE. Furthermore, if the eastern NOC attempts to market oil, it would be in breach of UN Security Council Resolution 2146, which provides member states with authorization under Chapter VII to intercept illegal oil shipments from Libya and return them to the control of the Libyan government, currently recognized as the GNA.

Haftar's real objective, hence, is likely to be to exert maximum leverage over his political opponents to force them to change who controls the CBL, and provide stable funding for the LNA, modifying the way in which oil revenues are distributed. Indeed, the first precondition set by the LNA on 5 July to reopen the oil ports is to replace the current CBL governor, Sadiq al-Kabir, with Mohammed Al-Shoukri, who was chosen by the House of Representatives, the parliament of the eastern government. The LNA sees Al-Kabir as a partial figure who favors western Libya and accuses him of funding Islamist-aligned militias, including those that had joined Jadhran's offensive on 14 June, through oil revenues. Other preconditions include the establishment of a local fact-finding committee to ascertain where Islamist groups were receiving their funds from and the opening of an investigation to clarify why the LNA had not received salaries since May.

Outlook and implications

Haftar's attempt to take control of the key Libyan financial institutions came as the LNA declared on 28 June the complete capture of the eastern city of Derna, after a month of fighting to dislodge a coalition of jihadist militias that had controlled the city for more than four years. By taking Derna, the LNA is now in undisputed control of the whole of eastern Libya, as well as part of the south, a position of strength that has likely reinforced Haftar's aspiration to become the dominant and unchallenged military and political figure in Libya. From a political perspective, these challenges to the status quo in the Oil Crescent further deepen the eastern-western divide and undermine the UN Action Plan for Libya, which entails holding presidential and parliamentary elections by 10 December and which was reaffirmed during a 29 May conference in Paris bringing together the House of Representatives head Aguila Saleh, the GNA Prime Minister Fayez al-Sarraj, the High State Council head Khaled al-Mishri and Haftar. Haftar's scheme, however, is highly hazardous, as it risks pushing those western militias supporting the GNA and opposing a reconciliation with the LNA, especially the powerful militias from Misratah, to take up arms against the LNA and embark on a new offensive aimed at bringing the Oil Crescent under the NOC's control. The deployment of western militias from Tripoli and Misratah to Abu Grein and Sirte, or similarly a LNA move from the Oil Crescent towards Sirte, would be a key indicator of forthcoming renewed fighting for the control of the Oil Crescent. Conversely, an LNA statement expressing willingness to hand over the oil terminals to the recognised NOC or the GNA accepting the request to replace the CBL governor would be an indicator of decreased risk.