U.S. supports freezing Libya’s oil revenue until agreement on revenue management mechanism is reached by embattled political stakeholders

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The United States announced yesterday that it supports a temporary freeze on Libya’s oil revenues until an agreement on a revenue management mechanism is reached by the embattled political parties.

The US Embassy statement released yesterday said, “The restoration of Libyan oil production is important to the Libyan people and to the global economy. An agreement on a mechanism for the transparent management of oil revenues is imperative to achieve this, as discussed by the Libyan parties during the April 1 meeting of the economic working group of the Berlin process.

The U.S. Embassy fully supports the temporary freeze of oil revenues in the National Oil Corporation (NOC) account at the Libyan Foreign Bank (LFB) until there is agreement on a management mechanism revenues.

The mechanism should include agreement on spending priorities, transparency measures, and steps to ensure oversight and accountability. The United States stands ready to provide technical assistance at the request of the Libyan parties to assist with such a mechanism.

Progress on these important issues will contribute to a more stable political environment and help restore momentum towards parliamentary and presidential elections as demanded by the Libyan people.”

Analysis
The US Embassy’s new position on the distribution of Libya’s oil revenues comes after US Ambassador and Special Advisor on Libya Richard Norland met with Speaker of the House of Representatives (HoR) Ageela Saleh in Cairo on May 8.

Setback for the Aldabaiba camp
It is a huge setback for outgoing caretaker Prime Minister Abd Alhamid Aldabaiba in his efforts to stay in office and a boost for the HoR-chosen Prime Minister’s opposition camp Fathi Bashagha and his allies, the President of the HoR Ageela Saleh and Eastern military commander Khalifa Hafter.

The United States is moving towards the Bashagha camp?
It is an admission and recognition by the United States that Libya’s oil revenues are not fairly distributed. It aligns with the eastern camp’s narrative that Tripoli is corrupt and usurps oil revenues from Libya disproportionately at the expense of the rest of the country.

Sanalla pressed by the Aldabaiba camp
It also confirms a split between the United States and National Oil Corporation chairman Mustafa Sanalla, who until then was seen by his critics as aligned with American and British policy. In an interview with a Libyan satellite TV channel this week, Norland said he was surprised that Sanalla transferred the oil money to Aldabaiba’s government. He said Sanalla had been under immense pressure to do so.

Aldabaiba depends on access to money from his ally and governor of the Central Bank of Libya (CBL), Saddek El-Kaber. This money comes from oil revenues transferred by the NOC to the CBL from the NOC’s LFB account.

Aldabaiba used this money to buy favors from the Libyan public by distributing various grants. The Bashagha camp accuses Aldabaiba of squandering public funds on populist policies designed not for the national interest but to win him the next elections.

The Bashagha camp views the Aldabaiba government as an ‘interim government’ with a diminished mandate and legitimacy that should cease all but essential spending until an election is held. One way to keep him from spending is to deny him oil revenues.

Shutdown of oil and ports
With Aldabaiba refusing to recognize Bashagha’s legitimacy as the newly elected Prime Minister by Parliament (the HoR), the so-called ‘locals’ have since forcibly halted Libya’s oil production at several oilfields and ports with the aim of weakening Aldabaiba and his government in Tripoli. It is widely believed that they were instructed to do so by Hafter/Saleh.

HoR-HSC talks continue
Meanwhile, the HoR and the High Council of State met in Cairo under the auspices of the United Nations with the aim of ending the political stalemate by organizing elections in accordance with the Constitution. There have been no positive results so far since the first talks in Cairo. Another round of Cairo talks will take place today.

The next step for the Aldabaiba camp?
We do not know now what will be the next step of the Aldabaiba camp? Without access to oil money, the government in Tripoli will lose its influence and lose its legitimacy and relevance.

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