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The poisoned prize: the quest for oil, money and power in Libya.

by | Jan 21, 2020

The Macro View

The poisoned prize: the quest for oil, money and power in Libya.

by | Jan 21, 2020

Libya, more than any other province of the kingdom of black gold apart from Iraq, has been a tragic victim of the “oil curse”. Libya possesses 48 billion barrels of proven crude oil reserves, the largest in Africa, bigger than even Angola and Nigeria.

Libya’s light sweet crude (low Sulphur content) grades are greatly coveted by French and Italian refineries. The erratic output of its oil export terminals on the Mediterranean – Ras Lanuf, Brega, Sidra, Hariga, Zuwetina – can have a disproportionate impact on the global wet barrel crude oil trading markets. This is exactly what happened last week when self-styled Field Marshal Khalifa Haftar, commander of the Libyan National Army (LNA), who challenges the legitimacy of the UN backed government of Prime Minister Fayez al-Sarraj, ordered all six ports to halt oil exports to put pressure on his political rival ahead of a Putin/Erdogan/Merkel brokered international conference in Berlin, the same city where Africa was dismembered by rival colonial empires in the time of Prince Otto von Bismarck in the 1880’s.

Libya, then a province of the Ottoman Empire, was brutally colonized by the fascist Italian dictator Benito Mussolini and his genocidal pro-Nazi Marshal Rudolfo Graziani, who murdered one tenth of its Arab and Berker population in a colonial war led by the legendary Omar Mukhtar, the lion of the desert. The cruel ironies of the game of nations never cease to amaze me.

General Khalifa Haftar has played a seminal role in the history of modern Libya. As a young captain, he helped Muammar al-Gaddafi topple the monarchy of King Idris Al Senussi on 1 September 1969 in a bloodless coup d’état. Haftar later broke with Gaddafi in 1983 after his Libyan expeditionary brigade in Chad was defeated by forces loyal to President Hissène Habré. Haftar and his soldiers were airlifted to Washington by CIA paramilitaries, where they lived on the largesse of a Reagan White House determined to overthrown Colonel Gaddafi’s brutal dictatorship in Libya.

Unfortunately, despite a series of abortive coups d’état attempts, military mutinies, mass executions and terrorist outrages like the destruction of a Pan Am Jumbo jet over the skies above Lockerbie, Scotland by Libyan intelligence agents, the Gaddafi regime survived until October 2011, when a NATO bombing campaign orchestrated by France, ostensibly to prevent a massacre of civilians in a Bengazhi uprising, led to the horrific murder of Gaddafi and his son Mutassim, the regime’s National Security Advisor who had visited Obama’s Secretary of State Hilary Clinton, as they emerged from a drain-pipe in Sirte. Sirte, the birth place of Gaddafi and his Gaddafa tribe has just fallen to the LNA.

In 2011, the overthrow of the Gaddafi regime led to panic in the crude oil market and Brent soared to $128 a barrel the day the dictator’s grotesque, bloodied body was publicly displayed by rebels in a frozen container. General Haftar’s militia brigades played a crucial role in the success of the revolt against Colonel Gaddafi and he reinforced his Libyan nationalist credentials when he launched Operation Karama (dignity) to vanquish Al-Qaeda in eastern Libya. This victory earned Haftar the gratitude of Egypt, Saudi Arabia and UAE, three Arab states with zero tolerance for terrorist outrages of Al-Qaeda, Daesh and the Muslim Brotherhood.

Libya historically, is three distinct countries – Tripolitania, Cyrenaica and the Fezzan. These three provinces were governed by separate, even rival, proconsuls and governors in the Roman and Ottoman empires. So it was not surprising that General Haftar, whose power base is in eastern Libya, Benghazi and the Sirte Basin, allied with a rival political bloc in Tobruk and moved against the Tripoli government of national accord (GNA) in 2014. The post Gaddafi era left a political vacuum as the Brother Colonel had gutted the Libyan state with his Jamuriyah/Green book madness concept in his 42 year reign of terror that exceeded the wildest dreams of Caligula and Nero. Libya was also divided by ethnic (Arab, Berber, Tuareg), tribal factions and regional militias who had helped to topple Gaddafi but were never disarmed by the weak, UN backed transitional government in Tripoli.

By 2018, Libya’s fabulous oil wealth became a coveted prize for the Great Powers and regional Arab states who were horrified at the prospect of a failed state in the heart of North Africa. In contrast, General Khalifa Al Haftar’s armies now control 80% of Libya and all its major oil export terminals in the Sirte Basin. The LNA has proven itself on the battlefield against Al-Qaeda/Daesh terrorists, secessionist militias, Gaddafi’s mercenaries and now the GNA’s Turkish backed military units. A civil war in North Africa has escalated into yet another Arab regional proxy conflict at the epicenter of the African migrant smuggling route to Europe.

In April 2019, General Haftar’s LNA moved against Tripoli regime. The LNA was supported by Egypt, France, Russia, Saudi Arabia and the UAE. General Haftar was received as a state guest by King Salman in Riyadh and President Sisi in Cairo.

France has taken a strategic interest in post Gaddafi Libya since 2011 as Total operates major oil concessions in a state that borders Algeria, Chad, Niger and Tunisia, all former colonies of the Fifth Republic. It is no coincidence that President Sarkozy convinced David Cameron and Barack Obama to initiate the NATO bombing campaign that led to regime change in Libya. France is a permanent member of the UN Security Council (a reward for the June 1940 la gloire against the Wehrmacht or Vichy?) but has supplied Haftar with weapons, intelligence, money – and, above all, political backing from the Quai d’Orsay.

The French role in the Libyan economy has led to a bitter rift with Italy since ENI refineries are dependent on Libyan crude feedstocks and the influx of African refugees from the Libyan coast has become the most divisive issue in Italian politics. The French, as in Saddam’s Iraq, have leveraged arms sales, diplomacy (an Exocet missile fired by the Iraqi Air Force sank the USS Stark in the late 1980’s) and battlefield intelligence into lucrative oil deals with General Haftar’s LNA. It is significant that Rome protested France’s decision to block the EU resolution condemning General Haftar’s assault on Tripoli. Total has gained access to the LNA controlled oilfields in southern/eastern Libya and even purchased a 16% stake in the Waha Oil Company, a subsidiary of the state owned Libyan National Oil Co. (LNOC), whose output is 1.3 MBD but at least 850,000 barrels a day is under the de facto control of the LNA.

Tunisia just arrested 13 armed French intelligence agents on its border with Libya. Algeria has expressed grave concern at the head of state level over spillover risk in the Libyan civil war, since terrorists based in Libya massacred dozens of oil workers at a Sonatrach oil terminal in its southern Saharan desert province. There is even evidence that Russia’s Wagner Group mercenaries are fighting in combat roles in the Libyan civil war and Chinese drones are as much a feature of this conflict as Scud missiles/Abram tanks were in Desert Storm in 1991.

Turkey has threatened military intervention in Libya to support the Tripoli government in order to protect its geopolitical interests relative to Cyprus, Greece, Egypt and Israel in the offshore gas politics of the eastern Mediterranean. Even President Trump overruled his own State Department’s position against a military solution in Libya by expressing support in a White House phone call to General Haftar.

Libya has now replaced Iraq and Syria as the epicenter of the most high stakes geopolitical conflict in the Arab world. President Erdogan has sent hundreds of Turkish electronic warfare/air defense technicians to help the Libyan GNA government defend Tripoli and Misrata from General Haftar’s offensive. There are rumours that private Turkish military contractors and even pro-Ankara Turkmen militias from Syria are fighting with the GNA’s combat troops to defend Tripoli.

Yet General Haftar’s decision to halt oil exports means the LNOC will not be able to transfer $60 million a day to the central bank in Tripoli, money desperately needed to pay salaries of the civil service and soldiers. The Berlin conference cannot avert the inevitable. General Haftar’s LNA has seized Sirte and can launch air-strikes on both Tripoli and Misrata. The LNA has outgunned and out-strategized its GNA foes. The fall of Tripoli is only a matter of time and Berlin will not avert an imminent LNA victory in Libya.

Will Turkey deploy its air force to save the GNA regime, as Putin did for Assad in Aleppo in 2015? No. The LNA has sophisticated anti-aircraft missile batteries and its forces are only 100 miles away from Tripoli and Misrata airfields. Turkey has no aircraft carriers and its airbases in Western Anatolia and northern Cyprus are too far away to execute credible or effective air combat missions.

There is no way France, Egypt or even Italy will allow a Turkish naval task force to sail to Tripoli – after having spent literally centuries trying to limit Turkish naval power in the Mediterranean. Europe has never forgotten the battle of Lepanto, which vanquished Ottoman sea power and turned the Sublime Porte into history’s “sickman of Europe” who was finally euthanized by Kemal Ataturk in 1924 with the birth of the Turkish Republic.

The last thing Erdogan needs is a Turkish Navy fleet sunk by NATO anti-ship missiles. An amphibious landing on the Libyan coast is impossible for Ankara. So the die is cast and the outcome of the battle of Libya is almost certain. General Khalifa Haftar’s LNA will enter Tripoli and win the priceless prize coveted by the world’s most powerful state. Oil, money and power will converge once again to destroy yet another Arab state a century after the death rattle of the Ottoman Empire created the tragic war ravaged, doomed modern Middle East. Arab oil has once again proved a lot more expensive than Arab blood.

About Matein Khalid

About Matein Khalid

Matein Khalid is Chief Investment Officer and Partner at Asas Capital. He is responsible for global investment strategies, merchant banking, and the development of the multi-family office investment platform, advising ultra-high net worth royal and family offices in the UAE on global equities markets and foreign exchange.

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