snapshots

Libya: The Government of National Accord Takes Aim at French and Other European Firms

4 MINS READMay 9, 2019 | 21:23 GMT
The Big Picture

In countries divided between rival governments, fights over companies and business entities are a key component of the dispute, increasing contractual and business risk dramatically. This is certainly the case for foreign firms in Libya, and especially for French firms, given that France has backed Khalifa Hifter and his Libyan National Army in its conflict with the U.N.-recognized Government of National Accord in Tripoli.

What Happened

The Libyan civil war had already greatly complicated business operations for foreign companies, which have long had to deal with risks stemming from fighting among the country's powerful militias and from jihadist attacks. Now, firms must also worry about which of the country's two governments their home country backs. On May 9, the economy minister of the U.N.-recognized Government of National Accord (GNA), based in Tripoli, announced that his ministry is suspending the operations of 40 companies including Total, Thales, Siemens, Petrofac and Alcatel-Lucent (now owned by Nokia), because their business licenses had expired and not been renewed.

The concentration of French companies on the list, which also included some Egyptian and other regional companies and firms from other European countries, and the fact that Total was the only company on the list with significant operations in the country, suggest that the directive targeted France, specifically, for political reasons.

Why It Happened, and What it Might Mean for Total

Competition between France and Italy for influence in Libya has been fierce. Italy is the strongest supporter of the GNA, and Italian oil and gas multinational Eni was left off the list. France, meanwhile, has backed Khalifa Hifter and his Libyan National Army (LNA), which recently launched an offensive on Tripoli, adding another large complicating factor into the French-Italian competition. GNA Prime Minister Fayez al-Sarraj traveled to Europe the week of May 5, stopping in Paris to meet with French President Emmanuel Macron, and tried to get European powers to stop the LNA offensive — but the meetings appear to have gone poorly. While Macron did back a cease-fire, this is unlikely to translate into him actually promoting one to Hifter, who might well ignore such entreaties anyway.

The timing is not good for Total. The French oil supermajor operates in Libya via the Mabruk joint venture with the Tripoli-based National Oil Corp. (NOC). The two are major participants in certain projects like the Al Jurf offshore oil field and onshore El Sharara oil field. Total has sought to expand its holdings in Libya, inking a deal with Marathon Oil in 2018 to buy a 16.33 percent stake in the Waha Concession, one of Libya's most important oil and natural gas exploration areas. But the NOC asserted pre-emptive authority to take the stake solely for itself. Total has argued that no such rights exist in Waha; the two have since been negotiating a resolution to the dispute.

The longer Libya's civil war continues, the more likely it is that French companies like Total will consider working with companies backed by the Libyan National Army.

Now, the GNA has ordered Total to halt operations in Libya. Although it is based in Tripoli, the NOC enjoys countrywide autonomy — from a functional standpoint, the NOC is both the national oil company in Libya and the country's oil and natural gas regulator working with oil companies — and so may ignore the GNA and continue operations with Total and other companies on the new list. If the NOC does continue working with Total, greater discord can be anticipated between it and the GNA, which tried to seize the NOC's regulatory functions in 2017.

In the meantime, a parallel Benghazi-based NOC set up by Hifter's allies has sought to persuade Hifter to allow it to export oil independently from the Tripoli NOC. The longer Libya's civil war continues, the more likely it is that French companies like Total will consider working with LNA-backed companies like the Benghazi-based NOC in just this sort of endeavor, especially if the West – and Europe – expands its support for Hifter.

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