Have Fuel, Will Fight: Why an Oil Blockade Won’t Work Against Gaddafi

Have Fuel, Will Fight: Why an Oil Blockade Wont Work Against Gaddafi
With a military stalemate increasingly likely in Libya, U.S. and European politicians have been eyeing an oil blockade against Muammar Gaddafi as a way of breaking his determination to keep fighting and avoiding a drawn-out war. But the West might want to rethink that idea: Five weeks after NATO air strikes began pummeling his regime’s military installations, Gaddafi appears to have adapted to the ongoing conflict, in part by tapping a dependable spigot of fuel for his loyalist fighters — enough, say energy analysts, to keep Gaddafi’s military on the move for weeks, if not months. “It is not like the Libyan military seems to be running out of fuel,” says Greg Priddy, energy analyst for the Eurasia Group in Washington, D.C. “As long as the military has first dibs on everything, they are okay.”

Ironically, the U.N.’s no-fly zone imposed on Libya last month pushed Gaddafi into conserving huge amounts of oil, by blasting many of his heavy, gas-guzzling tanks to smithereens. Long accustomed to operating under tight sanctions, Gaddafi has simply switched tactics. With his soldiers now crossing the country’s vast terrain in SUVs, Gaddafi has been forced into a lower-tech, more self-sufficient battle — one which might have greater durability if the conflict drags on. “There is probably less of a problem now for the regime in keeping vehicles fueled,” says Charles Gurdon, director of Menas Associates, a risk consultancy in London.

Despite that, European leaders have scrambled this week to try to tighten the stranglehold on Gaddafi’s fuel supplies, while bolstering the oil business which the rebels now control. U.S. officials on Tuesday eased the sanctions rules, allowing U.S. firms to buy oil from the opposition’s breakaway companies in eastern Libya — and so giving the rebels the revenue with which to buy weapons on the open market. By contrast, Gaddafi’s ability to export oil is severely constrained. After meeting in Rome on Tuesday, French President Nicolas Sarkozy and Italian Prime Minister Silvio Berlusconi said they would push countries to ban all oil trades with Gaddafi-controlled Libya.

Still, it is unclear whether such a blockade could deal a mortal blow to Gaddafi’s fight. The war has already had a drastic effect on Gaddafi’s economy. Libya’s oil industry — on which the country’s economic survival depends — has been devastated, and most energy analysts believe it will take years to recover, even if the war were to end quickly, in part because restarting shuttered oil fields requires complex engineering. The Paris-based International Energy Agency estimates that Libya — with Africa’s biggest oil reserves — now pumps less than 200,000 barrels of oil a day, about one-eighth the level it produced in early February; exports are zero.

In addition, Gaddafi is still trying to import fuel; oil exports and imports are not banned under U.N. sanctions, but since all trade with Libya’s National Oil Corporation is now outlawed, few trades are legal. Reuters reported on Tuesday that Libya had bought a shipment of fuel from the Italian refining company Saras in early April, by loading the fuel out at sea, off Tunisia’s cost, onto a ship owned by a company connected to Gaddafi’s son Hannibal.

Yet even under those dire conditions, Gaddafi has kept his military well fueled with Libyan oil — product which does not require cloak-and-dagger operations at sea. According to estimates by energy analysts, every day about 150,000 barrels of oil from fields in southwestern Libya are piped north through the Sahara to the country’s second-biggest refinery in Zawiya, 30 miles west of Tripoli, in government territory. The refined fuel then goes to Gaddafi’s forces, presumably at no cost, allowing the regime to keep men deployed in battle. “There are anecdotal reports about Tripoli’s gas scarcity,” says energy analyst Priddy. “But this is not something which will collapse Libya’s military.”

With their SUVs fueled up, Gaddafi’s fighters roared across the hard-packed Sahara sands in a hit-and-run attack last weekend. The men blew up two oil pipelines in eastern Libya near the rebel-held Sarir fields, before turning tail and speeding back west. The fields had fed the opposition’s sole refinery and export terminal at Tobruk, near the Egyptian border. Rebel officials said it could take them about a month to resume production. For the rebels, producing oil is critical — not only in order to fuel their war effort, but to raise revenues for eastern Libya, especially if a protracted war ends in the country splitting in two.

In early April, the rebels’ breakaway oil company exported one million barrels of oil from Tobruk, selling it to the giant Swiss-based oil trader Vitol, who sold it on to China. Yet while rebel officials are clearly serious about establishing an independent oil industry, energy analysts say the opposition could find it difficult to export big quantities of oil while Libya’s future is so uncertain; few traders or foreign countries will risk huge purchases from fields whose ownership could suddenly change.

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