Libya's Next Crisis: Finances
The demise of Muammar Gaddhafi appears imminent as opposition Transitional National Council (TNC) military forces have taken Tripoli. However there is one big issue which remains — the TNC government in Benghazi is severely hampered by a lack of funding.
With the war potentially at the home stretch, the TNC must turn to three major sources of potential income: international aid; the repatriation of frozen Gaddhafi family assets; and resumption of oil production. The funding is vital to the success of the revolution as well as the country.
The funding would allow for the TNC government to provide desperately needed humanitarian support to the millions of citizens in need. The money could allow the TNC military to purchase badly needed supplies, including, and especially, diesel and gasoline. It would also help to relieve the dire humanitarian situation and begin the process of rebuilding the country’s damaged oil infrastructure.
International aid for the TNC comes primarily from countries in the Libyan Contact Group; however, aid money has not sufficiently financed the TNC and will soon run dry. The rebels requested $3 billion in loans from the various countries, but received pledges totaling much less. Qatar has been a major donor to Libya, pledging $400-$500 million, as well as sending over ammunition, fuel, and trucks. Kuwait donated $180 million back in April and continues to offer humanitarian assistance to refugees. Other countries have pledged lesser amounts; the U.S. sent $25 million in non-lethal equipment in April, while the U.K. and France made similar sized pledges. Turkey is currently sending its third shipment of fuel to Benghazi — a shipment last month was worth approximately $10 million.
Libya has vast oil reserves, many of which are currently falling under TNC control. However, much of the money from previous oil sales during the Gaddhafi regime remains frozen in accounts worldwide following the UN Security Council 1973 resolution, which instituted a freeze on all international assets belonging to the Gaddhafi government.
On August 15, the Netherlands announced they had unfrozen $143 million for use by the World Health Organization to purchase badly needed medical supplies. In July, a Libya Outreach Group report noted that $168 billion in frozen assets could be repatriated to the TNC “to maintain current operational stability and reconstruct and develop the country.” Of that, $32 billion is held by the U.S. Treasury Department and the lengthy legal and bureaucratic process has begun to get the money repatriated. Britain is close to releasing $149 million, and assets frozen by 20 other countries and 6 international financial institutions are still being held.
The oil resources and reserves could provide ample funding for the TNC. Libya is endowed with vast oil wealth. The Organization of Petroleum Exporting Countries (OPEC) ranks Libya as having the 9th largest oil fields worldwide. In 2009, Libya produced 1.7 million barrels of oil per day, but recent estimates have put that down to several hundred thousand. The level of oil production under Gaddhafi in his last few weeks has likely been closer to zero.
If the TNC is able to restart production in the eastern Arabian Gulf Oil Company (Agoco) oil fields, they could be expected to produce 440,000 barrels daily, earning upwards of $40 million per day. This income could be used to stabilize the decimated economy and purchase badly needed military hardware and humanitarian supplies. The desperate security situation surrounding the oil fields has prevented oil production thus far, however when an oil protection force is established, production is likely to resume.
Post-Gaddhafi planning and preparation must be ramped up. The recent TNC plan for post-Gaddhafi Libya shows significant internal planning is taking place. However, the international community must provide the TNC with their rightfully owed international assets to allow the government to coalesce the revolution, invest in the oil infrastructure, and provide desperately needed humanitarian and military supplies.
Photo Credit: B.R.Q