Libya oil chief says foreign powers hampering efforts to end embargo

The head of Libya’s state oil company has blamed foreign powers backing renegade general Khalifa Haftar for hindering talks intended to enable the north Africa state to end a six-month oil blockade and resume crude exports.

Mustafa Sanalla, chairman of the National Oil Company, told the Financial Times that “some regional countries are complicating the negotiations while enjoying the absence of Libyan oil from the market”.

Mr Sanalla, who is spearheading an initiative to lift the embargo imposed by forces loyal to Gen Haftar in January, declined to name the countries. But he appeared to be referring to the United Arab Emirates and Saudi Arabia, both supporters of the renegade commander.

“It’s very clear who is controlling Libya now. It is from outside and this decision about oil is about who is controlling [the country], not the Libyan side,” Mr Sanalla said.

The embargo has caused Libya’s crude output to collapse from about 1.2m barrels per day to less than 100,000 bpd at a time when Opec members, led by Saudi Arabia, and Russia — another backer of Gen Haftar — have slashed production to stabilise plunging oil prices.

Even if the initiative to resume production succeeds, Mr Sanalla said it would take months and hundreds of millions of dollars for Libya, an Opec member, to get back to full production because of the damage done to oil facilities.

“We have a disaster — technical problems everywhere, the collapse of oil tanks. Yesterday we had a big leak in an offshore exploration line,” he said. “We can’t tell the size of the disaster until our staff can make a full inspection.”

The oil facilities have long been vulnerable to attack and used as pawns, as rival Libyan factions have divided the country into fiefdoms — the embargo has cost the country more than $6.4bn in lost revenue, according to the NOC.

Efforts to resume production come during a period of relative calm after Gen Haftar, who controls eastern Libya from his headquarters in Benghazi, suffered a string of military defeats by forces loyal to the UN-recognised government in Tripoli, which have been boosted this year by increased military support from Turkey.

Libya has been enduring a civil conflict, which has morphed into a proxy war awash with foreign mercenaries, since Gen Haftar launched an offensive on the capital last year.

Under Mr Sanalla’s initiative, the Libyan parties and their foreign backers would agree that oil revenue would be frozen for a set period in the NOC’s account rather than transferred to the Libyan central bank. The bank has faced mounting criticisms from all factions over a lack of transparency, concerns about corruption and the inequitable use of petrodollars.

The US and the UN would then oversee negotiations between the rival Libyan groups and their foreign backers to negotiate a “very transparent financial arrangement including how the money is spent,” as well as reforming the more than 20,000-strong Petroleum Facilities Guard, which is made up of militiamen and tribal fighters.

“The PFG has been a disaster for Libya . . . it has become an enemy within, holding our oil production to ransom repeatedly since 2013,” Mr Sanalla said.

Talks on the initiative are being overseen by the US and the UN, and involve the UN-backed government, Gen Haftar’s representatives, France — which has been a supporter of the commander — the UAE and Egypt, which also backs the Libyan strongman.

Despite relative calm in recent weeks, diplomats fear all sides are mobilising for the next phase of the conflict and Mr Sanalla is desperate that oil facilities, particularly in the east, do not become targets.

“The longer the delay the more time this gives for warring sides to prepare for a new battle. We have to do what we can to avoid a new battle on our facilities,” he said.

“Our sole aim is to resume production as soon as possible — it’s our duty to safeguard the wealth of Libyan people.”

The NOC, one of the few state institutions deemed to be above factionalism, has said Russian mercenaries with the Wagner Group, a private security firm, as well as Sudanese fighters, have moved to the Sharara oilfield — the country’s largest — in southern Libya.

Sharara is operated by a consortium of the NOC and four European energy companies, including France’s Total, Spain’s Repsol, Norway’s Equinor and Austria’s OMV.

“This is a very serious threat that our international partners operating in the field and us take very seriously,” Mr Sanalla said.

His fear is that if the initiative to resume the output fails, the crisis will deepen.

“The situation will be very dangerous, the war will be there . . . we have very limited time and we have to utilise this window to get rid of this threat on our facilities,” he said. “If we lose this opportunity it will be a disaster for all.”