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The Implications of the Drop in Libyan Oil Exports - Can Arıhan

Just like the other OPEC members, Libya's economy is heavily dependent on oil exports. The country holds the largest oil reserves in Africa, but it has been suffering from continuous civil war and instability after the long-time ruler Muammar Gaddafi was toppled in 2011. There are currently two rival governments in Libya, and both compete to seize control of the country's most important source of economic power: the oil fields. This rivalry has inflicted a heavy price as it resulted in a dramatic drop in Libya's oil exports in 2020.

Internationally recognized Government of National Accord (GNA) and the Libyan National Army (LNA) led by the warlord Khalifa Haftar have been clashing to eliminate one another and unite the country under one banner. Although the Tripoli-based GNA was established in 2015 as an UN-sponsored entity, the country's status quo did not allow for a swift unification. LNA, being supported by Egypt, the UAE, Russia, and France, overwhelmed GNA militarily for a significant period of time. Until mid-2020, it was only one step away from capturing the capital Tripoli. Nevertheless, Turkey weighed in, and it provided GNA with advanced drones, economic assistance, and military training. Currently, the situation is not so dire for GNA militarily as Tripoli safely remains in their hands.

However, the war with LNA also had significant economic complications for the GNA because their main source of income (that is to say, oil exports) was disrupted by the forces loyal to Haftar.

According to Anadolu Agency, Libya's (GNA's) oil revenues decreased an astonishing 92 percent in 2020. That meant GNA could only earn $652 million from oil exports (as opposed to $7.04 billion in 2019) when it desperately needed financial resources to fund its years' long civil war against LNA. This was largely caused by the LNA blockade on GNA exports and the continued attempts to seize oil fields. Such a strategy could not hinder the military gains of the GNA thanks to the noteworthy Turkish backing but still crippled the finances of the government in Tripoli.

Parallel to previous figures, World Oil notes that Libyan (GNA's) oil production has plummeted to about 110,000 barrels a day, from 1.2 million in 2019. Similarly, in an article that describes the impact of the Libyan war on oil production, Libya Herald quoted Chairman of Libyan National Oil Corporation Mustafa Sanalla saying: "The first quarter of 2020 was a huge decrease in revenues for Libya, as a direct result of the illegal blockade of numerous oil and gas facilities. This is only part of the picture, as the corrosion in pipes caused by still oil and saltwater is resulting in physical damage that will cost millions to fix when the crisis is over".

Considering all these dramatic figures, it seems obvious that an end to Libya's civil war will significantly boost oil production in the country and give the nation the much needed financial resources to rebuild the country that has been torn by years of conflict. Unfortunately, although the violence subsided after Haftar's campaign to capture the GNA capital (i.e., Tripoli) failed, the country is far from being united. The North African nation is very much divided from the east (Tobruk, where the pro-Haftar government is located) and to the west (Tripoli).

Oil production is, in fact, an economic issue. Still, in Libya, which hosts the third civil war (along with Syria and Yemen) that continues after the Arab Spring, this economic issue can only be settled with a political solution. And to achieve the political solution, international powers should decide which entity in Libya is the rightful government. The GNA in Tripoli is, de jure, the internationally recognized government in Libya, and it enjoys the UN's recognition. By the UN's policies, Turkey, Italy, Malta, Qatar back the GNA headed by Prime Minister Fayez al-Sarraj. Nevertheless, many countries (including Egypt, the UAE, France, and Russia) support the warlord Haftar, and his LNA for political and economic (mostly related to production and sales of oil) ends. This de facto split of the regional powers in Libya leads to the Libyan people's continued agony and a never ending civil war.

As both GNA and LNA fall short of completely overwhelming the other and uniting the country, the Libyan people keep suffering from terrible living conditions. They even risk dying in the Mediterranean waters while trying to cross to Europe in the hope of a better life. Of course, oil production is not the only problem in Libya. Still, once a political solution is reached, increased oil revenues seem like the only option to provide for the country's rebuilding. Such an increase in the Libyan oil exports will also contribute to the world oil markets as the oil demand is likely to increase rapidly after the Covid-19 Pandemic is over. Libya, which is located right below Europe, might emerge as a strategic country to supply the expected increase in oil demand. Still, the years-long civil war must come to an end for Libya to emerge as a stable oil producer once again.


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