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From: Berhane Habtemariam (Berhane.Habtemariam@gmx.de)
Date: Tue Apr 19 2011 - 09:37:44 EDT
Special Commentary on Libya: It Didn't Start This Way, But It's a War For
Oil Now
Publication: Volume: 0 Issue: 0
April 19, 2011
Category: Home Page, Featured, Hot Issue, Military/Security, Foreign Policy,
Africa
By:
<http://www.jamestown.org/articles-by-author/?no_cache=1&tx_cablanttnewsstaf
frelation_pi1%5Bauthor%5D=153> Andrew McGregor
Executive Summary:
After nearly two months of fighting in Libya, what began as a revolution
against Mu’ammar Qaddafi’s repressive regime has turned into an internal and
international struggle for control over Libya’s oil and gas reserves. Of the
country’s four major oil basins, the most productive – Sirte Basin – is only
partly controlled by the rebel forces. While some reserves are in contested
areas, the majority of Libya’s oil is still in government hands. Now lacking
funds, arms and leaders, the rebels’ sole asset and the key to any possible
success is their share of the oil fields. They are currently desperate for
funds, fuel and training. Furthermore, the rebels are almost completely
dependent on NATO forces to defend their oil operations, which would require
the unpopular and unlikely decision to put Western troops on the ground in
Libya. However, multiple American energy producers, including
ConocoPhillips, hold stakes in Libyan oil fields. The international
community is now scrambling to find alternative sources of oil until UN
sanctions are lifted. Qatar, which has supplied the Benghazi rebels with
four shipments of petroleum products, has also agreed to market the rebel
oil. Additionally, Saudi Arabia has boosted its output to meet any shortfall
in supply created by the Libyan crisis. Meanwhile, the violence in this oil
war is spreading, with three oil workers recently killed in loyalist
attacks on the Misla and Sarir oil fields in early April.
Introduction
As ships of the U.S., French and British fleets stood by, a supertanker
carrying a Libyan rebel shipment of 550,000 barrels of high-grade crude oil
worth $110 million made its way from Tobruk earlier this month, headed east
for China. An observer might have come to the conclusion that the war in
Libya was securing the energy supplies of those who refused to sanction or
join it. Without knowing it, however, this observer could also have been
gazing at the last major oil shipment to leave Libya for some time, leaving
a revolution the West had hoped would be self-financing instead reliant on
handouts from nations that have invested too much in the revolt to turn
back.
Assertions that oil was behind the conflict from the beginning are both
predictable and inaccurate. The West had repaired its relations with Qaddafi
who was opening the Libyan oil industry to Western participation and was
selling the West prime petroleum products at market rates. There was simply
no reason to destroy stability in a reliable energy producer, particularly
at a time when the United States and its allies are trying to disengage from
two costly wars in Muslim countries and mount their own economic recoveries.
The Libyan revolt was rather a spontaneous eruption of dissatisfaction with
Qaddafi’s repressive and erratic regime. This, however, has been its
greatest weakness; the revolt is unorganized, unplanned, unfunded,
leaderless and militarily inferior to its opponent. Despite a month of
fighting, international sanctions and a massive Western aerial intervention,
the revolt that began with the slogan “Libyans can do it themselves” is now
desperate for funds, fuel, food, arms and training. The rebels’ sole asset
and the key to any possible success is the oil fields under their control,
though recent long-range operations by Qaddafi loyalists in the Libyan
desert have halted production, leaving the rebels without a source of
financing and entirely dependent on Western sources of money and arms, a
long way from the revolution’s once buoyant “do it ourselves” philosophy. It
did not start this way, but the Libyan crisis has evolved into an internal
and international struggle for control of Libya’s abundant oil and gas
reserves.
Libyan Oil Production
Libya is home to four major oil basins: the Ghadames, Murzuk, Kufra and
Sirte basins. The most productive is the 230,000 km² Sirte Basin, which
holds roughly 80% of Libya’s proven reserves with 43 billion barrels and
accounts for 90% of production. The rebels control a part of the Sirte Basin
capable of producing 200,000 bpd. Some reserves are in contested areas, but
the vast majority of Libya’s oil remains in government hands. While fuel
supplies have been a problem in the rebel-held areas, the government
continues to control nearly all Libya’s refining capacity and most of its
export terminals (Reuters, April 11). Libya has the largest oil reserves in
Africa and is the world’s 17th largest oil producer. 85% of production goes
to Europe, 5% to the United States and 10% to China.
The rebel-held oil facilities are now being operated by AGOCO (Arabian Gulf
Oil Company), a 1979 split-off from the state-owned National Oil Corporation
(NOC). AGOCO claims it has two million barrels still in storage at Marsa
al-Hariqa, though this has not been confirmed (Reuters, April 7). The NOC
claims it is currently producing up to 300,000 bpd, but would have little
alternative to storing production until sanctions are lifted or alternative
means of sale can be established.
Besides agreeing to market the rebel oil, Qatar has also supplied the
Benghazi rebels with four shipments of badly needed petroleum products
through its state owned International Petroleum Marketing Co. (PennEnergy,
April 13).
Saudi Oil Minister Ali al-Nuaimi said Saudi Arabia has enough spare output
capacity to meet any shortfall in supply created by the Libyan crisis,
having already boosted its output to about nine million bpd, including a new
blend it claims approximates light sweet Libyan crude (Gulf Daily News
[Bahrain], April 10). However, Saudi Arabia has not produced more than 10
million bpd in recent years and some industry experts doubt it will be able
to increase production to 12.5 million bpd, as it claims. There are also
questions regarding the quality of the new Saudi blend, which may not be as
fine as the Libyan product.
Opportunities for China and Russia?
Defected former Libyan Energy Minister Omar Fati bin Shatvan recently
declared that Russia and China would not be granted the opportunity to
develop oil and gas fields in Libya under a new rebel regime because they
had failed to support the rebellion, adding that French and Italian
companies could be rewarded with oil and gas contracts for their support
(AFP, April 7). However, Qaddafi has already invited Russian, Chinese and
Indian diplomats to discuss taking over Western oil operations in Libya once
he has dealt with the Western supported rebellion.
Vulnerability to Attack
Three oil workers were killed in loyalist attacks by armored vehicles on the
Misla oil field on April 4 and 5, and an attack on the Sarir oil field on
April 6. Sarir is also home to important installations belonging to the $25
billion Great Man-Made River project, which supplies water from subterranean
Saharan aquifers to Libya’s cities, including Ajdabiyah and Benghazi.
Tripoli claimed (without evidence) that the damage was caused by “British
war planes,” perhaps seeking a propaganda victory on top of a series of
successful raids (UKPA, April 7). The rebels are calling for NATO to defend
their oil operations, but this will be difficult without putting Western
troops on the ground, a move that would be opposed by many NATO members.
Loyalist forces seem to be basing their attacks out of the Waha oil field,
located near the center of the Sirte Basin operations. American energy
producer ConocoPhillips has a 16% share in a joint venture working the Waha
oil field, while Marathon Oil and Hess Corporation hold smaller stakes.
Qaddafi’s forces can also operate from the desert city of Sabha, home to a
large military base and the loyalist Megarha tribe, striking east to attack
rebel-held oil fields.
The loyalist raids targeted oil storage tanks and a diesel tank that
provides fuel to the generators at Misla and Sarir. Many skilled workers
capable of repairing such damage have been evacuated from Libya and the
rebels have only been able to spare young, untrained fighters to defend the
oilfields from further destruction (Financial Times, April 7). Without more
substantial defenses, it looks like rebel oil production will cease for the
duration of the conflict. Even before the attacks, oil production at the
Misla and Sarir oil fields was only one-third of capacity. AGOCO officials
have said production will not resume until the oil fields have been secured
(Reuters, April 13). In these circumstances, Qaddafi’s forces can continue
to disrupt rebel oil operations without having to damage or destroy the most
important elements of the oil fields, enabling them to be put back into
production quickly in the event of a loyalist victory.
The only export terminal in rebel hands is Marsa al-Hariqa near Tobruk,
which would be vulnerable to attack via the desert highway from Ajdabiyah
should that city be secured by loyalist forces. Marsa al-Hariqa is the
smallest of Libya’s oil terminals in terms of loading volumes. Perhaps the
most vulnerable part of the infrastructure is the 500 km pipeline connecting
the eastern oil fields to Marsa al-Hariqa. Other pipelines connect the same
oil fields to terminals controlled by the government.
An Unfinanced Revolution
The rebel leadership is attempting to secure an exemption from UN sanctions
for their oil exports. However, even if loyalist forces are ousted from the
oil fields, it is likely the rebels will be unable to produce more than
about 50,000 bpd, an amount likely to be insufficient to finance services,
purchase food and other goods and run an expensive military campaign against
Qaddafi’s forces. Marine insurance for vessels doing business in Libya has
skyrocketed, perhaps prohibitively except for countries such as Qatar that
are willing to absorb the risk. UK Foreign Secretary William Hague has
already asked the international community to provide “temporary” financial
support to the INC. Qaddafi has considerable gold reserves stored in
Tripoli, enough to keep a war running for years, while the rebels have only
whatever oil is still stored at the Tobruk terminal.
In the continuing search for funds, the rebel Interim National Council
(INC), recognized as Libya’s government by France, Italy and Qatar, has
asked the United States for immediate access to Qaddafi’s frozen assets,
believed to total more than $34 billion (Reuters, April 9). The request
raises the question of whether funds that should belong to the Libyan people
as a whole can be released to an unelected committee composed largely of
Benghazi-based dissidents.
Stalemate or Defeat?
Without military intervention by ground forces, indicators point not toward
stalemate, but toward an eventual government victory, even if NATO
airstrikes cause a delay in this outcome. Strategically, Qaddafi’s forces
hold the upper hand and have proven highly adaptable in developing tactics
to cope with NATO’s aerial intervention.
Qaddafi is demonstrating that authoritarianism will prevail over the type of
“war by committee” that is being run by both NATO and the Libyan rebels. The
no-fly zone might actually have improved loyalist tactics, forcing them to
abandon slow moving armor columns in favor of more mobile deployments in
pick-up trucks that are able to mount quick strikes against rebel forces.
U.S. and NATO commanders complain that loyalist forces assemble near
civilian infrastructure such as schools and hospitals as if this was somehow
“unfair.” The West has invented this form of limited warfare and should not
be surprised that the Libyans and others subjected to it would devise
tactical methods of response that do not involve lining up in the open
desert to be destroyed by enemy airstrikes.
With many major tribes now siding with Qaddafi, whether through loyalty,
tribal ties or cash payments, NATO stands in danger of being seen to be
attempting to impose a national government consisting of a dissident
minority. Such a state would seem to stand little chance of survival once
NATO military support is withdrawn. Both sides have broken out the armories,
and Libya is now flooded with arms, leaving any new government subject to
armed opposition.
Having taken the lead in marketing rebel oil, the tiny emirate of Qatar
appears to be taking the lead in arming the insurgents – according to rebel
General Abd al-Fatah Younes (who appears to have picked up a Western
security team to ensure his personal safety), Qatar has supplied the rebel
forces with anti-tank weapons (al-Jazeera, April 8; Independent, April 7).
Considering the military ineptness of rebel forces prone to panic and
flight, there is every possibility that arms and munitions provided to the
rebels will soon wind up in the hands of a grateful loyalist army.
Conclusion
NATO’s campaign might easily be called “The War of Contradictions,” since it
has said one thing and done another from the beginning. Its entire framework
for intervention is based on a no-fly zone to protect civilians that was
exposed as a cover for battlefield air support for the Libyan rebels almost
immediately. While some NATO nations see the campaign as one intended to
protect civilians, France, Britain and the United States are clearly set on
regime change, a course that cannot be reversed at this point. From the
beginning, Western involvement in the Libyan crisis has been based on the
false assumption that Qaddafi was universally disliked and unwanted in
Libya. Despite ample evidence to the contrary after nearly two months of
fighting, the NATO campaign continues to rest on this unfounded belief.
NATO and the Western media celebrate every time another non-combatant
politician defects, but these efforts at self-preservation play no role in
the battle on the ground. What is more important is the near total absence
of defecting loyalist fighters. For the Libyan regulars and their mercenary
auxiliaries it is clear who has the upper hand in the fighting and who has
the ability to pay their troops and reward success handsomely.
Rebels now demand nothing less than unconditional surrender – probably not a
realistic option, but one based on the belief that NATO will do their
fighting for them. The rebels now believe their ranks to be thoroughly
infiltrated by Qaddafi spies, probably a sign that morale is crumbling as
rebel fighters refuse to acknowledge war is a professional’s game.
If the conflict drags on, who will be the first to break sanctions by buying
oil from the Qaddafi government? Italian oil firm Eni was reported to be
arranging for a shipment from a Qaddafi-controlled terminal, but believes
the shipment will not violate sanctions as the oil is owned by Eni (Reuters,
April 13). Italy purchases 32% of Libya’s oil and must now try to make up
the shortfall.
Without oil, the rebel movement has no future. It already lacks ideology and
a leader; if it also lacks a financial base it would seem to have little
future. As one rebel fighter told a Reuters correspondent: “We have no
coordination. We have no organization. We really have no strategy. We have
no commander” (Reuters, April 10). To succeed in destroying the rebellion,
Colonel Qaddafi must prevent the rebels from producing and selling oil. If
the conflict drags on, the costs to Western nations involved in imposing a
naval blockade, maintaining a no-fly zone, providing air support to rebel
operations and funding, feeding and fueling the “liberated” areas of Libya
will soon draw an outcry from the very same public that once demanded
military intervention. Time is on Qaddafi’s side; eventually international
pressure will force the rebels to temper their demands to find a negotiated
settlement. The alternative is Western military occupation of Libya, a new
and unexpected war to be added to the unresolved campaigns in Afghanistan
and Iraq.