Haftar’s lucrative oil blockade

The general's eastern power base appears to be benefiting financially, but the country's economy is suffering, writes Aydin Calik

Libya's oil blockade has entered its second month with more than half of its typical crude production of 1.2mn b/d off line. Although the UN's Libya mission reports progress in efforts to resolve a leadership crisis at the central bank that sparked the blockade, a workable solution could yet prove elusive. But whether the blockade is lifted in days or endures for weeks, the shutdowns have demonstrated eastern-based general Khalifa Haftar's ability to choke his rivals in the west of oil revenues at little cost to himself.

Previous wide-scale blockades instituted by Haftar exacted a heavy toll on both the internationally recognised administration in the west and parallel administrations he has propped up in the east. But this time around, Haftar has managed to design the blockade to avoid the financial and political costs associated with past shutdowns. For one, the current shutdowns at oil fields can only really be described as a partial oil blockade. Libya has exported more than 400,000 b/d of crude so far this month, with almost all of this from eastern terminals where operations were ordered to stop in late August. Argus estimates Opec member Libya's current crude production at about 500,000 b/d.

Most of this production is part of state-owned NOC's crude-for-products programme, which feeds a booming fuel-smuggling industry in the east. There has been no let-up here. Imports of refined products this month are at their highest on record at 300,000 b/d, according to Kpler, far beyond Libya's real domestic needs.

Some crude is also being exported by eastern-based Libyan firm Arkenu Oil, which analysts suspect was set up to create a direct oil revenue stream independent of the central bank in Tripoli. "The Haftar family has managed the feat of orchestrating an economically lucrative oil blockade," senior fellow at the Atlantic Council Emadeddin Badi says.

And some crude output is being kept on line to feed domestic refineries and allow associated gas production to supply power plants. Past blockades have tended to cause power cuts and reduce domestic supplies of diesel and gasoline, putting pressure on Haftar to lift them. But now, he can keep revenue channels open and mostly absolve himself from any backlash resulting from insufficient domestic energy supplies.

General practice

Haftar's ability to design the blockade to suit his interests partly derives from an informal deal in July 2022 that saw him end a months-long oil blockade in return for installing Farhat ben Gudara as chairman of NOC. In this role, ben Gudara has proven far more co-operative than his predecessor Mustafa Sanalla, who refused to allow Haftar to benefit from any blockade he imposed.

That "deal" had underpinned the relative peace between the country's east and west since. If a durable solution to the current leadership crisis at the central bank is to be achieved, a new arrangement between east and west will need to be worked out. Horse-trading behind the scenes continues. "There's still a lot of negotiations to go as far as Libyan politics is concerned," an oil industry source says on the possibility of the blockade being lifted.

The longer the central bank crisis persists, the more precarious Libya's economic predicament becomes. Oil revenues that usually flow into the bank have all but stopped and its ability to conduct international financial transactions has been degraded. But even if a resolution is found and oil production returns to normal levels, this would at best represent a fragile and temporary solution to a long-term problem — the lack of a coherent central authority. Worryingly, Libya is a long way from any sort of political process that could heal its divisions.

Libya crude production