Europe needs to get behind new peace accord in Libya

The draft peace agreement texts barely mention oil, except in referring to the security of facilities. But the country’s energy resources are absolutely crucial to building a functioning state.

Political power grows out of the barrel of a gun, according to Mao, but also from the spigot of an oilwell.

Libya’s peace accord, reached in the Moroccan city of Skhirat, is now “final”, according to UN envoy Bernardino Leon, and it is up to the parties – the House of Representatives operating from the east, and the General National Congress in Tripoli in the west – to accept or reject it by tomorrow.

The draft agreement texts barely mention oil, except in referring to the security of facilities. But the country’s energy resources are absolutely crucial to building a functioning state.

Libya’s oil production, about 1.8 million barrels per day before the revolution, fell almost to zero during the fighting in 2011, then rebounded before being interrupted by a series of blockades by pro-federalist groups in the east, protests and terrorist attacks. It now hovers at about 500,000 barrels per day, a slight improvement on last year.

With approximately 370 million barrels of oil in storage worldwide, prices are hovering about $50 per barrel and the geopolitical risk premium is zero, a stark contrast to the rise above $120 per barrel in 2011 caused by the Libyan revolution. In the absence of geopolitical disruption, low prices are likely to persist.

However, Russian-backed rebels in Ukraine, ISIL in Iraq and Syria, war in Yemen and the yet-to-be implemented Iranian nuclear deal all could change this. Stabilising Libya offers an achievable step towards offsetting some of these other energy security risks.

Complaints that the US is abdicating its role of guaranteeing security in the region ignore the facts that Washington is a long way from Tripoli, and that it is the EU and Libya’s neighbours that are bearing the brunt of the country’s breakdown. The UAE, Turkey, Egypt and Qatar have been consulted on the peace agreement but, of course, beyond this, outside interference has worsened and prolonged Libyan infighting.

The EU needs to play a stronger role in brokering and enforcing the Skhirat agreement, engaging neutrals and isolating rejectionists and militants. European complacency is baffling, in the face of an ISIL outpost on the Mediterranean in the city of Sirte, the surge of refugees, and the danger of spill-over to the Arab Spring’s democratic success story, Tunisia.

Terrorist groups based in Libya threaten Algerian petroleum facilities, insecurity damages the financial interests of major European energy companies, while supplies of Libyan gas would add to European leverage in the power play with Russia.

The Union for the Mediterranean in June launched a Platform for Gas to improve cooperation between the EU and North Africa. But the absence of a functioning government in the holder of North Africa’s biggest hydrocarbon reserves blows a gaping hole in the platform.

Libya’s desperate need for finance, particularly with low oil prices, puts it at the mercy of any armed group that can blockade a field or an export terminal.

A durable Libyan state structure will have to address the distribution of oil revenues, under a possible “federal” or at least decentralised plan. At the same time, it needs a coherent national energy strategy, infrastructure and achievable budget. A post-conflict Libya has a second shot at avoiding the rentier-state trap, and building a diversified economy, but needs outside expertise, of the kind the EU provided so well to post-communist Eastern Europe.

After the successful 2011 revolution and international intervention, the role of Libyan oil and gas was largely ignored. This time, the international community should not miss its chance to restore an important part of global energy security, the key to rebuilding Libya, and one of its two key levers of power.

Robin M Mills is Head of Consulting at Manaar Energy, and author of The Myth of the Oil Crisis.

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