Jul 24, 2014 | 09:38 GMT

5 mins read

Oil Export Deal Could Further Destabilize Libya

Oil Export Resumption Deal Could Destabilize Libya Further

News of an impending deal to bring oil exports back online is likely to create more problems for Libya's embattled central government rather than solve them. After the fall of Moammar Gadhafi's regime, Tripoli has found that such deals usually trigger a larger competition between various armed groups demanding often-competing concessions, further destabilizing the country. As long as Libya depends on cooperation from the various armed groups within its borders to maintain stability, its reliance on negotiating and granting concessions (rather than using force) to end protests and fighting will perpetuate the very pattern of extortion and violence by militias that Tripoli is trying to end.

Libyan media outlets are reporting that members of the government-funded Petroleum Facilities Guards and Tripoli have reached an initial deal allowing for a temporary resumption of exports at the 90,000 barrels-per-day Marsa el Brega loading facility in eastern Libya. The deal, brokered by tribal elders from Marsa el Brega, is provisional. The guards whose protests closed the facility last week are demanding pay increases and, more controversially, the reinstatement of Brig. Idris Bukhamada, the former commander of the Petroleum Facilities Guards. The protestors are giving the government 20 days to meet their demands, though this process likely will be complicated by the impending dissolution of the outgoing General National Congress in favor of a new transitional political body, the House of Representatives, expected to take place in early August.

Bukhamada was removed in deals between the General National Congress and a group of renegade Petroleum Facilities Guards in April and earlier this month. Ibrahim Jathran, a former regional commander of the Petroleum Facilities Guards and leader of the breakaway group that has kept much of Libya's eastern oil exports offline for nearly a year, demanded that his forces be reincorporated into the larger body of the guards. Leveraging his control over the majority of eastern Libyan export capacity, Jathran also pushed the government to appoint new leadership for the force, effectively ousting Bukhamada, his professional and regional rival. The replacement was Ali al-Arash, a man seen as closer to Jathran than to the government and whose leadership has been contested and ultimately rejected by the Bukhamada loyalists within the Petroleum Facilities Guards.

Libya's Urban and Rural Power Centers

Libya's Urban and Rural Power Centers

The episode underscores the difficulty in reaching lasting arrangements in Libya's increasingly fragmented political and social order. Stratfor has long noted the temporary nature of agreements reached by the weak central government and the highly competitive tribal, militia and ethnic groups that have dominated post-Gadhafi Libya. It is nearly impossible to make concessions to one group without angering its competitors, and nearly all of the rival groups are able to control and take critical infrastructure — including airports, pumping stations, oil refineries and export terminals — offline.

The outgoing government and its successor body now must choose to either acquiesce to the demands of Bukhamada's supporters at Marsa el Brega and bring the terminal and its airstrip back online, or placate Jathran, whose forces still guard the bulk of eastern Libya's export capacity. While Jathran is present at more ports, Bukhamada's cousin, Col. Wanis Bukhamada, is head of Bengahzi's Sawaiq special forces currently fighting alongside retired Gen. Khalifa Hifter's anti-Islamist forces in the east.

The embattled central government's considerations go beyond pay scales and leadership structures of embittered petroleum guards into broader issues of renegade national forces, anti-incumbency movements and a risk of larger-scale fighting between the country's many competing armed groups. The central government will have a difficult time reaching a deal with one group of Petroleum Facilities Guards that does not violate the terms of its deal with the other, and risks angering both — resulting in cutoffs of all or some of Libya's eastern oil terminals. Those on strike are unlikely to modify or lessen their respective demands, making a limited restart followed by a partial shutoff or delay from either Marsa el Brega or other eastern terminals the most realistic outcome. Such an outcome would occur within weeks rather than months

This unpredictability and the government's lack of enforcement capabilities is causing other larger, structural issues for a government keen to export what oil it can while some fields and terminals are still open. Buyers are demanding discounts — rumored to be between $1-2 per barrel for now — for spot purchases, making it more difficult for the National Oil Company to sign months-long supply contracts to traders who are wary of Libya's ability to guarantee stable, ongoing supply deals. After nearly a year of halted exports, Libyan crude supplies have become largely displaced in international markets. Buyers are also hesitant to buy Libyan crude blends of volatile and unknown quality at current prices, especially since the central government has been prevented from testing crude flows into coastal storage tanks and monitoring the additional processing necessary to refine crude blends.

Tripoli now has to deal with a national force tasked with protecting its oil fields and infrastructure that effectively is split into two camps: Jathran supporters and Bukhamada supporters, with both possessing questionable loyalty at best to the national government. Regional militias and tribal and ethnic groups continue to maintain a disjointed system of local fiefdoms, largely preventing the national government from controlling their oil resources and critical infrastructure. This scenario makes it quite probable that either Marsa el Brega or other eastern terminals, such as Ras Lanuf and As Sidra, will start cutting off oil exports again in the near future as Libya destabilizes rapidly beyond the point of political reconciliation.

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