rpdefense
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.
The Shortages
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.
: 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.
