x Abu Dhabi, UAESaturday 22 July 2017

Libya's oil could leave the country on a slippery slope

Libya historically was divided into three parts: Tripolitania in the west, Barca in the east and Fezzan in the south. But now, with attempts to declare Barca a federal region, a cursory look would suggest old divisions have resurfaced, with oil playing a new and crucial role, writes Robin Mills.

Libya historically was divided into three parts: Tripolitania in the west, Barca (Cyrenaica) in the east and Fezzan in the south.

But now, with attempts to declare Barca a federal region, a cursory look would suggest old divisions have resurfaced, with oil playing a new and crucial role.

About 3,000 people gathered in Benghazi last monthto announce that Barca was an autonomous region within a federal state. Barca is at the centre of Libya's oil industry, with two thirds of production and three quarters of reserves there.

Both Barca and the sparsely populated Fezzan have more oil per person than Iraq. Tripolitania, by contrast, with less than a tenth the per-capita reserves, is comparable to Algeria, but two thirds of Libyans live there.

Federalism would thus raise thorny questions about the distribution of revenues.

Barca complains of a lack of spending, poor infrastructure and marginalisation during the Qaddafi era. The country's second city, Benghazi, resented the centralisation of power in Tripoli. This is a familiar story from oil-rich regions within other countries: Basra feels neglected within Iraq; Khuzestan within Iran; and Biafra in Nigeria attempted to secede in 1967, triggering a devastating civil war.

Yet the Libyan situation is far more complicated than a simple tripartite division. The Benghazi conference itself had no official standing. People seem to identify more with their towns and local districts than with the historic regions. But the municipal level is too small for successful management of the expansive, complex oil industry, nor can it oil sustain separatism, as long as the central government controls all sales.

There is an understandable wish for stronger local government. The Benghazi declaration led the interim government to rebalance the constitutional committee to represent all regions equally. But many Libyans, even in Barca, are strongly antagonistic to the concept of federalism, equating it with breaking up the country.

Intermarriage, tribal affiliations and migration of Cyrenaicans to Tripoli has further blurred the distinction between east and west.

It is not comparable to the deep historic and ethnic fissures between the semi-autonomous region of Kurdistan and the rest of Iraq, or between South Sudan and Sudan.

There are practical issues, too. The key Es Sider export terminal, the major Ras Lanuf refinery and the Greenstream gas pipeline to Italy lie in Tripolitania; oil and gas from landlocked Fezzan has to pass through Tripolitania to reach the sea.

Although predominantly in Barca, the main oil-producing Sirte Basin is split between all three regions, with the barren Sirtica desert providing little natural delineation.

This does not mean that decentralisation is impossible. There are numerous successful models. In the UAE, each emirate has complete sovereignty over its natural resources, since the federation was established only after Abu Dhabi and Dubai discovered oil.

Assisted by their willingness to share some of the wealth with their compatriots, this system has worked well. But it has left the UAE without a strong, over-arching energy strategy and infrastructure.

The United States, Canada and Australia also have federal systems, with generally effective state-level oil management but a strong strategic role for central government.

In Iraq, by contrast, a failure to define oil sector governance clearly in the constitution has led to endless disputes between Baghdad and the Kurdistan region, frustrating the development of the Kurdish oil sector.

Moves for decentralisation and greater local autonomy in Libya are understandable. If Libyans make the contentious choice to devolve oil management, it should be the culmination of a national dialogue in which all options, and their drawbacks, are clearly understood.

Oil can be the glue that holds a country together, or the lubricant that lets it slip apart.

Robin Mills is the head of consulting at Manaar Energy, and the author of The Myth of the Oil Crisis and Capturing Carbon