Eastern Libyan Government Defies Central Authority with Oil Deal

Libya’s eastern government defied the wishes of the central government for the first time by selling oil to an oil tanker, according to Reuters. The UN Security Council responded by blacklisting the tanker, and officials fear that the move could spark future unofficial sales that would weaken central state revenues. Oil is the primary income source in Libya, but production has declined due to political instability, security concerns and labor disputes.

Libya’s eastern government defied the wishes of the central government for the first time by selling oil to an oil tanker, according to Reuters. The UN Security Council responded by blacklisting the tanker, and officials fear that the move could spark future unofficial sales that would weaken central state revenues. Oil is the primary income source in Libya, but production has declined due to political instability, security concerns and labor disputes.

International leaders are also concerned that unsanctioned oil sales could lead to arms sales against the central government. Unauthorized sales of Libyan oil is nothing new, with the U.S. acting as a primary enforcement body, but American authorities have yet to impose sanctions or a military solution in response to the recent oil deal.

The eastern government is intent on entering the oil trade and shows no sign of backing down, creating a state oil company that competes with the central government’s national oil firm. The idea of unification currently seems out of the question.

Officials from multiple governments have united and forged an alliance under UN support, but leaders have not accepted the proposed unified leadership. The Tripoli government uses current oil revenues to buy the loyalties of local officials, but Libya suffers from too many special interests that prevent a widespread consensus.

At this stage, Libya is nowhere near on a track to recovery, especially as investors would have to deal with multiple governments in an uncertain business climate, while establishing operations in a dangerous atmosphere where terrorism and murder runs rampant.

NATO’s support of Libyan rebels did more harm than good, as the country devolved into territorial boundaries ruled by warlords, terrorists and ruling governments with diverging interests. The presence of jihadists is also noteworthy, further destabilizing a nation that was once stable under Muammar Gaddafi.

Gaddafi was an autocratic ruler accused of human rights abuses, but he achieved some of the highest literacy rates in North Africa, fostered significant growth rates throughout the years and maintained stability over a divided political system.

Further, he attempted to diversify the economy into other areas in the 1990’s, such as agriculture and industrial production, to offset energy reliance. After Gaddafi was removed from power and killed in 2011, all sense of security and progress went out the window, as ethnic cleansing of black Libyans took place at the hands of NATO-backed rebels and terrorists, with the overall murder rate skyrocketing over 500 percent from 2011 to 2013.

Libya will remain in a precarious position going forward, as the economy is not diversified enough to breathe new life into the system, and a low-priced oil market has wider implications for a country that is dysfunctional and can be considered a failed state.