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US Historic Bubble

Libya Moving From Arab Spring To Arab Winter

Politics / Middle East Aug 24, 2013 - 12:13 PM GMT

By: Andrew_McKillop

Politics

ARAB SPRING – ARAB WINTER
Already dubbed 'Arab Winter', the unrealistic hopes and aspirations of 2011's Arab Spring are rapidly being replaced by civil tension and fear, as we witness the breakdown of the unified nation state in country after country across the Middle East and North Africa (MENA). Shaded by the Syrian civil war and the probable emerging Egyptian civil war, the Islamic Crescent of instability stretching from Libya and Tunisia through Egypt and Lebanon to Syria, with another branch running through Yemen and Iraq is becoming a sombre reality. Above all, how outsiders can respond and react to it has no easy answers and throws up dangerous pitfalls for foreign policy, diplomatic relations and the economy as shown by the USA's near-total loss of leverage and influence in Egypt.


 Libya's domestic upheavals, at least until now in late August have been studiedly downplayed by world media. The outbreaks of clan, community, sectarian and street fighting are however no longer possible to ignore, as Libya' shifts to the Yemenite model of an already longstanding concerted assassination campaign against national security, military, and intelligence officials across the country. The present on-the-ground situation could be called an approximate three-way split of the former national territory into three competing power bases, western Tripolitania, low population central and southern Fezzan, and eastern Cyrenaica – using previous or traditional geopolitical concepts.

This ignores what is a widespread urban-focus campaign targeting Libya's central government and its attempts at restoring a semblance of central power through 'Popular Committee' tribal leaders either neutral towards, or supporting the central government in Tripoli. The Committees are hoped at worst to “divide and rule', and at best to provide intelligence, local guides and advisors, and clearing forces able to hold the terrain. This especially concerns those economic sectors and geographic areas where the oil and gas industry has been degraded, but Cyrenaica, called Pentapolis in Antiquity is better-placed regarding presently developed resources and existing oil and gas production and export infrastructures.

Cutting down to reality is sombre. Libya's oil industry is in the midst of its worst crisis since the 2011 civil war because of political and tribal conflicts, lawlessness, strikes, oil theft, protection rackets and equipment failure and breakdowns at major petroleum facilities. Although mostly ignored in the analysis and journalistic reports, but as in Egypt, Saudi Arabia and other MENA countries ironically excluding only Syria, dependence on food imports is sometimes total. If exports – especially oil – decline, food shortage or even famine beckons, inevitably intensifying conflict on the ground.

Reported as far back as December 2012, Libya is paying significant risk premiums on its lifeline imports of food, which in the case of wheat cover more than 75% of its needs. "Libya has a huge amount of oil wealth, but its chaotic administration and fears about non-payment are giving it a bad reputation in international trade," a European grain trader said in a Reuters interview, December 3. Bulk food traders cited a November tender where Libya paid $395 per tonne on a CIF basis for 30 000 tonnes of soft wheat, while the same day Jordan, in no way an oil exporters but more reliable, paid only $378 a tonne CIF for higher quality wheat transported with higher shipment costs.

DAILY REVOLT
 In Libya's latest disruptions, security guards at the country's two main crude oil export terminals re-imposed a strike they called off 10 days ago. Previous to this, operations had resumed at the ports of Es Sider and Ras Lanuf after a two-week stoppage. The two ports have a combined export capacity of around 600 000 barrels a day (0.6 Mbd), about 40% of Libya's theoretical total export capacity of about 1.55 Mbd, which in fact has never been re-attained since the fall of Gaddafi's regime.
 
Reported by major newswires including Reuters and VOA, the latest work stoppages come in the wake of ongoing local conflict between gunmen and security personnel at the main oil services centre of the eastern-Libya town of Awjila. The explanation by Tripoli-based Libyan officials was that they believed the attack was linked to “turf war' competition between militia groups over oilfield contracts and the placement of their members in the newly created national Petroleum Facilities Guard, a special security force under the direct authority of the Defense Ministry. This projected new oilfield and oil sector security entity would be made up largely of former independent militia members - who have a long track record of fighting among themselves.

The port closures were started by workers with 'conventional demands' for payment of back-wages owed, higher future wage rates, more jobs for relatives and friends, and similar claims. Today however, Libyan officials say the situation has morphed into a series of oil and gas facility occupations, not to press home conventional demands but to produce and sell oil independently and outside the Libyan government and its NOC (national oil company). Well-armed guards operating at Libyan oil and gas facilities are trying to sell oil without government approval, as confirmed by several international commodities trading houses cited by 'Wall Street Journal' August 21.

The response by the Libyan central government, whose writ runs less and less wide, is threatening to “bomb from the air and sea” any tanker illicitly buying and taking oil out of the country. Shown as a clip on 'Wall St Journal', the Libyan Navy Special Forces video portrays a Libyan soldier armed with a 1970s-vintage RPG (rocket propelled grenade launcher), supposedly aiming at an offshore oil tanker in the vicinity of Es Sider, the country’s largest oil export terminal. Other news footage from Libyan towns, as well as cities shows much more recent and lethal smaller-calibre military hardware on sale at low prices in street markets. Rather surely, insurance charges on shippers of Libyan oil are rising, as physical exports decline almost to nothing.

Car bomb attacks in Libya's major cities are rising, often simply focusing “Western or western-linked” buildings and entities, with no claim by the bombers either before or after the attack. Apart from US and French targets, UK targets are also included, underlining that the US-French-UK military campaign to oust Gaddafi (called a “NATO campaign”) has left enduring anti-Western emnity.

END OF THE CENTRAL STATE
Libyan Prime Minister Ali Zeidan has warned, most recently two weeks ago that the economic consequences of unpredictable but constant off-and-on disruption to oilfields, production facilities and export terminals has already cut the month-average oil exports of Libya by about 70%. What this means to Libya is simple – well above 95% of the country's revenues are oil and gas-linked.

Oil industry officials have said the export storage tanks serving the Es Sider, Amna and Sirtica oilfield terminals are now at maximum capacity. As a result, oilfield production must be shut down to minimum levels. Libya's oil minister Abdel Bari Ali al-Arousi said on August 12 that the government was “working to end disruptions” concerning the appointment of a new head for its Petroleum Facilities Guard -- but with leaden predictability any name put forward generates a mix of rage and approval from the different heavily armed factions vying for power and able to mobilize oil sector strikers, as well as their militias to enforce their opposing demands.

In total and at any one time, different groups can close all of the main oil export ports of Ras Lanouf, Zeuitina, Al-Sedra and Al-Hariga, forcing a shut down in oilfield production to well below 30% of normal levels, prime minister Ali Zeidan has said on several recent occasions. His central government's writ now extends less and less far, as key ministers 'defect' or resign at an increasing rate, most recently Interior minister Mohamed al-Sheikh who resigned August 19, following the large anonymous car bomb attack, August 17, at the Egyptian consulate in Benghazi.
 
While most media remains fixated on Egypt's accelerating breakdown away from a centrally governed state to a form of rule by “popular street committees”, Libya has already moved far down the same one-way track without this being acknowledged by Western media. As we shall likely see, at least in Libya if not Egypt – due to Egypt's size – the Yemen scenario covers what can be called the Post National State, in the Islamic Crescent of Instability.

YEMENITE SCENARIO? 
Yemen is in all-out Arab Winter and is a major focus of the USA's drone war – and the power base of AQAP or Al Qaeda in the Arabian Peninsula. Due to AQAP’s persistence in Yemen, and the drone war being increasingly admitted as counterproductive due to the large number of “collateral” victims, US policymakers are being forced to rethink strategy against the group. This has meant the only possible strategy of facilitating the long-term expansion of Yemeni security forces and government services to areas where al-Qaida’s influence is most developed.

Exactly like Libya is now doing after the Gadaffi regime, Yemen has broken down into an ever weaker central state and a range of strong regional and local power bases. Any security program with a chance of success must however be decentralized. The main danger is of course that decentralized, armed and trained fighting groups will fight each other, rather than AQAP or other “designated brigands” as defined by outside or Western interests.

While Yemen is a relatively minor oil producer and exporter (0.2 Mbd average in 2009 but now considerably less), its heavily degraded national security situation can be compared with Libya since 2011. Over the past few months Libya's oilfields and export terminals have been affected by everything from striking security guards to militias fighting over who should get security contracts, and conflict between armed groups stealing and offloading increasing amounts of oil for illegal transport to other petroleum service centers, as well a “protection racket” pressure by Islamic jihadist groups claiming to be al-Qaeda affiliated.  The surge in car bombings, assassinations and a mass jail breakout in the country’s second-largest city, Behghazi, have added to the recent spike in insecurity.
 
For Libyan oil the result is clear. Oil minister al-Aroussi said last week that Libya's average daily exports are now only about 0.3 Mbd, through the country's one-only operating export terminal at Zawiya. This port is the only one where, to date, “turf wars”, protection rackets, and inter-tribal conflicts as well as al-Qaeda-assimilated conflict with governmental forces has not disrupted operations.
 
After the fall of Gaddafi, the country's transitional authorities were quick to encourage foreign oil companies and the Libyan NOC to resume production. By as early as autumn 2011, to the surprise of foreign oil experts, the NOC claimed production had almost matched pre-war levels of about 1.6 Mbd. In fact, reported extensively in world media, the numbers were exaggerated and output was never restored to a day average above 1.35 Mbd, and this estimate may be optimistic. Among the reasons why production and exports was able to be temporarily resumed so rapidly, the utilisation of overdue-for-replacement facilities, maintenance reduction, and non-repair of major equipment played key roles.
 
Security issues and resulting supply disruptions plague Yemen's oil industry, and few experts forecast it can ever restore even 2009-level production and exports. Libya’s oil industry's unattractive internal security issues are already deterring several major foreign oil companies from bidding for contracts to manage the fields. Some oil and gas majors such as Royal Dutch Shell and OMV, while denying they intend pulling out of Libya are openly expressing doubt on the wisdom of bidding for future oil contracts or expanding existing operations in Libya.
 
One main gauge of Libya's security situation will be the central government's success or failure in creating its Petroleum Facilities Guard. In Yemen, no such security entity exists despite calls for the creation of it. While Yemen is as far away as possible from its nominal central government consolidating control of the country’s oilfields, pipelines and export terminals, Libya may still be able to exercise central control. But if not, the Yemenite scenario for Libya unfortunately beckons.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2013 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

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