Some Libyan oil still being exported

One fortunate feature of the present situation in Libya is that some oil is being exported (while petroleum products were successfully imported by the regime) and that, despite the freezing of Libyan financial assets, acute foreign exchange shortages have not yet arisen.

The viability of many of the recently started industries and service sector facilities is, however, questionable because them current complex situation is unlikely to be revolved in the immediate future. There is, nonetheless, potential for the payment in foreign exchange for imported goods and services but this will involve risks for any company breaking international sanctions against the regime.

An agreement approved on 27th April by the US Treasury Department's Office of Foreign Assets Control (OFAC) gave permission for the marketing of oil by the rebels using the good offices of Qatar Petroleum and the assistance of Vitol, one of the world's largest independent oil traders.

US Ambassador Gene Cretz welcomed the arrangement and the demonstrably improved American links with the Interim Transitional National Council (ITNC). He talked in terms of co-operation which would open a new phase in relations between Libya and US.

The report from the market in Tripoli is that great caution is being exercised by owners of shares and property and that the market is, by and large, very depressed. Foreign companies entering the Libyan market at this stage must expect very tough trading conditions.

Foreign Minister Abdelati Obaidi was preparing for a major mission to the EU states to take place in the immediate future. This mission has, however, been shelved as a result of the orchestrated attacks by Libyan mobs on the foreign embassies which has dashed hopes for an orderly end to the crisis.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2011 Menas Associates

Libyan oil sector in a state of disrepair

In the key oil sector the Libyan regime has pursued a policy of destruction rather than preservation of the oil installations along the Gulf of Sirte. ENI announced on 14th April that it planned to transfer much of its oil stored in Libya to a safe Italian base as soon as possible. Their intention is to rescue some of their assets, not an easy matter, because the continuation of oil exports cannot be relied upon. Indeed, the revolutionary authorities have stated that further oil exports will be held back until repairs are effected at two oilfields – Mesala and Sarir.

Doubtless, legal wrangling will be acute between the two sides in determining which of the governments in Libya should be in receipt of revenues and taxes arising from oil exports. A strong lobby including the French, whose government has already recognised the Interim Transitional National Council (ITNC) as the legitimate administration, UK and Qatar favours retaining all payments frozen until such time as there is arbitration on the ownership of the oil shipped.

Throughout the country security is poor and few establishments are functioning at other than low capacity. For the moment, foreign concerns are sheltered while Libyan nationals are heavily engrossed in the political turmoil but almost inevitably life will become difficult depending on their support for or against Colonel Mu'ammar Qadhafi's regime.

The local staff in Tripolitania could turn antagonistic to foreign employers should NATO help to usher in new victories for the eastern Libyans.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2011 Menas Associates

US says replacing Qadhafi is paramount

The US administration, having pulled back from NATO-led air strikes, has continued to maintain that the replacement of Colonel Mu'ammar Qadhafi, as well as resumption of essential utilities to besieged areas such as Misrata, is paramount.

In an independent trip, the maverick former congressman Curt Weldon, who has previously courted controversy in the US for his stance on Libya, visited Tripoli at the regime's invitation and met Sa'adi Qadhafi. The trip was privately financed by US firm Worldwide Strategic Energy and is rumoured to have been planned from the Libyan end by Sa'adi.

On his return to the US, Weldon has been backing the idea that the Leader could step aside to allow Saif Al-Islam to take Libya forward into a period of constitutional change. He claims that this plan now has the backing of Sa'adi.

Official US engagement in Libya has been provided in the form of US envoy Chris Stevens who had previously worked at the US Embassy in Tripoli and has been in Benghazi since 5th April. The Interim Transitional National Council (ITNC) has been pressing Stevens on their claim for the monies that have been frozen by the US Treasury following UN and US sanctions, and are asking Washington to release a portion of the funds in order to tackle some of the shortages faced by Libyans, particularly medical supplies.

Although the US is understood to be considering the matter, it is clear that there are concerns over the manner in which the money could be spent, including fears over Islamic elements inside the rebel group.

On 8th April, the US also widened the circle of those affected by economic sanctions. Five more members of the Qadhafi regime have been added to the list, including National Oil Corporation (NOC) head Dr Shukri Ghanem and Prime Minister Baghdadi Al-Mahmoudi.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2011 Menas Associates

Libya: Uncertainty likely to remain and hinder early restoration of normal economic life

The war could arrive at the gates of Tripoli, but not until the Interim Transitional National Council (ITNC) can succeed in surging through Sirte and on to Misrata and Tripolitania. Therefore, for the time being and other considerations apart, the threat of fighting on the streets of Tripoli should be enough to deter all but the bravest of companies from an early return to their assets in Libya.

The capture of Tripoli and of Colonel Qadhafi are key elements in the opposition's policy toward the state. Inevitably, unless decisively defeated, Tripolitania will be a central target for armed and covert operations by eastern Libyans. Any immediate improvement in the situation is, therefore, difficult.

At best companies, in present circumstances, can encourage local employees to keep a watching brief over physical assets. They could secure, where possible, the integrity of its workforce through the payment of wages (for example) and could continue to support their activities in Libya through visits and establishment of a presence on the ground to indicate a continuing corporate interest in commercial Libya.

At the moment, however, the prognosis must be that there will be a continuing struggle without there necessarily being an early settlement because neither side currently has the ability to win outright. The exception here is if the UN military intervention remains firmly in support of the revolutionaries.

Uncertainty is likely to remain to hinder an early restoration of normal economic life although the wide-scale official recognition abroad of the revolutionary government would be a major step forward.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2011 Menas Associates