Tripoli Government's Counterattack Promise Lifts Oil Jitters

(Bloomberg) -- Libya’s internationally-recognized government said it would start a counterattack to clear the OPEC member of forces loyal to strongman Khalifa Haftar, escalating a standoff that has the potential to rattle global oil markets.

The operation, dubbed “Volcano of Anger,” seeks to “cleanse all Libyan cities of the aggressors,” the Government of National Accord’s military spokesman, Mohamed al-Qonuni, said in a televised statement.

Tripoli Government's Counterattack Promise Lifts Oil Jitters

Fighting on the outskirts of Tripoli showed no sign of abating despite appeals for calm by global powers and the United Nations. Haftar’s forces face well armed and experienced militias in the capital and a battle for control could lead to some of the bloodiest fighting since a 2011 civil war toppled Muammar Qaddafi.

Haftar’s self-styled Libyan National Army continued its push to enter the capital Sunday, conducting airstrikes on a road leading to Tripoli, LNA spokesman Ahmed al-Mismari said. The United Nations mission in Libya called for a short humanitarian cease-fire to evacuate civilians and wounded near the capital, but it appeared to have little impact.

At least 35 people have been killed in clashes since Wednesday, according to figures from both sides.

Oil Production

While the latest fighting is south of Tripoli -- away from most of the main oil ports and fields -- the risk of disruption rises the more inflamed tensions get. Western Libya is home to the Zawiya oil terminal, the export point for crude pumped from the country’s largest field, further south at Sharara.

A drawn-out conflict would force the LNA “to commit increasing amounts of military and financial resources to its war effort,” Hamish Kinnear, senior analyst at consultancy Verisk Maplecroft, said in a note. “This means the group will have to dial down its already limited presence in oil-producing areas of the oil crescent and the southwest, raising the risk of disruption to production.”

The U.S. Africa Command said it was temporarily withdrawing troops from Libya in response to “security conditions on the ground.”

Tripoli Government's Counterattack Promise Lifts Oil Jitters

Italian oil giant Eni is monitoring the developments in Tripoli “very carefully,” and the situation at the fields is under control, a spokesman for the company said in a message. He said Eni currently doesn’t have any staff in the capital. Separately, Mellitah Oil & Gas, a venture between Italy’s Eni and Libya’s state-run National Oil Corp., asked its Tripoli-based employees who live in neighborhoods “witnessing security tension” not to go to the office, according to a statement on its Facebook page.

Haftar has said that his push to Tripoli is aimed at combating militias in the area, which he said had sown chaos. But Prime Minister Fayez al-Sarraj, who heads the UN-recognized government, accused the eastern-based warlord of backtracking on earlier promises to work toward a political compromise. Haftar’s advance “will be met only with decisiveness and force,” Sarraj said.

“Things can still get much, much worse south of Tripoli,” said Wolfram Lacher, an analyst at the German Institute for International and Security Affairs. Both sides are adding forces to the clash, he said.

Rival militias have become the main power brokers in the North African country, with the Tripoli government commanding few cohesive forces and relying more on allied militias. Those same groups have vowed to confront Haftar’s offensive.

While he commands the country’s most organized force, Haftar lacks the oil funds that could finance his attack and bolster his bid to extend power over the fractured country. Analysts have said money could be a reason why Haftar is willing to stretch his forces with a run at Tripoli.

“The strength of LNA security over oil and gas sites was severely tested during a temporary takeover of the oil crescent ports in June 2018,” said Kinnear. “A repeat of this scenario becomes increasingly likely should fighting in the west drag on.”

The 300,000 barrel-per-day Sharara field, “will also be at a higher risk of renewed disruption while the LNA is distracted in the north west,” he said.

©2019 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.