Why Haftar Isn’t Going to Sell Libyan Oil
While there are plenty of political and industry players the world over who would like to see a winner in the Libyan civil war stalemate, the oil and gas market at large would take a significant hit if the conflict were to end and the oil starts flowing again. Not even the myriad of external forces lining up to materially support either General Khalifa Haftar’s ongoing attempt to take Tripoli or the inadequate and militia-backed Government of National Accord (GNA), behind which the UN has hesitatingly thrown its weight, have been able to resolve anything.
But the coronavirus just might.
In a country that, until now, has not had a single case, the other shoe is dropping. On Tuesday, Libya reported its first COVID-19 case, and the fear is that it does not have the facilities to contain a spread.
For now, the National Oil Company (NOC), the neutral voice in all of this, is thinking it will be able to turn the taps back on for 1 million barrels per day of oil.
Is it realistic?
Those taps are controlled right now by Haftar, and his external allies, which include OPEC king Saudi Arabia, OPEC prince UAE and even Russia (by way of unofficial mercenaries), are not interested in having the general give the green light to start pumping again. So there is very little pressure at all on Haftar to change strategy. That strategy so far has been to put the squeeze on the Tripoli-based…
Why Haftar Isn’t Going to Sell Libyan Oil
While there are plenty of political and industry players the world over who would like to see a winner in the Libyan civil war stalemate, the oil and gas market at large would take a significant hit if the conflict were to end and the oil starts flowing again. Not even the myriad of external forces lining up to materially support either General Khalifa Haftar’s ongoing attempt to take Tripoli or the inadequate and militia-backed Government of National Accord (GNA), behind which the UN has hesitatingly thrown its weight, have been able to resolve anything.
But the coronavirus just might.
In a country that, until now, has not had a single case, the other shoe is dropping. On Tuesday, Libya reported its first COVID-19 case, and the fear is that it does not have the facilities to contain a spread.
For now, the National Oil Company (NOC), the neutral voice in all of this, is thinking it will be able to turn the taps back on for 1 million barrels per day of oil.
Is it realistic?
Those taps are controlled right now by Haftar, and his external allies, which include OPEC king Saudi Arabia, OPEC prince UAE and even Russia (by way of unofficial mercenaries), are not interested in having the general give the green light to start pumping again. So there is very little pressure at all on Haftar to change strategy. That strategy so far has been to put the squeeze on the Tripoli-based government by starving them out. So far, he’s starved them out of $3.5 billion in oil revenues since January. But turning the taps back on would make things very difficult for the Saudi-Russian oil price war, which presently consists of both parties trying to out pump the other to flood the market and tank oil prices until someone blinks.
Does this status quo suit Haftar? Not exactly. What he would like to do is add another twist to his oil strategy: He wants to turn the pumps back on but sell the oil independently and divert the revenue away from Tripoli and the GNA, which uses it, in part, to fund the militias that support it (as long as they’re getting paid to do so). This has been Haftar’s goal for a while, but he can’t do it without allies agreeing to buy it. Any arrangement to that effect is likely to be stymied right now because the oil markets are saturated. Haftar would have to sell at a significant discount to already rock-bottom prices. Haftar’s allies, which include Russia, Saudi Arabia, and the UAE, aren’t going to be keen to have this Libyan oil back on the market right now, no matter where the revenues go.
But other pressures will now put the squeeze on both sides. The coronavirus is causing panic, and fighting has escalated at the arrival of Libya’s first confirmed case.
The Democrats’ Big Green Misstep
The Senate’s $2-trillion coronavirus stimulus bill agreed to on Wednesday barely slipped through as Democrats sought to slip some new green deal elements in - most notably tax credit extensions and direct pay provisions for the wind and solar industries. The Senate wasn’t buying what the Dems were selling, though. Renewables won’t be getting any stimulus, and the Trump administration thought this really wasn’t the time for it.
Renewables will also suffer supply-chain and economic disruptions in the COVID-19 pandemic, but they can also - like everyone else - get plenty of cheap credit to float them through this crisis. Certainly, a green deal shouldn’t hold up a stimulus package. But renewables aren’t being singled out here: of the $500 billion rescue fund Republicans pushed for, the oil industry isn’t getting any, either. This isn’t about fossil fuels vs. renewables anymore: This is about a global pandemic and how to best staunch the bleeding.
Both Republicans and Democrats have had to sideline their campaigns, and the coronavirus crisis will likely serve as Trump’s litmus test, which at this point will be tough for any president to pass - especially one who has based his victory on the stock market. Nevertheless, it was a massive misstep for the Democrats to try to slip this green deal element into a stimulus bill in which it has no place. It won’t win them many favors right now, but they also have little place at the campaign table during the pandemic. All they can do is watch what happens and re-emerge when the dust settles.
Politics will have to wait.
