Oil and Gas

A Libyan Militia Tries—and Fails—to Sell Crude Oil to North Korea


A bizarre stand-off appears to have ended in Libya, where the country’s navy has taken control of a North Korea-flagged oil tanker that was attempting to buy more than $30 million worth of “illegal” crude from a militia that took control of the country’s three biggest ports last summer.

The episode began late Friday night, when the oil tanker, called Morning Glory, pulled into one of the country’s largest ports with the apparent goal of filling up on Libyan crude that militia leader Ibrahim Jadran is intent on selling. Though Jadran’s militia controls the port, it does not own the oil. That belongs to the Waha Oil, a joint venture between Libya’s state-run National Oil Company and three western companies: Marathon (MRO), Hess (HES), and ConocoPhillips (COP).

According to a report from Bloomberg News, the Morning Glory can carry about 350,000 barrels of oil. At today’s prices that would be about $38 million in ill-gotten proceeds.

Prime minister Ali Zeidan threatened to blow up the tanker should it try to leave with any of the oil. When the army refused his orders to fire on the ship, Zeidan sent in a government-backed task force to take control of the tanker, which began loading crude on Sunday night, according to The Guardian. As of Monday evening, the tanker was being escorted to a government-controlled port in western Libya.

Militia leader Jadran maintained that he was merely trying to circumvent the country’s notorious corruption and sell the oil on behalf of the Libyan people. The Libyan government—and most analysts, for that matter—contend that Jadran was trying to steal the oil and keep the money for himself. On Sunday, U.S. State Department spokeswoman Jen Psaki issued a statement calling the oil “illicitly obtained,” and that selling it “amounts to theft from the Libyan people.”

Having North Korea show up as the apparent buyer adds little legitimacy to Jadran’s case. When you’re trying to sell oil on the world’s black market, who else do you call but Pyongyang?

This is the latest bit of chaos to ripple through Libya, which has been stuck in a deep power vaccum since militias took control of the country’s three biggest ports last summer. Libya’s oil exports have slowed to a trickle, starving the government—and thereby the economy—of its main source of revenue. The Libyan parliament has been meeting in a hotel since protestors stormed the legislative building with knives and guns last week, killing a guard and wounding six lawmakers.

Though it’s also true in such places as Nigeria and Venezuela, nowhere does power more completely flow through a country’s oil supply than in Libya. Controlling Libya’s oil is to dominate Libya.

Zeidan’s big mistake appears to have come last summer, when he entrusted the security of Libya’s ports to Jadran and his militia. Though he thwarted the sale of Libyan oil to North Korea, it’s tough to see how Zeidan can wrest back control of the country’s ports and ultimately, the ability to restart the country’s economy. “I’m not sure there is a step that he can take that is not a misstep,” says Sarah Emerson, an energy analyst and principle at ESAI Energy. Karim Mezran, a resident senior fellow at the Atlantic Council, says the only way forward is to hold new elections. “Zeidan has lost,” says Mezran. “He’s too weak to take back power.”

The world could certainly use Libya’s oil supply. The country holds Africa’s largest oil reserves, boasting some of the highest-grade crude in the world. Yet the tap has basically been turned off since the 2011 revolution. With no way to export oil, Libya has cut production. The country now pumps about 275,000 barrels a day, compared with 1.4 million barrels daily last July.

Philips_190
Philips is an associate editor for Bloomberg Businessweek in Washington. Follow him on Twitter @matthewaphilips.

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Companies Mentioned

  • MRO
    (Marathon Oil Corp)
    • $39.23 USD
    • -0.09
    • -0.23%
  • HES
    (Hess Corp)
    • $97.51 USD
    • -0.22
    • -0.23%
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