The predicted (last Summer when the rebel militias cut off oil exports) cash crises has arrived and it has everyone’s attention. Despite the rebels blocking oil exports now expressing willingness to deal, oil exports are still at an all-time low of 100,000 barrels a day. The government has only $116 billion left and little credit. Government banking officials insist that can be made to last for at least two years but Libyans are seeing growing cutbacks in government spending. Most Libyans depend on the government for jobs, food and other essentials. Without oil income the government cannot deliver. About two thirds of the $53 billion annual government budget is for salaries and benefits. A growing number of government workers are having their pay or benefits delayed so that more essential issues (like food imports) can be attended to. The government reserves are not all cash and it takes time to convert some of those assets into cash. The government is also warning people that a lot of Kaddafi era subsidies will have to go in order to keep the economy going. Such a move would be very unpopular. Kaddafi provided a lot of stuff at very low prices. Like loaves of bread for a few pennies. Fuel and electricity was also sold far below cost as were airline, bus and train tickets. Another problem is the many people who collect a government paycheck don’t do any work, or even show up for work. Thus there are 22,000 soldiers in Benghazi, according to payroll records, but few of them are on the job. Some of that is because some government or military official is pocketing the payroll, but in other cases there are real people getting paid but they only show up on payday, if that (because direct-deposit is available). Changing all these bad habits is very difficult. The greed, Islamic terrorism and sense of entitlement that is so widespread in Libya also means that foreign investors are not interested because Libyans make inefficient and troublesome employees. Libya is no place to create wealth but it is an ideal place to squander it.
The basic problem is that Libyans have proved unable to agree on how to handle their oil wealth. The tribes living where the oil comes from want a larger share. Actually, everyone wants more, for one reason or another. In the last year various local militias near the oil fields and export terminals have seized these facilities halted most (over 70 percent by the end of 2013 and over 90 percent now) oil exports. All this was largely unexpected because at the start of 2013 oil production was at 1.4 million barrels a day and nearly back to normal. Then greed got the best of many factions who decided their loyalties were more to themselves than to Libya as a whole. It’s been downhill since then. Before the 2011 revolution oil accounted for over 90 percent of government revenue and over 70 percent of GDP. With over $20 billion in oil revenue lost so far the government is running out of credit and will soon have no way to pay for essential imports, like food. These shortages have become more widespread and severe and that is driving many people to either back the government or use more desperate measures to grab whatever they can.
Because the refineries that provide fuel for Libyans are also shut down the government has to spend scarce cash to import fuel. Even the greedy militias are now aware that what they are doing means the economy will collapse and with that food and other essentials will not be available for most Libyans. To avoid that catastrophe there is compromise or force, or a combination of the two. Ultimately force will prevail as starvation is the last thing anyone wants. The economy is already in decline because many payments have not been made for things that can be delayed (infrastructure and replacements for old or destroyed equipment). The government ordering the troops in does not sound so crazy in light of the dire financial situation. The absence of law in most of the country is crippling the economy, which is still trying to recover from the 2011 revolution. Kaddafi tightly controlled the economy and his overthrow was supposed to allow economic activity to flourish. But the widespread presence of armed men taking what they want and kidnapping for ransom has made entrepreneurs and investors unwilling to do much.
Let’s Make A Deal
The rebel militias holding east Libyan oil facilities now say they are ready to work out a deal over control of these facilities. What changed their minds was the March 17th U.S. Navy SEAL raid to capture the rebel controlled tanker full of Libyan oil. Apparently over the last two weeks the rebels have learned that the foreign criminal gangs who were once willing to broker sales of stolen Libyan oil have backed away. The oil smuggling gangs see the American warships and commandoes as a deal breaker. With no way to sell the oil they control, the rebel militias must quickly make the best deal they can with the government because these militia leaders are broke and their armed followers expected great things to come from occupying the oil facilities. Government troops are closing in and apparently it comes down to working out a price to avoid a battle and get the militias out of the oil export facilities.
The militias holding the eastern oil facilities have also lose some of their Robin Hood glow. They now stand accused of working with former officials of the Kaddafi government to smuggle oil out of the country and sell it. There are still a lot of Kaddafi era officials in Libya and even more overseas. Some of these Kaddafi henchmen are still wealthy, having gotten a lot of money (usually obtained by corrupt means) out of the country before the 2011 revolution. These guys still have contacts and fans inside Libya (among the tribes that Kaddafi favored) as well as a taste for obtaining more Libyan cash. The pro-Kaddafi exiles are open for business and smuggling is more attractive to them than subsidizing terrorism. The war is over, Kaddafi is gone and life goes on.
Another unresolved problem is that while there is a Libya there are not enough true (patriotic and loyal to a central government) Libyans. There are many countries suffering from this problem with tribal, ethnic, regional and other loyalties that create lots of corruption and little national unity. In these conditions a lot of the corruption is not seen as stealing, but simply taking care of your own group. In a place like Libya, where decades of oil wealth have created a population largely dependent on oil income for basic survival, this lack of unity has become a matter of life or death.
Another source of unrest is brewing on the Tunisian border. There the smugglers are having more problems with the security forces on both sides of the frontier. It’s all about money of course as the smuggling deprives the governments of over half a billion dollars a year in revenue. But the smuggling, especially of cheap Libyan into Tunisia, has become the primary livelihood for thousands of Libyan families. Locals believe the Libyan and Tunisian security forces are simply seeking a bigger cut of the smuggler profits. That’s how things work in this part of the world. The smugglers also have to find a patron, a “boss of all bosses” to negotiate deals with local army and police commanders. Everybody wants to get paid.
France Guards The South
The continued success of the French-led counter-terrorism effort in northern Mali and the equally determined efforts by Islamic terrorists to maintain a presence there anyway has led France to set up a permanent base in the north. This would be similar to the base it has long maintained on the other end of Africa in Djibouti. Since September 11, 2001 that base has been shared with the Americans and the Mali base is expected to see a lot of Americans helping out. France currently has about 1,600 troops in northern Mali and that appears to be about what it will take to staff the permanent base. France is particularly concerned about the continuing unrest in Libya and the ability of Islamic terrorists to establish bases and training facilities there. Because of all that, this year there have been several incidents of Islamic terrorists moving into northern Mali from Libya and until the Libyan government establishes some control over the many Islamic terrorists roaming Libya, more will show up in northern Mali.
March 31, 2014: As a goodwill gesture to get negotiations going the government has released the three militiamen who were arrested off Cyprus by U.S. SEALs on the tanker carrying $30 million in stolen Libyan oil. The rebels are also demanding the return of the tanker and the stolen oil but the government is apparently not willing to go that far. The three militiamen were quickly pointed out by the crew of the tanker after the SEALs seized control. The ship captain said the three were armed and tasked with ensuring that the tanker went to wherever the oil brokers (who were going to sell the stolen oil) instructed. The three Libyan militiamen were armed and the crew was not, so they just went along, having been assured that they would be paid and not harmed if they did. The crew were not so sure they would be safe as it appeared the Libyan militiamen were dealing with some pretty shady characters.
March 27, 2014: Another militia composed of personnel hired to provide oil facility security has gone rogue and blocked a pipeline from a southwestern oil field. The former guards want lots of money. The main source of exported oil now are two offshore fields.
March 26, 2014: The U.S. has sent a team of American soldiers to Libya to work out details of a training program being set up in Bulgaria for the new Libyan Army. In late 2013 the U.S. agreed to establish a training facility in Bulgaria where 500 American soldiers would serve as instructors at a camp that would train 8,000 (or more) Libyan recruits in basic military skills.
March 24, 2014: The government said it is releasing the 21 man crew (consisting of six Pakistanis, six Indians, three Sri Lankans, two Syrians, two Sudanese and two Eritreans) of the oil tanker captured by American SEALs and returned to Libya on the 23rd and its cargo of 350,000 barrels of oil will be unloaded there. The U.S. handed control of the tanker to Libya in international waters some 30 kilometers off Tripoli and removed the American sailors who had supervised the return of the ship.
March 23, 2014: In the east (Derna) gunmen ambushed a van carrying $600,000 from a telecommunications company to a bank and made off with the money. The thieves were probably members of one the militias that dominate the city (to the east of Benghazi). There is no law in places like Derna but the local militias still need cash.
March 22, 2014: The army began fighting rebel militias in the east that are holding three oil export ports. The rebels apparently hoped to interfere with the arrival of more troops but were driven off. The troops are better trained than the militiamen and that is apparently making a difference. On March 12rh the government gave the rebel militias until the 26th to relinquish control of the oil ports. The rebels do not appear to be making preparations to leave.
March 21, 2014: In the capital a Tunisian diplomat was apparently kidnapped for ransom. Earlier in the day (before dawn) someone got past the tight security at the main airport and placed a bomb on the main runway. A timer detonated the bomb, causing little damage but closing down flight operations for several hours.
March 20, 2014: In a first, the Libyan government finally admitted that it has an Islamic terrorism problem and called for international help to deal with it. The government now wants to form a dedicated counter-terrorism force and knows that will require outside help. NATO, which has many members just across the Mediterranean, is expected to be the main source of assistance. Countries like Italy and France have many Arab speaking counter-terrorism operatives and many expatriate Libyans live over there. Then there are the Americans, with all their useful gadgets, technical magic and unique specialists (like the SEAL commandos who took back the tanker full of stolen Libyan oil).
March 19, 2014: The success of recent joint operations around Lake Chad has led the nations bordering Lake Chad (Chad, Cameroon, Libya, Niger, Nigeria and the Central African Republic/CAR) to form a permanent task force to patrol the lake region and coordinate operations against smugglers, Islamic terrorists and bandits. The initial emphasis will be on containing the Islamic terrorists, mainly the Nigerian Boko Haram, in the area. The new task force will have its headquarters in the Nigerian town of Baga, which is on the lake. Baga is large enough to accommodate a new military base. The goal is to have the new task force up and running before the end of the year. Increased coordination will start immediately.
March 18, 2014: In the southwest the local Tuareg tribes warned the government not to use force to remove the militias occupying oil facilities in the area.
March 17, 2014: Some 32 kilometers off the coast of Cyprus two dozen U.S. Navy SEAL commandos used power boats to go from a U.S. Navy destroyer to a nearby North Korean tanker. Once aboard the tanker the SEALs quickly took control and arrested three Libyans the crew of 21 said had, in effect, hijacked the tanker and its $30 million cargo of stolen Libyan oil. There were no casualties and the tanker was taken back to Libya. Libya had asked the United States to help retrieve the tanker, which had fled Libya with the oil. The North Korean registered tanker fled the Libyan oil loading port of Es Sider early on March 11th and made it to international waters before Libyan Navy gunboats could catch up. The Libyan sailors were within their rights to board the tanker and retake it, but they were not trained to do so and there were apparently some armed men on the tanker. The tanker then moved towards Cyprus and Libya asked the Americans for some help. The U.S. dispatched a destroyer with SEALs on board and the American warship was soon following the tanker. The U.S. government agreed on the 16th to use SEALs to get the tanker back and the raid was carried out before dawn on the 17th.
In the east (Benghazi) a car bomb went off outside a military school killing seven soldiers and wounding twelve.
March 16, 2014: The rebel militias in the east that are holding three oil export ports now say they are willing to negotiate. Up until now the militias asserted that they were representing the new government of an independent country called Cyrenaica. The rebels have been trying to make this stick since the beginning of the year but without cash (from selling oil) they got no traction.
March 15, 2014: The parliament gave the interim prime minister another 15 days in power. Parliament is, as usual, deadlocked. This time it is over who the new prime minister should be. Parliament is split into many factions, most of them either secular or Islamic.
March 14, 2014: The UN agreed to extend its support effort in Libya until March 13, 2015.
March 13, 2014: North Korea denied any involvement with the North Korean registered tanker that carried off Libyan oil illegally. North Korea pointed out that the ship was registered in North Korea in February for six months with the understanding that there would be no illegality involved. The ship is actually owned by a Saudi company and currently controlled by an Egyptian shipping company that is apparently helping to sell the oil. North Korea has long been involved with shady deals like this and is apparently trying to distance itself from one that went off the rails.