Libya’s ongoing political crisis has intensified as eastern factions expanded an oil blockade, demanding the reinstatement of the ousted central bank governor, Sadiq al-Kabir. The struggle for control over the Central Bank of Libya has raised the stakes in a country already divided between eastern and western powers, each backed by different international allies.
Oil Production Halts as Tensions Rise
On Wednesday, Libya’s oil blockade widened with eastern leaders pushing back against the Presidency Council’s decision to replace al-Kabir. The move has disrupted operations in several key oil fields, including Sarir, El Feel, Amal, Nafoora, and Abu Attifel, leading to a near-total shutdown of the Sarir field, which normally produces 209,000 barrels per day. Analysts estimate that the ongoing disruptions could slash Libya’s oil output by as much as 900,000 to 1 million barrels per day.
Eastern factions, aligned with the Libyan National Army (LNA) led by Khalifa Haftar, have vowed to maintain the blockade until the western-based Government of National Unity in Tripoli reinstates al-Kabir. This escalation underscores the fragile nature of Libya’s peace and the continued east-west divide that has plagued the nation since the NATO-backed uprising in 2011.
Divisions Over Central Bank Control
The crisis over the central bank is the latest flashpoint in Libya’s political landscape. The central bank governor position is crucial, given that control over oil revenues is the main prize for all factions. The eastern-based House of Representatives, which opposes the dismissal of al-Kabir, views the Presidency Council’s decision as an overreach. Armed factions in the northwest have mobilized in response, raising the specter of renewed conflict.
Despite four years of relative peace following a 2020 ceasefire, Libya’s political and military factions remain deeply entrenched in a standoff. Diplomatic efforts to hold elections and establish a more legitimate government have stalled, adding to the uncertainty. Meanwhile, eastern authorities have halted all production and exports from oil fields under their control, although some ports in the Oil Crescent continue to operate normally.
Global Oil Market Impact Uncertain
The potential disruption to Libya’s oil exports, a member of the Organization of the Petroleum Exporting Countries (OPEC), could have significant implications for global energy markets. Libya was producing about 1.18 million barrels per day as of July, but ongoing blockades threaten to cut this figure drastically. Despite the scale of the disruption, analysts are cautious about predicting a major impact on global oil prices. As of Wednesday afternoon, benchmark Brent crude prices were down 1.6%, trading at $78.28 per barrel.
Fernando Ferreira, Director of Rapidan’s Geopolitical Risk Service, noted that while the blockade is significant, it may not be enough to shift the broader bearish sentiment in the market. “I’m not sure it’s enough to break through this overpowering macro bearish sentiment that continues to shape the market,” Ferreira said.
Ports in Libya’s Oil Crescent, a key region for hydrocarbon exports, continued operations on Wednesday without orders to halt exports. Engineers reported that four vessels were loading 600,000 barrels each at ports including Es Sidra, Brega, and Zueitina, signaling that while disruptions are severe, they are not yet total.
The situation in Libya remains fluid, with the potential for further escalation or a diplomatic resolution depending on the actions of both domestic factions and international stakeholders. The coming days will be critical in determining whether Libya can avoid sliding back into widespread conflict and further instability.
Source: Reuters
