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Exclusive: Qadhafi talks oil-tanker sales with Russians

Russian investors are on the verge of buying a fleet of oil tankers from Libya’s state-owned General National Maritime Transport (GNMTC), says a source close to the negotiations

GNMTC is under the control of Muammar Qadhafi’s son Hannibal. According to sources, he has spent recent weeks trying to sell the company, or its vessels, as part of a bid to settle debts and raise much-needed cash for the war-ravaged regime.

Tighter EU sanctions on regime-controlled ports in Libya and Nato’s interdiction of vessels carrying fuel to supply Qadhafi have severely disrupted GNMTC’s ability to trade. A sale of some of the vessels may be an effort to circumvent sanctions.

The Russian party would pay $300 million for some of the GNMTC fleet: the company’s website lists 15 vessels, although other sources say it owns 22. Its book value before civil war broke out was $1.3 billion, said one of the sources that revealed the impending deal with Russian investors.

One source said Sovcomflot (SCF), Russia’s state-controlled shipping firm, was interested in GNMTC’s tankers. SCF declined to comment when contacted by Petroleum Economist.

A source with close knowledge of the deal has alleged that in lieu of a cash payment to settle the sale, some of the transaction could involve payment in kind, possibly including weapons and fuel. Any cash payment could not be made to a Libyan account without breaking economic sanctions in place against the Qadhafi regime.

Ross Denton, a partner at global law firm Baker & McKenzie, said that if it were possible to show direct ownership of GNMTC by the Qadhafi family or the Tripoli regime, then any sale would breach sanctions.

Big breaches

As well as the EU, the US and UN have imposed sanctions against the Qadhafi regime. Under the terms of the EU and US sanctions, “any transaction resulting in an economic benefit” to the Qadhafi regime would be in breach. It is understood that payment in kind would be considered such a breach.

The wording of the UN Security Council resolution instituting sanctions is less detailed, but it is understood any payment in kind would, at the very least, be contrary to the spirit of the sanctions, said Charles Claypoole, of Latham & Watkins.

Denton said cash payments could prove difficult for any potential buyer. “How are you going to get the money to the Libyans? The western banking system won’t touch this, so there’s no obvious or meaningful way for them to be paid.”

He added: “The second-level problem is that the US would say those assets are tainted as they’ve been acquired in contravention of the sanctions. Even if they were able to get this fleet and pay for it, there would be a problem using the tankers.”

“Contravening the sanctions is a criminal offence,” said Claypoole. “Prosecution of any violation will be done by the competent authorities of the country having jurisdiction over the violation and could result in heavy penalties or imprisonment.”

Growing desperation

News of a potential sale highlights the growing desperation at the heart of the Qadhafi regime. Hannibal is thought also to be seeking cash to help finance his and possibly other regime figures’ departure from Libya, said one of the sources.

Petroleum Economist previously reported an attempt to sell some of the GNMTC fleet to Asian investors.

EU sanctions on Libya have blacklisted six regime-controlled ports: Tripoli, Al Khoms, Zuara, Brega, Ras Lanuf and Zawiyah. After weeks of fighting for the town, rebel forces say they are now closing in on total control of Brega, a hub for oil exports. Qadhafi forces heavily mined the port as they retreated. 

Update 11/08/2011: SCF Group today issued a statement denying it was in talks with GNMTC. The statement said: "SCF  notes the media speculation linking it with the possible acquisition of Libyan shipping company GNMTC. Such speculation is entirely inaccurate and  SCF Group confirms that neither it, nor any of its subsidiaries, has any plans whatsoever to acquire GNMTC or any of its assets.”

Additional reporting Kwok W. Wan, Anthea Pitt

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