Friday, April 5, 2019

Russian Energy Interests In Libya

Antonio Carbotti, Energy Analyst
In the Libyan quagmire, one actor is playing a fluid and balanced strategy, expecting a pay off in the long-term: i.e., the Russian Federation. Through a balanced approach and avoidance of taking any firm side in the ongoing conflict, Russia is determined to appear as a reliable actor and a responsible game changer in the overall situation in the area. Economic and political interests are playing the crucial role, following the traditional three routes, through which Russia is usually exerting its influence abroad: energy, weapons and infrastructures. This paper is devoted to the energy dimension of Russian activism in Libya, as Gazprom, Rosneft and Tatneft are slowly coming back to the country and consolidating the achievements gained before 2011, with an eye to further enhancement.

Libya’s energy sector

Libya has been typically considered as an influential actor in the world energy market, and joined OPEC in 1962. According to the BP Statistical review of World Energy (2018), crude oil is by far the most prominent energy source, with 48 thousand million barrels of proved reserves (approximately 3% of the total proved reserves on Earth), making up almost 79% of energy production (p.12). The OPEC report for the country (2018) states that oil represents the 82% of export earnings, and Oil&Gas sector accounts for approximately 60% of the GDP. It comes easy therefore to understand the effect a fall in oil production may have on the economy in the country. After the beginning of the hostilities in the country in 2011, up to 2016, it has been calculated that the output has fallen by 13,5. Despite this critical disruption, 2017 was characterized by a significant growth, thanks to a slightly more stabilized situation in the country, at least as far as production sites are concerned: in fact, in 2017 the output grew by 102% in comparison with the previous year, reaching a peak of production of 865 thousands barrel per day (approximately 40,8 million tonnes) (BP, p.14). Natural gas production is the second main asset of the country, significantly inferior to that of crude oil: the overall proved reserves are considered to be around 1,4 tcm, with an output of 11,5 bcm in 2017 (BP, p.28), of which just 4,4 bcm destined to export (to Italy).

Russia’s involvement in the Libyan energy sector

Russia-Libya relations have been intense and prosperous since when the USSR was basically the sole supplier of weapons to the African country. For the first time, in April 2008, a Russian president, Vladimir Putin, visited Libya. A major breakthrough for the relations between the two countries was the elimination of the Libyan debt of $4.5 bln in exchange for contracts in the infrastructure and energy fields, as reported by B92 (2008). In 2008, the Italian economic newspaper, IlSole24Ore underlined the strategic importance of the agreement reached about a Memorandum of Understanding between Gazprom and the Libyan National Oil Corporation to set up a Joint Venture, in order to deal with exploration, production and transportation of oil and gas. Moreover, between 2007 and 2008, Gazprom won a tender for the natural gas exploration and production in the plot No. 64, in the area of Gadames, located in the Western part of the country. On Gazprom International website, other areas of involvement are outlined: the company participates also in the offshore plot No. 19, under the condition of production sharing, and in the Oil concessions C96 and C97 in partnership with Wintershall A.G.

As outlined on its website, Pjsc Tatneft had production sharing contracts signed for operations in Libya, but due to the political situation in the country, the execution of exploration work programs was suspended in 2013. According to the National Oil Corporation (NOC) website (2018), the chairman, Eng. Mustafa Sanalla, met Mr Rustam Khalimov, the first Deputy General Director of Russian oil company Tatneft on October 4th 2018, in the margins of the Russian Energy Week conference. The companies discussed areas of mutual cooperation, in addition to Tatneft’s forthcoming resumption of its 2007 exploration and production sharing agreement (EPSA).


In February 2017, Rosneft signed a crude offtake agreement with Libya’s National Oil Corporation, and according to Reuters (2017) lifting off was on already in July. The fields involved eastern areas of the country. Rosneft interest to invest in Libya is motivated by the vast reserves in the country, the low cost of production and the presence of export route to Italy. Russia is very actively playing in the Libyan energy market, which goes hand in hand with Russian activism in other fields, especially the military one. The two are assisted by the political involvement and stand Russia is showing in the Libyan political situation.

From the very beginning of the revolution, Russia has been a vehement opponent of the Western resolution to overthrow Qaddafi, which would have, as it actually happened, led to political disorder for the years to come, especially in the light of a missing day-after plan for the country. Civil war has raged and plagued the country up to these days with an actual division of power between the widely recognized Government of National Accord (GNA) led by Fayez al-Sarraj in the Western part of the country, and a second major block, internationally identified with the figure of the Field Marshal Khalifa Haftar, leader of the Libyan National Army, controlling a wide area in the East. Moscow has been supporting Haftar, and the Field Marshal from his part has been repeatedly looking for Russian support: in 2016 and 2017, Haftar visited Moscow three times, reportedly to ask for Russian military aid (Kartsev, 2018 ) and twice in 2018, in August and November, when he talked directly with Russia’s defence minister Sergei Shoigu (Reuters, 2018).  On September 15th, 2018, Serraj met in Moscow the presidential envoy for the Middle East and Africa, Mikhail Bogdanov.

As stated by the Arab Weekly (2018), Russian pragmatism is evident by its attitude toward the two main sides involved: it is supporting discreetly but actively Haftar, nevertheless not going against the GNA, backed by the United Nations. Russia gained this way a reputation of reliable actor and mediator in the area, filling the vacuum left behind by the Western powers. This enflamed the debate in Europe, where the British newspaper The Sun (2018) disclosed  persistent rumors  on a Russian plan to make a new Syria out of Libya. Apart from the hyperbolic description made by the newspaper concerns on the control of the migration routes, Russian military counsellors are widely thought to be in Libya, as testified by sources of RBC (2018). This can be understood as a support to the Field Marshal, in order to protect the sites for exploration and production of oil, which are located mostly in the Eastern area of the country, controlled by Haftar. It is reasonable to think that Russia is more interested in influencing the Libyan energy sector, rather than pushing for a resolution of the conflict, whose possible evolution or resolution appear still blurred. No one seems to be ready to gamble for one side or another in the country for the time being. In fact, as Belen’kaja noted (2017), Libya is one of the strongest players in world energy market, and the rise in production witnessed in the last year could put at risk the quota agreed by the OPEC countries on their 171st meeting, held on November 30, 2016.

This is even more so, according to the fact OPEC, or better its format OPEC+ with Russia heading the non-OPEC countries, has agreed last week on a larger-than-expected cut in production, as reported by Bloomberg (2018), thanks to a deal between Iran and Saudi Arabia mainly brokered by Russia itself, which expects a 1.2 million oil barrel per day to be removed from the market. Forbes (2018) argue that this cut could turn out to be even more consistent than expected, reaching 1.5 million bpd, according to Venezuela’s political and economic situation and Iran isolation resulting from US sanctions, despite the actual results of this decision are yet to be fully understood and verified.  In fact, the amount of $70 per barrel target by OPEC is already somehow dubious to reach, as US constantly increasing its oil output. Russia is trying to balance and mediate amongst the different positions in the OPEC, in order to contrast this trend. In this scenario, Libya is definitely part of the game according to its exemptions from the quota and its ever-growing production, witnessed in the current year. Libya, together with Nigeria has been since January 2017 exempted from OPEC oil cuts according to the difficult situation in the country. Nevertheless, with production skyrocketing in the second half of 2018 up to 1.05 million bpd in November, according to the Platts OPEC survey (2018), the other OPEC countries were confident to convince Libya to cut the output as well. Still, the situation is far from stabilized and defined. On December, 9th, 2018, Libya declared force majeure on exports from its largest oilfield, after tribesmen and state security guards seized the facility, as reported by CNBC (2018).

Russian Energy policy in Libya

Russian Energy policy in Libya should be understood in a wide way, not just in a view of mere competition with Europe. No doubt, the gas route to Italy represents an important percentage of Italian gas import, but should not be overemphasized as TAP is expected to come to completion the next year, diversifying the country imports. Libya is important in Russian calculation for the role it may play in the wider world oil market game, apart from providing a strong presence in the African country and, no doubt, expanding Russian sphere of influence up to the Central Mediterranean. But it is still early to figure out how the whole situation would turn out to be, and maybe a more balanced approach can be a good example for other world powers.

Championing rogue warlord Haftar reveals true agenda in Libya

Analysis: Russia's intention to play a greater role in Libya has launched numerous speculations about Moscow's agenda in this war-ravaged country. 
Until 2011 and the fall of Muammar Gaddafi's regime, Russia and Libya enjoyed fruitful economic and political cooperation. The popular uprising and foreign intervention completely halted their relations causing significant loses for the Russian side. 

Depending on sources, Russia lost between $4 and $10 billion in contracts (mostly military) that were never accomplished.

In 2016, the trade flow between the two countries dropped to only $74 million. But in the last two years, frequent contacts between top Libyan and Russian officials indicate that this is about to change as Russia is coming back.

After Western states failed to achieve a stable transition of the country after the revolution and military intervention Russia has increased its efforts to regain the influence and to restore the broken ties filling the vacuum created.

In addition, various media reports suggest that Russia is allegedly increasing its military presence in Libya leading some to a conclusion that Moscow is trying to turn Libya into new Russian stronghold in the South Mediterranean.

Is Russia really deploying its troops in Libya?

In October the UK tabloid The Sun published an article claiming that Russia wants to take control of Libya. 

According to the story, Russia has established two military bases in Tobruk and Benghazi and deployed dozens of special forces (Spetsnaz) servicemen officers of the Chief Directorate of the General Staff – previously known as the GRU, Russia's main military intelligence service – as well as Kalibr anti-ship missiles and S-300 air defence missile systems.

The tabloid also claims that seizing control of the biggest illegal immigration route to Europe is Moscow's primary objective, as it would allow Russia better negotiating positions when dealing with Europe.

However, Jonathan M. Winer, Scholar at Middle East Institute and former US Special Envoy for Libya, as well as former counsel to the US Senator John Kerry, explained that it is hard to use something as a bargaining chip that you do not possess. 

Ungoverned territory, civil wars, and bad governments who fail to provide basic levels of security, stability, food and work in the Middle East and Africa have all played significant roles in creating the conditions for people in those countries to seek greater safety, security, and opportunity in the European Union. 

"The 1,770 kilometre Libyan coast cannot be secured by any foreign power without comprehensive Libyan cooperation. Russia is poorly positioned to get that at a national level, even if it has been successful in purchasing relationships with the current leaders of the House of Representatives in Tobruk and with General Haftar and his forces," he told The New Arab. 

While Russia is definitely interested in restoring once close ties with Libya, the allegations coming from The Sun and some other media outlets are highly debatable. 

In the toxic atmosphere of emerging new cold war between some Western states (notably the UK) and Russia, inaccurate or false reports are nothing new and many of these "news" fall into the category of propaganda for domestic consumers. There has been little or no concrete evidence of Russian greater military presence in the region. 

Deployment of military hardware and personnel in the big cities such as Tobruk or Benghazi would be detected so far, as it would be almost impossible to hide it. Sarah Yerkes, a fellow in Carnegie's Middle East Programme, told The New Arab that while she is not sure whether Russia will establish a base in Libya, it certainly could expand its influence there. 

"Russia has had an interest in North Africa for some time, and the chaos in Libya is the perfect environment for Russia to gain a stronger foothold," she added. 

Indeed, in the past few years, various Libyan forces have welcomed limited foreign military assistance against the Islamic State group [IS], al-Qaeda in the Maghreb, Ansar al-Sharia, and Jama'a Nusrat al-Islam, in the form of weapons and intelligence. However, Russia has only two military bases outside of countries who were in the former Soviet Union- in Vietnam and Syria. Winer seriously doubts the Libyan people would welcome Libya becoming the third. 

"My very strong impression is that Libyans do not want to be told what to do even by other Libyans, let alone foreigners of any kind, including Russian ones,” he said.

There are also several other factors that could motivate an increased Russian presence, particularly Libya's oil and Russian contracts there. 

Some believe that one of Russia's main goals is gaining control over Libya's oil reserves, which rank 10th in the world. Two years ago, Rosneft and Libya's National Oil Corporation signed a cooperation agreement. Since most of the country's oil fields are located in eastern Libya, many believe that this evidence explains Russia's close ties with General Haftar's faction. But this cooperation is extremely difficult and expensive considering the current security situation in the country.

Besides oil, Yerkes points that Russia also has an interest in preventing further growth of IS and other extremist groups there. Russia would also likely want to restart arms sales that plummeted following Gaddafi's death. Therefore, she does not think Russia's agenda in the country is about countering Europe as much as it is about Russian interests. 

Who is Russia supporting in Libya?


Many reports are suggesting that Russia is secretly supporting Eastern Libyan strongman General Khalifa Haftar. Haftar's Libyan National Army represents the Tobruk-based Libyan National Congress in the country's east, who gained a high reputation after defeating radicals. The UN and Western states, however, endorsed the Tripoli-based Government of National Accord and its leader Fayez al-Sarraj. 

International key factors have unsuccessfully attempted to reconcile two factions but it seems that Russia, encouraged by its diplomatic and military success in Syria tried to play a leading role in Libya too. 

The rivaling leader has visited Moscow on several occasions leaving the impression that Moscow tries to keep good relations with both sides, what may prove beneficial once the civil war is over.

In theory, Russia has tried to follow the principle of equidistance with Tripoli and Tobruk as two somewhat legitimate centers of state administration and authority. 

However, Russia has a long history of finding and manipulating local actors in countries with weakened governments, especially corrupt ones. Winer recalls that in 2016, Russia printed billions in counterfeit Libyan dinars and gave them to Speaker of the House Agila and General Haftar, damaging the Libyan government of national accord and the Libyan economy in the process, contributing to Libya's massive inflation, and facilitating grand corruption.

In 2016, Russia printed billions in counterfeit Libyan dinars and gave them to Speaker of the House Agila and General Haftar, damaging the Libyan government of national accord and the Libyan economy in the process 

Such tactics to gain influence work well during times of trouble. He thinks that whenever Libya gets beyond its current crisis, Libyans will want a domestic Libyan government to control Libyan territory, Libyan security, Libyan oil, Libyan wealth, and Libya's future – not foreigners of any kind.

From there it is hard to think of Russia as an objective mediator, despite the declared principle of equidistance. While Russia is the only major power currently engaged in Libya, its ability to replace the West and the UN as a new and more successful mediator is questionable.

According to Winer, if Russia seeks to go it alone on negotiations with the various Libyan factions, it will be unlikely to achieve even the type of success achieved by Egypt, France, and Italy, among others, in 2018 – which is very little. 

Russia can be helpful if it aligns itself with the UN Special Representative of the Secretary-General (SRSG) and with other countries, from North Africa, the Middle East and Europe, as well as the US and other influential countries such as China, to support efforts that enable Libyans to reach compromises and move forward with a national conference, a referendum on a Constitution, and national elections.

Stasa Salacanin is a freelance journalist who has written extensively on Middle Eastern affairs, trade and political relations, Syria and Yemen, terrorism and defence. 

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