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Oil crescent endgame

The political disintegration since 2014 has led inexorably towards a final battle for control of Libya's commanding heights

Oil has been at the centre of conflict since the civil war began in the country two years ago. Africa's largest reserves-and one of the Atlantic basin's most highly prized flows of crude exports-marked a huge catch for the winner.

The current conflict emerged in the political ruins left by Libya's civil war in 2011, and began in earnest in July 2014 when a coalition of Islamist and western coastal factions-the dominant groups in what was then the General National Congress-suffered steep losses in elections for a new parliament, the House of Representatives (HoR).

Unwilling to be a minority force, the factions formed the Libya Dawn (Fajr) militia coalition and captured Tripoli, destroying the airport and forcing embassies to flee the capital.

The new parliament quit for the eastern city of Tobruk and aligned itself with Operation Dignity (Karama), an anti-Islamist force consisting of tribal militias and Libya's small post-Qadhafi army, now known as the Libyan National Army (LNA). Dignity's Khalifa Hafter was appointed army chief and war began.

Oil has dominated Libya's economy for decades, providing most of its export income and funding the government's budget. Geographically, production is divided in four approximate zones; the offshore Bouri fields, northwest of Tripoli, and three concentrations of onshore fields.

Misrata, the backbone of the Libya Dawn coalition, and allies from the Tebu tribe, from the country's south, quickly captured Sharara and El Feel. The two oilfields in the Murzuq basin-where combined productive capacity was 0.55m barrels a day-represented a handsome bounty. Zintan, a powerful Dignity militia which already controlled Wafa, Libya's biggest gasfield, also in the southwest, cut the pipelines from the Murzuq fields to the coast and production ceased.

In late 2014, Misratan units struck in the prolific oil crescent, in the Sirte basin. They attacked the Es-Sider oil-export terminal, Libya's largest oil port, and, 30km southeast along the coast, Ras Lanuf, another port and the country's largest refinery. A maverick militia, the Petroleum Facilities Guard (PFG), beat them back with the help of Dignity air strikes, but several storage tanks went up in smoke. The National Oil Company (NOC) declared force majeure over the fields supplying the ports, shutting output from a basin that had once accounted for almost half of Libya's 2011 capacity of 1.6m b/d.

That left the southeast Sarir and Mesla fields as the only remaining producers. They were under Tobruk's control. In the oil crescent, Islamic State (IS) set up a base in Sirte, from where it began striking at nearby oil installations, including one brutal attack on the Mabruk oilfield and other nearby assets.

For the republic

The battle for control of the oil was equally fierce in the political arena. As the elected government, the HoR was recognised internationally, giving it the legal right to handle oil exports, but there was a problem. Both NOC, the holding company for state oil assets, and the Central Bank of Libya (CBL), which receives oil revenues, were in Tripoli. The HoR fired NOC chairman Mustafa Sanallah and CBL chairman Saddik al-Kabir, but both men elected to stay in Tripoli, supported by Libya Dawn. Tobruk appointed new chiefs of both organisations, but with their experts and administration in the enemy capital, both struggled to maintain order.

By then, the atomised nature of Libya's tribal-based political landscape had made itself felt. Libya Dawn recreated a rump of the GNC, while militia commanders kept the power. In Tobruk, the parliament played second fiddle to Dignity and firebrand commander Khalifa Hafter. Each warring coalition was itself beset by internal wrangles between militias and tribes. The GNC always met in secret, its numbers small; while less than half of the HoR's MPs bothered to turn up for most sessions, and 30 pro-Libya Dawn members boycotted the parliament altogether.

Tobruk's prime minister Abdullah al-Thinni tried last year to persuade foreign oil buyers to pay into new bank accounts outside Tripoli central bank's control. He failed.

Western backing for the HoR had begun to cool, as it became clear Libya Dawn would not take part in a government where it would be a minority. Instead, after months of negotiations in Morocco and Geneva, the UN proposed in late 2015 a new power-sharing Government of National Accord (GNA) to unite the country. Diplomats spoke of the NOC and CBL being "independent" of any government.

When both the GNC and HoR disavowed the peace process, the UN created the new government anyway, using its 40-strong negotiating team, Libya Political Dialogue, as the enabling authority. The team, made up of disparate tribal elements, formed the GNA in December, appointing a centrist politician, Fayez al-Serraj, as prime minister and leader of a nine-strong presidency.

The key power of the new government, confirmed by a UN Security Council resolution the following month, was that it would gain international recognition, and therefore title to the oil wealth, which would pass from the HoR. There was just one problem: the Libyan Political Dialogue required that the HoR agree to its own replacement. Despite repeated efforts to get the parliament to vote its support for the GNA, it did not. Under international pressure, the GNA moved to Tripoli-arriving by boat after opponents in the capital threatened its members; and residing for months under friendly militia protection in a naval base.

Then the international powers split. The US, EU and Dawn's principle backers, Qatar and Turkey, recognised the GNA. Russia, together with Dignity's backers Egypt and the UAE, stuck with Tobruk's HoR.

Quantitative pressing

The split turned into a chasm in May 2016, when Tobruk's central bank issued its own currency, printed in Russia, even as Libya's hitherto official central bank in Tripoli issued dinars printed in the UK. Fearing an east-west breakup, the CBL's governor Kabir agreed the two currencies could be interchangeable. With its very legitimacy, and that of the state institutions at stake, loss of control of the money supply and the inevitable inflationary impacts were the least of the CBL's problems.

Installed in Tripoli, the GNA's lack of electoral legitimacy quickly became plain. It had no security force of its own and little public support, and agreed that Dawn militias would continue to control the capital. Kabir and Sanallah re-appointed themselves head of the GNA's NOC and CBL without waiting for a GNA vote. Four pro-Dignity members of the GNA quit, tilting its balance towards Dawn.

Tobruk was furious. In April it had tried to sell oil independently of Tripoli, loading 0.66m barrels aboard an Indian-registered tanker for a customer in the UAE. But the UN Security Council, including Russia, blocked the move, and the tanker was eventually obliged to sail to Zawiyah port, controlled by Dawn. Next, Tobruk announced a blockade of its port, Hariga, cutting onshore production from Sarir/Mesla, the fields supplying it.

In Tripoli, the GNA was struggling, unable to dent the militias' control of the capital or project any authority. With oil revenues collapsing, the city's two million people were being kept alive by fast-diminishing foreign reserves. Day-long power cuts, currency shortages and a fivefold rise in food prices saw protests and riots.

In May, Sanallah took the initiative to begin talks with the chairman of the eastern NOC, Naji al-Maghrabi, and the east's blockade of Hariga ended. In early July, the two men announced a united NOC with Sanallah as chairman and Maghrabi as a board member. International markets, which prize Libyan crude for its high quality and watch the sector closely, were relieved at the news. But the deal was still fraught. Maghrabi said it depended on a 50:50 split in oil revenues between Tripolitania, with 4.5m people, and the east's Cyrenaica, with 1.5m. Thinni lowered the east's demands to a 60:40 split, but the GNA baulked at this too. Towards the end of July, the UN tried to broker another way out of the oil impasse, by trying to strike a deal with Ibrahim Jadhran, whose division of the PFG had gained control of Es-Sider, Zueitina and Ras Lanuf. He pledged to open the ports-though he had no control of the fields that supply them. Sanallah wrote to the UN, lambasting the deal, which he said would only reward the efforts of other militias to hold Libyan oil hostage.

Meanwhile, the armies gathered in the oil crescent. With Zintan's hilltop fortresses seemingly impregnable, and Sarir/Mesla in the hands of the HoR, the GNA's only realistic chance to take oil production facilities is the central Sirte basin. In June, Dawn militias, declaring support for the GNA, attacked IS's main base in Sirte. To the south, Hafter's Dignity army deployed around the oilfields. Jadhran's PFG declared support for the GNA, while tribes in the oilfields declared for the HoR. When, as seems likely, Dawn clears Sirte, the armies representing the two sides that have been battling for control of Libya's commanding heights since 2014 will stare at one another across the country's prolific central oilfields.

Diplomats are left hoping Libyans can discover a late-flowering urge to unify. If not, Dawn and Dignity are preparing for a battle which may decide who gets the oil, and so who wins the war.

Key players

National Oil Corporation

NOC is the holding company for all Libya's state energy assets, based in Tripoli. It oversees its regional units and joint ventures and sells Libya's oil. In late 2014, its current chairman Mustafa Sanallah was fired by the House of Representatives (HoR) which appointed its own chairman. Sanallah refused to go, remaining in post supported by Libya Dawn militias opposed to the HoR. Sanallah worked for NOC under Qadhafi and is regarded by foreign buyers as experienced, especially concerning oil sales, including selling oil at agreeable discounts throughout civil war. Eastern politicians earlier this year tried to cleave their own NOC from the national firm. That failed, but politicians in the GNA have lately been trying to install their own man at the helm, instead of Sanallah. He remains in position. Most NOC work is done from administration HQ in Tripoli without formal objection from the HoR. But the rivalry for control of Libya's oil sector-especially exports and revenue-is central to the conflict.

Central Bank Libya

The CBL, in Tripoli, controls foreign reserves and receives oil revenues through its subsidiary the Libyan Bank of Foreign Trade, based in Naples, Italy. The CBL's chairman, Sadiq al-Kabir, a former bank official in the Qadhafi era, is supported by Libya Dawn and was previously fired by the HoR, which has since appointed a rival chairman to its own central bank, in Tobruk. The Tripoli CBL receives oil payments and pays salaries for all Libyans, including 158,000 militiamen from both Libya Dawn and Operation Dignity. In June, the CBL (Tripoli) distributed dinar banknotes printed in the UK, while Tobruk's rival central bank distributed its own banknotes, similar but not identical to Tripoli's, printed in Russia.

House of Representatives

Elected in June 2014 as Libya's second transitional parliament, consisting of 188 seats and, after Dawn militias seized Tripoli in 2014, fled to Tobruk, Libya's easternmost main town. It formally controls Operation Dignity. It was Libya's internationally recognised government from August 2014 until December 2015, when the UN appointed the Government of National Accord (GNA). The HoR has not endorsed the GNA. The HoR's speaker is Agila Saleh, from Obeidi, the east's largest tribe. He is now subject to an EU travel ban and EU and US Treasury asset freeze, on the grounds that he has obstructed the GNA.

General National Congress

Elected in June 2014 as Libya's second transitional parliament, consisting of 188 seats and, after Dawn militias seized Tripoli in 2014, fled to Tobruk, Libya's easternmost main town. It formally controls Operation Dignity. It was Libya's internationally recognised government from August 2014 until December 2015, when the UN appointed the Government of National Accord (GNA). The HoR has not endorsed the GNA. The HoR's speaker is Agila Saleh, from Obeidi, the east's largest tribe. He is now subject to an EU travel ban and EU and US Treasury asset freeze, on the grounds that he has obstructed the GNA.

Government of National Accord

The GNA was created by a UN-chaired peace negotiation committee, the Libyan Political Dialogue, on 17 December. Both the GNC and HoR opposed it. The GNA consists of a 9-strong presidency led by prime minister Fayez al-Serraj, a Tripoli politician and businessman. Governed by the Libya Political Agreement that mandates an advisory State Council be made up of GNC members and for the HoR to become the country's legislative body. The agreement is supposed to come into force when the HoR votes its agreement, which it has failed to do.

Libya Dawn

Dawn is an alliance of supporters of the Muslim Brotherhood, Libya Islamic Fighting Group and Islamist Martyrs Block, together with tribal militias from around Tripoli and western coastal towns Misrata-the most powerful single force in Libya-Ajalat, Zawiyah, Sabratha and Zuwara. It was formed in July 2014. Its militias are self-governing but many have announced alignment with GNA.

Operation Dignity (Libyan National Army)

Dignity, also frequently referred to as the Libyan National Army, is made up of all the forces opposing Libya Dawn, giving it superior numbers, but less coordination. It consists of Libya's small army-Libya's second most powerful cohesive force-an air force in the eastern province of Cyrenaica, plus tribal units from the east, parts of the south and the west, including the Zintan militia-Libya's third most powerful fighting force. Dignity includes some Salafist militias in Benghazi and Tripoli. General Khalifa Hafter, appointed by the HoR as its army commander, is Dignity's leader.

Islamic State

IS's self-declared caliphate in Libya stretched 200km along the country's central coastline. But an offensive by Misratan militias in June-August has pinned it back to parts of Sirte. The Pentagon estimated its force as 6,000-strong, though others say the number is much lower. Many are foreign volunteers. It has largely failed to win support in Libya's tribal-based society, but has nonetheless committed a string of high-profile attacks and successfully targeted energy installations. It was kicked out of its first base, in Derna; its units in Benghazi have been surrounded; and those in Sabratha were destroyed by US air strikes and local militias earlier in 2016. It still has a presence in Tripoli.

Petroleum Facilities Guard

The PFG in eastern Libya is led by charismatic tribal leader Ibrahim Jadhran and controls the oil ports of Es-Sider, Ras Lanuf, Hariga (Tobruk) and Zueitina. The PFG blockaded those ports from August 2013 to April 2014 until its demand for money, believed to be almost $300m, was paid. Jadhran also tried to export oil from Es-Sider in March 2014, allowing a North Korean-registered vessel to load at the port. US Navy Seals eventually seized the tanker. Jadhran also at one stage proclaimed autonomy for eastern Libya. The PFG frequently changes allegiance. It supported the HoR and battled Dawn for control of the ports in December 2014, and also tried to fight off IS attacks on the facilities in January and February 2016. In April 2016, it switched its allegiance from the HoR to GNA.

United Nations Special Mission to Libya

Led by envoy Martin Kobler, a German diplomat, Unsmil supports and helped create the GNA. It announced it had moved to Tripoli in April 2016, but by the end of July remained based in Tunis.

International backers

The US and EU recognise the GNA as Libya's legitimate government. The UN calls on members to recognise the GNA, not the HoR; but its resolution 2259 on the matter is ambiguous over whether this is valid if, as is the case, HoR does not agree. Other GNA backers include the UK and Italy, as well as Qatar and Turkey, which also supported Libya Dawn. Russia, Egypt and the UAE continue to recognise the HoR-Egypt and the UAE are also the principle military backers of Operation Dignity. France formally backs the GNA but its special forces have been fighting along-side Hafter's army.

Glencore/ Vitol

In October 2015, Mustafa Sanallah, chairman of NOC Tripoli, announced a contract with Swiss-based Glencore to lift all oil exports from Tobruk's Hariga port. A month later, he announced a second contract with Swiss-based Vitol to supply all Libya's petroleum imports. Vitol had been a crucial supplier to Libya's rebels during the 2011 civil war. The Glencore contract annoyed Tobruk NOC, because money paid by Glencore for oil produced in the east is received by Tripoli's CBL.

This article is part of a report series on Libya. Next article: A fractured oil sector

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