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Navy SEALs Seize Rogue Tanker but Libya's Oil Crisis Continues

US Navy SEALs boarded the "Morning Glory" on Sunday, but the standoff in Libya's oil fields is having massive economic consequences
Photo by Antony Stanley

The audacious attempt by Libyan rebels to sell $38 million worth of crude oil was foiled on Sunday.

Yet the government is unable to control the turbulent country’s lucrative oil trade, and last week’s removal of Prime Minister Ali Zeidan — after he failed to stop the “Morning Glory” tanker leaving from a rebel-held port — poses a new threat to Libya’s stability.

“After ousting Zeidan the political situation became more complicated, and the dispute between the Islamists and liberals within the GNC [General National Congress] is deepening,” Rawad Radwan, an activist, told VICE News.

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The North Korean-flagged tanker — which sailed on March 10 from the port of Es Sider — took advantage of poor weather conditions to slip away from Libyan warships that had intercepted it, rebels and state oil company officials said.

On Sunday, in a mission approved by President Barack Obama, US Navy SEALs seized the "Morning Glory" near Cyprus, preventing the rebels’ first oil sale.

“US forces, at the request of both the Libyan and Cypriot governments, boarded and took control of the commercial tanker Morning Glory, a stateless vessel seized earlier this month by three armed Libyans,” said Pentagon Press Secretary John Kirby in a statement on Monday.

After months of deteriorating security, the prolonged political standoff is further draining Libya's economy and the foreign currency reserves the government has tapped in order to cover its oil revenue losses.

“We do have [foreign currency] reserves to keep us afloat for one or two years,” Amr Farkash, Director at OEA Capital, told VICE News. “But we’re running out.”

Energy resources are both Libya’s greatest potential and biggest challenge to political transition. The country has the largest oil reserves in Africa and the fifth largest in the world. Oil and natural gas accounted for 96 percent of Libyan government revenue in 2012, according to the IMF.

Yet production levels have now declined to a little over 200,000 barrels per day, due to deteriorating security, ongoing protests, political infighting, and rebel blockades. Last summer the country was producing 1.4 million barrels per day, according to Reuters.

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The port of Es Sider — Libya's largest export terminal and one of three ports held by rebels who demand greater autonomy from the state — sits in the oil-rich region of Barqa, and is under the control of a rebel militia called the Petroleum Defense Guards.

The group relies on a force of about 17,000 fighters, around half the size of the Libyan national army. Its commander Ibrahim al Jathran told VICE News that his group would defend the region’s oil fields “with all the strength we have.”

Libya’s splintered government doesn’t appear to have the political muscle to regain control of the industry. In the standoff over Morning Glory tanker, the Libyan National Oil Corporation (NOC), which dominated the energy sector before Muammar Qaddafi’s downfall, struggled to assert its authority.

“The Libyan National Oil Corporation wishes to make it clear that the crude oil loaded upon the vessel ‘Morning Glory’ is the property of NOC and its partners,” the company said in a statement before the vessel’s takeover by the rebels. The rebels then escaped with the tanker into international waters.

Foreign oil companies are no longer eager to invest or wait out the political turmoil when they can transfer operations to safer shores. BP scrapped its plans to explore Libya's Ghadames basin in March, citing the security situation. ExxonMobil also reduced its staff and operations in the country in September.

“The majority of foreign oil and gas companies have already exited the country,” Sebastien Henin, Head of Asset Management at The National Investor in Abu Dhabi, told VICE News. “The security risk was too high after the revolution and it didn’t really improve since then.”

Libya’s inability to export goods, especially oil, and deteriorating security mean the multinationals will not come back and the government must continue to support the economy with currency reserves. But it’s the Libyan people who shoulder the economic burden, and they are already feeling the strain.

“A lot of people are holding on to cash, withdrawing from banks and buying US dollars,” said Farkash. “The standoff we have now — it’s not going to end anytime soon.”

Photo via Flickr