Libya’s Sarraj Balks at Deal With Haftar to Restart Oil Output

Libya General Says Oil-Export Blockade to End; Crude Prices Drop

Libyan Prime Minister Fayez al-Sarraj didn’t accept a deal reached between his deputy prime minister and rival military commander Khalifa Haftar to lift an oil blockade, a top aide said, casting further doubt on an imminent resumption of production.

Haftar had earlier announced he would lift the blockade that his eastern forces imposed on fields and ports in January. Deputy Prime Minister Ahmed Maiteeq, who is often at odds with Sarraj, had made the agreement last week at a meeting in Sochi, Russia, with Haftar’s son and representatives from eastern Libya. He was meant to visit Sirte, a city by held by Haftar, to sign the agreement on Friday but was blocked by other members of his government.

Maiteeq said in an interview that he thought Sarraj would embrace the deal, but the senior aide, who can’t be named because of internal policy, denied that in a response to questions.

Libya’s National Oil Corp. had denounced what it called parallel talks in a statement late Thursday and said it wouldn’t lift force majeure until Russian mercenaries who support Haftar withdraw from oil installations.

Maiteeq said he wanted the mercenaries out of the country, but the issue didn’t come up in the talks with rival Libyans to restart production. The agreement is meant to set up a commission to distribute oil revenues more fairly, a key demand by Haftar that had led him to shut down the fields as his campaign to capture Tripoli -- the western coast capital where Al-Sarraj’s Government of National Accord is based -- flagged in January.

Sarraj announced earlier this week that he will step down by the end of October to make way for a new government, raising the stakes for rivals within his camp who want to replace him.

Haftar, whose forces control oil-rich eastern Libya, said on television that he has decided to allow the reopening of the nation’s ports “as per conditions and guarantees that ensure a fair distribution of wealth and spare it being plundered or used in terrorism financing.” The announcement was the result of talks with Maiteeq.

A spokesman for the NOC declined to comment.

False Dawn

There have been false dawns before in efforts to resolve the long-running conflict between Haftar’s Libya National Army and the GNA. Maiteeq said in a phone interview that he was confident Al-Sarraj will back the new accord, but he also acknowledged that the NOC wasn’t part of the discussions that led to the deal. The senior Sarraj aide said the prime minister was firmly against the deal.

Haftar had conditioned resuming production on a mechanism being in place to distribute revenue, officials said. The NOC, backed by the U.S. and United Nations, had proposed freezing revenue until that mechanism is decided, and also conditioned lifting the export shutdown on the withdrawal of Wagner, the Russian mercenary force, and other armed groups.

Any additional supplies would be entering the market at a sensitive time for the market, just as the recovery from the historic slump triggered by the Covid-19 pandemic is faltering.

Brent crude fell below $40 a barrel last week for the first time since June, prompting a robust response from OPEC+ at a meeting on Thursday. The international benchmark rebounded 8.3% this week, to settle at $43.15 a barrel on Friday.

Despite having Africa’s largest crude reserves, Libya may struggle to ramp up production quickly even if the conflict has abated. Its oil industry is crumbling after more than nine years of neglected maintenance amid a civil war that’s killed thousands and destroyed towns across the country. The lack of basic, nuts-and-bolts servicing has left pipelines corroding and storage tanks collapsing.

©2020 Bloomberg L.P.