A letter from Fathi Bashagha — unilaterally appointed by the House of Representatives’ (House) last year as the premier of the parallel Government of National Stability (GNS) — to the National Oil Corporation’s (NOC) chairman, Farhat Bengdara, has been was leaked. He called on Bengdara to freeze all oil revenues in the NOC’s Libyan Foreign Bank (LFB) account which would effectively deny both the Central Bank of Libya (CBL) and incumbent Prime Minister Abdulhamid Dbeibah’s rival incumbent Government of National Unity (GNU) of access to oil revenues which represent over 90% of all state funds. This is the same mechanism that Khalifa Haftar used to try and remove the previous Government of National Accord (GNA)

Legally, however, the NOC is under the authority of the GNU cabinet, rather than the parliament’s leadership, and it has rarely bowed to previous political pressure. The LFB also operates under the GNU’s Finance Ministry so it is highly unlikely that Bashagha’s letter will have any effect in reality. Moreover, given the ongoing dispute between the two rival governments, Bashagha’s decision once again threatens to politicise the NOC, which western countries are determined to prevent. 

In 2020 the former GNA premier, Fayez Sarraj, personally demanded the freezing of oil revenues in the LFB account. At that time the central bank was split, there was an ongoing war, and oil revenues were ‘distributed in a centralised manner.’ Such arguments and conditions do not apply in today’s landscape: there is no military conflict; there is considerable pressure from the US and other countries for the two CBL governors to resume talks over the unification of the central bank; and the GNU is being criticised for its lavish spending on different regions, sectors, and demographic groups. Bengdara is very unlikely to respond positively to Bashagha’s demands so we are likely to witness renewed threats of oil blockades in the coming weeks. We will continue to monitor the situation because his response will be critical for the country’s political and economic future. 

A new oil blockade will once again exacerbate the current domestic and international political divisions. The US and EU will probably attempt to intervene in order to maintain Libya’s oil production and the NOC’s political neutrality. The country only accounts for around 1% of global oil supplies but is particularly important for southern European states, including Italy and Spain, which would be severely impacted by yet another Haftar-implemented blockade. The current volatility in the global oil supplies — caused by the sanctions on Russia — will make the West even more determined to maintain oil production. It could result in the reimposition of sanctions on House speaker Aguila Saleh or even, for the first time, on Haftar and his family.

Previous oil blockades depleted foreign currency reserves but they then began to recover following the combination of rising production and higher world oil prices. The national economy is totally dependent on oil revenues and a prolonged cut would prevent any government from funding the improvements it needs to finally end the stagnant post-2011 era. It will, however, be dependent on the whims of warlords until Libya has an independent, accountable, and professional security force which can protect the country’s critical energy infrastructure.