Global Corporations and Politics
Libya: How Corporations Get Along Without the State

So far, the major European corporations are better at negotiating between conflicting sides in Libya, thus taking advantage over their Chinese and US competitors. They pump the product across the frontline, ensure the security of their assets, work with the para-legitimate armed groups, and are skilled at distinguishing the fast changing shades of their legitimacy, writes Andrei Maslov, coordinator of the work on the Russia-Africa Shared Vision 2030 report, Intexpertise research network.

Architecture of the political system

For almost 10 years the international media has focused on the military and political situation in Libya. Today, the territory is the closest open armed conflict to the European Union. The conflict involves armed units of every possible form and degree of legitimacy ranging, from jihadist groups to private militia and security companies to foreign armed forces.

By 2019, these diverse groups had united behind two main centers of activity: the East with their HQ in Benghazi and the West headquartered in Tripoli. The specific characteristic of Libya’s internal conflict (which was never a pure civil war) is that both forces generally recognize the other’s legitimacy. Tripoli houses the UN-supported Government of National Accord (GNA) under Fayez al-Sarraj. The central figures in the East are the President of the House of Representatives Aguila Saleh and Khalifa Haftar, commander of the Libyan National Army appointed by the Presidential Council of Libya, which is actually chaired by the same Fayez al-Sarraj .

 

Formed under the terms of the 2015 Libyan Political Agreement, the Presidential Council nominally carries out the functions of Head of State. The Presidential Council is a source of legitimacy for both the East and the West, but itself is virtually inactive. It consists of nine members, six of whom can veto any decision taken. In a conflict environment, this requirement means that the council is incapable of deciding on anything.

For example, Khalifa Haftar’s main ally on the Presidential Council, its Vice Chairman Ali Faraj Qatrani, has not shown up in Tripoli at all since 2019. Haftar, who sieged Tripoli for almost a year, can neither be dismissed, nor replaced without Qatrani’s consent. Moreover, officially registered LNA officers had been receiving, until recently, their official salaries.

In April 2019, the LNA launched an offensive on Tripoli, which soon turned into a protracted semi-circular land siege. In March 2020, the siege was lifted, with the East pulling back to the Sirt –Al-Jufra line that remains the natural boundary of either sides’ influence in terms of their ethno-tribal composition and economic interests: the main oil-producing assets in the East remain under the LNA control. There have been no significant changes since then.

Haftar’s advance on Tripoli was explained by the need to “free” the UN-recognized Sarraj Government from the influence of “terrorists,” “outside forces,” Ikhwans and other illegitimate (as determined by the East) groups. In this (and not just in this) respect, the Libyan War is reminiscent of medieval conflicts in Europe prior to the emergence of nation-states. This is a war for influence, a war for recognition and employment of the estate that pursues it.

Non-surprisingly the post-state political architecture reminds the pre-state one.

External forces and their interests

From time to time, armed forces units from Turkey, Egypt, the United States, Italy, France, and other countries operate in Libya, performing targeted missions that are not always publicized. By 2020, Turkey came to play as the most visible part (on the GNA’s side); the GNA is also actively supported by Italy. The East is backed by the UAE, Saudi Arabia and France.

By 2020, Russia had formed a balanced position   mainly due to the efforts of the Ministry of Foreign Affairs. While Emmanuel Macron, formally recognizing the Tripoli Government, renders direct support to Haftar whom he has met at least four times, Fayez al-Sarraj was the one invited to the Russia-Africa summit in Sochi by Vladimir Putin. The Russian Ministry of Foreign Affairs maintains a dialogue with Tripoli, while the Russian Defense Ministry cooperates with Khalifa Haftar’s LNA, considering it to be their legitimate counterpart.

Meanwhile multinational corporations have continued to operate in Libya throughout the war, first suspending production, then resuming it, then evacuating their personnel, and then bringing some of them back. Thus, the Libyan war gave an impetus to the development of the remote-control technologies long before COVID-19. All told, Libya’s assets are owned by 23 foreign oil and gas companies, led by Italian Eni, French Total, Austrian OMV, German Wintershall DEA, and Canadian Suncor.

Every day about 13 million cubic meters of gas are supplied to Italy via the Green Stream pipeline. Gas is produced at the Tripoli-controlled offshore Wafa and the Bahr Essalam fields. Italia overseas security of the infrastructure and their presence is a significant factor in support for the GNA in Tripoli. The gas supply system in Libya has been functioning almost without interruption throughout the war, including West-East deliveries for power stations on the other side of the frontline, in the East.

If Italian Eni remains the main stakeholder in the West, the National Oil Corporation’s main partners in the East, operating in the Oil Crescent, are Total and Suncor (formerly Petro-Canada). Like other foreign companies, they operate in Libya under disguising local names of the joint ventures they formed with the National Oil Corporation. For example, Mellitah is the joint venture involving Eni; Suncor, the biggest Canadian energy company, is a part of Harrouge Oil based on Haftar-controlled territory; Sarir is for Wintershall DEA; Waha Oil and Mabruk Oil (and others) are for Total, and Akakus is a consortium composed of Repsol of Spain, Austrian OMV, Norwegian Eqinor, and again Total.

Not a single foreign petroleum producer has left Libya after the after the outbreak of war. Production remains attractive even in a down market. On the whole, the Libyan oil industry is dominated by companies from EU countries like France, Italy, Germany, Spain, and Austria. The presence of non-EU entities (from UK, Norway, Canada, the US) has declined slightly during the war. Chinese and Middle East investors have so far failed to access these assets. “Libya is not for sale” and remains one of the last post-colonial resorts for European transnationals.

Libya at Crossroads: Unending Turmoil and Foreign Interests
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Media reports about an alleged letter of Saif al-Islam, the son of the former Libyan leader Muammar Gaddafi, to President Putin, asking the Russian authorities for support, raised many questions about the current political scene in Libya and the future of the settlement there.
Expert Opinions


The National Oil Corporation

Consolidation of eastern Libya under the control of Haftar’s LNA in 2016-2018 was initially endorsed not only by multinationals working in Libya but also the National Oil Corporation in Tripoli. Haftar’s rise to prominence was accompanied by growing oil production and the resumption of trouble-free operations at export terminals. A unified center emerged for keeping security from well to port.

Haftar’s 2019 advance on Tripoli did not initially lead to a suspension in oil production. Both sides of the conflict continued to work with the NOC, received salaries and funding, and even obtained fuel and lubricants from a centralized source. The balance was tipped in January, with Eastern communities deciding to suspend exports from the terminals they controlled. As a result, overall production fell from 1.2 million barrels a day to 0.3 and later to 0.1 million barrels, now remaining at this level.

What happened next was COVID-19 and the collapse of the oil price. Haftar’s Middle East sponsors, the UAE and Saudi Arabia, might have decided that it was too early to resume oil production. Although in May 2020 the situation on the front reverted to what it was in early 2019 and the architecture of the political system in Libya has not changed in any way since then, oil production did exist at that time but does not today. So, now the only new factor, the oil market, is playing a role, but this could change again soon as demand rallies and the US sees a drop in its domestic production.

We can expect Libyan oil to flow back into the market after it is allowed by the UAE and Saudi Arabia, which largely control the armed groups in eastern and southern Libya that, in turn, control the oil production and transportation infrastructure. The NOC’s latest official statements reproach “regional countries” for blocking the resumption of oil production. If an oil market revival takes a long time, it can be expected that the suspension will lead to the change of ownership of some blocked assets. At the same time players in the East may use the moment to negotiate certain redistribution of oil revenues.

The NOC tends to implement its oil industry development strategy regardless of how the political system has been changed since 2011. By 2024, available reserves will make it possible technically to boost production to 3.5 million barrels per day.

To characterize Libya’s contemporary political architecture, we can suggest the term stable pathological condition (SPS) borrowed from neurophysiology. According to Dr Natalya Bekhtereva, such SPС is defined as a clear deviation from the norm, in course of which the system does not demonstrate dynamics towards an increase in the degree of this deviation. In Libya, the government institutions are in a state of formal conflict regulated by informal collaboration agreements.

Even if production fails to return to 2019 levels, there is still a possibility of producing and supplying $15-20 billion worth of high-quality oil per year, something that would provide for the needs of a comparatively small population (6.5 million), which would ensure an inflow of vital imports. As a result, Libya may end up a fragmented, if formally unified country without a single executive vertical, but with a Central Bank, a national oil and gas corporation, a number of law enforcement agencies, and a system of laws accepted under Gaddafi (the oil and gas industry is fully regulated by these acts).

 How corporations operate in the absence of normal state

In order to operate in the absence of state institutions, corporations require intermediaries that can solve the problem of the vacuum of legitimacy. In Libya, an intermediary like this is the National Oil Corporation, a piece of state infrastructure left over from earlier times. To be able to fill the legitimacy vacuum, NOC supports the Petroleum Facilities Guards (PFG), a corporate security institution created back in the Gaddafi period. Today, it has evolved into a kind of franchise that can be issued to an armed group capable of securing an oil or gas infrastructure facility. The PFG’s operate both in the East (appointment of commanders is coordinated by Haftar) and the West (appointed by Sarraj) and are generally successful if the criterion is used that, the oil and gas infrastructure has sustained only insignificant damage during the 10 years of war.

It is noteworthy that the weakening of state in Libya has yet to reduce the government take, its share of oil revenue. The strict and centralizing laws adopted by Gaddafi in his last years are still in force. More than that, the EPSA IV package adopted at his instance was fully implemented only after his deposition. The NOC has ended up as the main revenue collector and beneficiary, and it influences the distribution of funds among local communities, the military, the budget, etc.

The production suspension is being used by various local militias in the East to revise approaches to income distribution. So far, the efforts by some forces in the East to revise oil and gas legislation itself looks like a utopia intended more for a propaganda effect. At the same time, the ongoing decentralization is actually being carried out through CSR (corporate social responsibility) mechanisms, with increasingly more state functions being handed over to corporate funding.

Corporate operators are collaborating with the NOC and are flexible in responding to instability, take into account the risks and costs, and amend insurance and security expenses. At the same time, corporate operators have to assume some state functions, such as ensuring law and order in adjoining territories, the functioning of the healthcare system, emergency response and recovery, road and water pipeline maintenance, etc. This inevitably leads to more red tape and the proliferation of uncharacteristic obligations and political problems.

So far, the major European companies are still better than others (the Chinese and the Americans, for example) at threading between conflicting sides. They pump the product across the frontline, ensure the security of their assets, work with the para-legitimate armed groups, and are skilled at distinguishing the fast-changing shades of their legitimacy.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.