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Libya's biggest oil port seized in blow to production surge

By GHAITH SHENNIB AND HATEM MOHAREB | Bloomberg | Published: March 4, 2017

Libya's biggest oil port was seized by an armed group, dealing a blow to the North African country as it seeks to revive production of its most important commodity. Brent crude futures climbed.

The Benghazi Defense Brigades, a militia that's not allied to the United Nations-backed government in Tripoli, took control of the Es Sider terminal on Friday afternoon, according to people with knowledge of matter who asked not to be identified because they aren't authorized to speak to the media. The facility had previously been under the control of eastern-based military commander Khalifa Haftar.

"That is a considerable blow to Haftar," said Mattia Toalda, senior policy fellow at the European Council on Foreign Relations. "We have to see if there is an immediate impact on exports. But for confidence in Libya's production it's a blow."

The clashes show just how vulnerable Libya's recent oil-production surge is to conflict that escalated in late 2014 but that had shown signs of calming in the past few months. The nation pumped about 700,000 barrels a day in February, almost doubling from a year ago, according to information compiled by Bloomberg.

Brent crude futures climbed as high as $55.86 a barrel following the port's seizure. They were at $55.61 at 5:11 p.m. in London.

After sweeping through the oil crescent in September and taking control of the ports in the region, Haftar had allowed Libya's National Oil Corp., part of the Tripoli-backed government that he opposes, to use Es Sider for oil exports.

But production remains vulnerable without a lasting peace between the east and west of the country. International efforts to break the political stalemate have so far failed.

Haftar is supported in his standoff with the government of Prime Minister Fayez al-Serraj in the west by Russia, the United Arab Emirates and Egypt. His allies contend that he alone has the military might and control of oil needed to govern the country. Others inside Libya also support him, though he's opposed by powerful militias mostly across central and western Libya, where 70 percent of the population lives.

"If they can hold on to the positions, they're calling Haftar's military bluff," Toalda said of the Benghazi Defense Brigades. "He had conquered the oil terminals with relatively few military resources. His ground troops are quite thin. He has prevailed until now thanks to a mix of the airpower and political skills."

"If his troops were overrun in two such areas in 24 hours, people inside Libya and outside will start to question his military force," Toalda added.

Earlier, workers at the terminal had fled to nearby Ras Lanuf as Haftar's forces sought to repel the attack, Saad Dinar, head of the oil workers' union in eastern Libya, said by phone.Bushra, the Benghazi Defense Brigades' news website, published photos showing their fighters at the airport in Ras Lanuf, another key city for Libyan oil exports.

The Benghazi Defense Brigades' stronghold is in Jufra, on the western edge of the nation's oil crescent, rather than the city of Benghazi, which is in the east. The group was formed in 2016 with a goal of wresting Benghazi back from Haftar.

There have been skirmishes in the area between the two sides before. Friday's fighting marks an escalation and highlights threats to the North African country's efforts to restore its crude production following two years of conflict.

Libyan oil production has been rising, with shipments from key ports resuming after many months of conflict. The more it pumps, the greater the pressure on other members of the Organization of Petroleum Exporting Countries to curb supply in order to eliminate a global oil glut.

"It's still very early to judge the situation, and it depends on the ability of each side to sustain their control over the area," said Zeid Ragas, a Libyan political commentator.

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Bloomberg's Caroline Alexander contributed.
 

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