Money is the artery of war.
- Peter the Great (attributed)
For a market missing some high-quality Libyan oil and wondering what happens if there’s going to be a long civil war there, here is a highly interesting development.
We think Libya’s rebels now have to a way to access oil cash, and therefore it could also be a way for Libyan oil to come back to the market even if Gaddafi stays on.
The Gaddafi-controlled National Oil Corporation and central bank come under UN sanctions now, making it harder for the Colonel to recycle oil receipts into cash for his armies — but also finally closing remaining outside access to production from these entities.
But what if other entities appeared outside his control?
Notably — here is an odd line in the way the US Treasury is now implementing the UN sanctions. From a statement last night, our emphasis:
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today identified 14 companies owned by Libya’s National Oil Corporation, as subject to sanctions pursuant to Executive Order (E.O.) 13566…
Treasury will continue monitoring the National Oil Corporation’s operations in Libya. Should National Oil Corporation subsidiaries or facilities come under different ownership and control, Treasury may consider authorizing dealings with such entities.
Now, considering ‘different ownership and control’…
Here’s a Transitional National Council statement dated March 19, although it seems not to have been published until Tuesday. Our emphasis:
The Transitional National Council met on Saturday, 19 March 2011, and discussed a number of important national issues on the current circumstances of the country and the importance of taking necessary actions. The outcome of the meeting is summarized as follows:
First: The Council discussed all the developments on the ground, including the crimes committed by the Qadhafi regime against the Libyan people the Libyan people as well as the report submitted on the implementation of Security Council Resolutions 1970 and 1973 decided accordingly the following:
1- To welcome the mentioned resolutions and urge the international community to expedite the initiative to implement the resolutions in order to protect the Libyan people and assist them in achieving the legitimate demand.
2- To call upon the Libyans throughout the country to be cautions and to continue to demonstrate peacefully in order to achieve their legitimate demands by going out to the streets and peaceful sit-ins, particularly after the international community ensured the protection of Libyan civilians in accordance with Resolution 1973 and demanding the international community to ensure the safety of Libyan civilians.
3- To urgently prepare a file on the referral of Qadhafi, his gang and his associates involved in killing of Libyans, to the international Criminal Court and entrusting a technical and legal team to complete the procedures.
4- To intensify contacts with brotherly and friendly countries for the recognition of the Transitional National Council and welcome the positive response of many countries to deal with the Transitional National Council and urge other nations to an early recognition of the Council and urge other nations to an early recognition of the Council as the sole legitimate representative of Libyan People.
5- To choose a number of ambassadors and representatives of Libya to foreign countries, according to proposal submitted by Foreign Affairs submitted for approval.
Second: The Designation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.
Third: The establishment of Libyan Oil Company as supervisory Authority on oil production and policies in the country, based temporarily in Benghazi and appointment of an interim Director-General for the Libyan Oil Company.
Issued in Benghazi on 19th March 2011
While it’s not at all clear whether the Gaddafi regime can hold its Tripoli power base for months or only days — if the rebels are now establishing institutions to manage oil and cash flows, they at least have a way to take care of the long term if that’s necessary.
And the Central Bank of Benghazi/Libyan Oil Company could be handy if the rebels move west and retake (say) Ras Lanuf, where considerable oil infrastructure is to be found — via this IHS Energy chart we’ve previously noted:
It also makes abundantly clear that Libya’s rebels are not some unknown quantity, nor lacking independence from the coalition forces. From the statement, they’re keen to acquire international legal recognition, quite notably. We wonder if that would improve whether western oil companies could make safe contracts with the rebels, as well.
While the US has not officially recognised the rebels yet — that Treasury proviso sure comes close, we think. France already is recognising them. And of course, Total had plenty of Libya production assets before the crisis.
Like we said… interesting developments, no?
Related links:
“I celebrate this uncertainty” - Zungu Zungu
The Great Gaddafi cash call – FT Alphaville
The Libya effect on crude differentials, charted – FT Alphaville
Scrambling to swap Libyan crude for Saudi - FT Alphaville