Oil crumps: Libya, Iraq ‘pay the price for chaotic Western intervention’

Oil crumps: Libya, Iraq ‘pay the price for chaotic Western intervention’
Libya’s oil production has now ‘virtually stopped’ as the country struggles to recover from western intervention that saw Muammar Gaddafi’s downfall, Mamdouh G. Salameh, oil consultant to the World Bank, tells RT.

Libya descended into chaos after the death of Gaddafi two years ago, and the country remains in political turmoil. The country’s administrative and security structures remain incredibly fragile. Only last month, the country’s Prime Minister Ali Zeidan was kidnapped from his own residence by militia.

The US consulate in Benghazi fell under siege in September. Four diplomats and the US ambassador were killed in the assault. The Russian mission in the country also fell under direct attack at the beginning of October in Tripoli. One person was killed and four others were injured.

The presence of militia remains more visible than the state security forces in the capital, while vast portions of the oil-producing desert country remain completely out of the central government’s control.

Libya holds the largest proven oil reserves in Africa, and its revenues used to almost entirely finance education, healthcare and maintenance in the country – any disruption to its production would be a disaster. The country’s oil production has already dropped from some 1.5 million barrels per day during the Gaddafi era to – at a low point – a mere 150,000 barrels per day, according to National Oil Corporation statistics released in September.

Over the weekend, a separatist Libyan region announced the establishment of an independent oil company after taking over several commercial sea ports. Protesters shut off the country’s only natural gas export line to Italy on Monday. The port in question is operated by Libya’s National Oil Corp and the Italian energy company Eni. The protesters have been given ten days to clear the facilities.

Gas flows on the pipeline to Italy were at 15.9 million cubic meters on Monday, Reuters reported. Italy is the lone buyer of gas exports from the Arab country. Libya's rank as a producer and reserve holder is less significant for natural gas than it is for oil, but it still has 1,549 billion cubic meters of reserves, according to OPEC.

Gazprom security men stand guard in front of a drilling platform at an oilfield near the Iraqi city of Badra, south of Baghdad, on October 18, 2012. (AFP Photo)

RT:We understand that the oil industry in Libya was crippled by the war back in 2011. Do you think that Tripoli needs to take action and regain control of its supplies and maybe even require foreign help to intervene? 

Mamdouh G. Salameh: Of course, Tripoli needs to take action to prevent the separation of the Eastern part of Libya from the central government of Tripoli. As you appreciate since the foreign intervention in Libya, Libya’s oil production has virtually stopped. It used to produce 1.6 million barrels a day from which it used to export 1 and a quarter million barrels mostly to Europe. Nowadays Libya is hardly able even to satisfy domestic consumption and I guess that overland Libya will stop to be an oil exporter for quite a while, until stability is returned to the country. That is the price countries like Libya and Iraq have paid for the chaos inflected on them by western intervention.

RT:So you don’t think that the Eastern part of Libya can attract oil partners on its own, independent of Tripoli?

MGS: Well, I don’t think most of the oil importers from Libya will deal with the Mellitah because they have signed agreements with the central government of Libya. And the best way is to deal with the central government of Libya. That’s why although the Mellitah can smuggle a little bit of oil for sale, most of the importance, particularly Italy, France and Germany will very much hesitate to buy oil from the Mellitah, they prefer to deal with the central government, and to do that the central government has to bring back stability to the country.

RT:Protesters to the west of Tripoli are also threatening to stop the gas spots as well. Can Libya’s economy deal with this turmoil?

MGS: It cannot. As it happens like most of oil producers in the world, especially in Africa, Asia and the Gulf, the Libyan budget is dependent to the tune of 85% to 90% on the oil revenue. They are not earning any revenue now at this minute from oil exports because there are no oil exports. Sooner or later Libya will stop even paying salaries to the employees, they delay the issuing of the budget because they don’t know what revenue they will be able to get and when they will be able to export oil as before.

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