Interview with Libya Expert Matthew M. Reed

Matthew M. Reed is a Washington, D.C. based analyst for Foreign Reports, a consultancy focused on oil and politics in the Middle East. His views on Libya have been quoted in the Wall Street Journal and published in Foreign Policy. He took the time to discuss his take on the current situation, specifically from an oil markets perspective. SAFE: How did you become an expert on Libya? Reed: I started following the situation closely last summer, when the oil crisis began. There’s been lots of drama that hasn’t been making its way into news stories. So I’ve been trying to determine the cast of characters, what their agendas were, and follow this high-stakes political drama costing billions of dollars in revenue. With hundreds of militias involved, you can tear your hair out trying to follow the details, but there are only a handful with any real power. Lately, Ibrahim Jadran (leader of the militia that has taken control of the Es Sider oil terminal in the East) has taken things to the next level by loading up the Morning Glory oil tanker, and actually managing to get it out to open water, in an attempt to sell Libyan oil on the black market. It reads like a thriller. SAFE: How influential is Jadran? What is his clout? Reed: His influence is limited. What he’s been able to secure for himself is more airtime by taking resources hostage. He’s made himself a celebrity, but it’s hard to say if he’s a hero for that many people. He has to worry now that he’s 8 months into this crisis, with nothing to show for it. SAFE: This incident has resulted in the ouster of interim Libyan Prime Minister Ali Zeidan, who has repeatedly threatened and failed to stop the militias. The seizure of the Morning Glory by militants was the straw that broke the camel’s back as Zeidan’s efforts failed to prevent the tanker from making it to the open water. Is this not a victory on any level for Jadran and the Federalists? Reed: The only thing Jadran can say he’s achieved is getting rid of a very unpopular and powerless prime minister. If that’s the most he has to show for it, he hasn’t really achieved anything. Zeidan was already on the ropes in December, but the Parliament couldn’t muster the votes to oust him. If this was the straw that broke the camel’s back, it’s a rather weak straw. SAFE: So who is leading country now? Reed: There doesn’t really appear to be anyone leading. Interim PM Abdulla al-Thinni will be in power until about April 1st, but it’s unclear who will be “in control” after that. SAFE: Based on what you know, what’s the current view on the ground? Are we looking at a return to civil war? Reed: The question of bloodshed and civil war comes down to the government’s response. Right now, Libya’s Parliament would like oil facilities to be liberated, and at this point it has the mandate to liberate them after billions in oil revenue has been lost. The problem is that Libya doesn’t have a national force that can go east and take the (oil export) terminals. If they wanted to do this, they would have to rely on friendly militias, which are located in the west. Deploying them east and taking terminals back could have the rebound effect of rallying eastern militias around Jadran. Making this a tribal affair could be explosive for Libya’s East-West divide. However, while the risk of violence is very real, civil war is not necessarily in the cards. Also, of course, this episode has been very embarrassing for Jadran; it will be almost impossible for him to come back from this. SAFE: The Guardian reported late last week that Federalist spokesman Senussi El-Megrabi has stated that another tanker will be loading from the port of Tobruk in the immediate future. Based on what you’ve said about what the failure of the Morning Glory means for Jadran, would you characterize this as an empty threat? Reed: A tanker might make it to the Tobruk port, but it won’t make it to its destination. The United States has responded forcefully—first through legal language, and then through military action by deploying the Navy SEALs. SAFE: Right. The State Department described the tanker as illegal and the oil as stolen immediately after it left port. Reed: Correct, and they’ve backed up that language through action, which sets a precedent for future intervention against additional attempts. The other thing in the pipeline is a UN Security Council resolution under Chapter 7. That’ll function as a license for member states to inspect and redirect any ship carrying stolen oil from Libya. What prevented the United States from taking action earlier was the legal basis to intervene. The White House was waiting for the stars to align from a legal perspective. SAFE: What was that final star that fell into alignment? Reed: It was when the North Koreans disowned the tanker. The Egyptian company that was involved only handled paperwork and certificates. The North Koreans flagged it, and then they took the flag back. There are rumors that a company in the UAE was responsible; a private Saudi company might also be involved but we just don’t know yet. SAFE: What about the reported purchasers in Greece? Reed: Two Israeli nationals and a Senegalese national flew into Cyprus last weekend and hired a boat to sail to the tanker before the U.S Navy took over the ship. Those “buyers” may have been opportunists—it is still unknown who was actually behind all this. The problem now for Jadran is that he is trying to do business in the Mediterranean, but everyone knows his game, and now he has to deal with the 6th fleet of the U.S. Navy and all the allied European navies. His dream is over, especially if the United Nations authorizes inspection and rerouting of tankers carrying stolen oil. SAFE: Although it has been foiled, this was not the first attempt of the Federalists to use illicit oil sales to further their goals. What prevented the success of their earlier efforts? Now that this strategy has failed, what are their next steps should they wish to escalate? Reed: The Federalists attempted to sell oil last August and again in January. Both times the tankers were turned away by warning shots from Libya’s ad-hoc navy, which basically consists of a few warships, complemented by a fleet of civilian craft retrofitted with heavy guns. While weak, the Libyan Navy was good enough to stop them the first two times. This third time they surrounded the vessel and lost control of it due to bad weather. Regarding escalation—that’s a tough call. Jadran’s only real concern is damage control right now. He has to protect his brand. He’s been embarrassed and his hopes and dreams have been dashed. SAFE: Oil markets have not reacted meaningfully, probably because Libya’s production has reached such pathetic lows. What is your expectation that supplies will return within the next year? Reed: Nobody is counting on Libyan oil. If conflict breaks out, it might impact prices momentarily, but it won’t last since most traders don’t expect Libya to come back within the coming year. The problem is that there are too many groups with very diverse grievances, and it has all combined to create this multi-layered crisis. The government still needs to address labor issues and complaints against management, everything from wages to minority rights, in addition to trying to solve this rather pesky Federalist problem. Eastern Libya was deliberately denied its fair share of oil revenues under Qaddafi; he wanted to ensure they wouldn’t have the resources to resist him. Jadran’s agenda and his grievances are legitimate, and shared by many in the east, but it’s hard to excuse his tactics, and his sincerity is in doubt. Now that his planned oil sales have been thwarted, we don’t know what he would have done with 30 million dollars if he managed to sell the oil. Would he have paid his men? It’s possible. But there was no real chance he was going to use the money to meaningfully improve security in the east. SAFE: In your opinion, what would be better for the long-term viability of Libya’s oil industry? A decentralized system in which local militias would have more autonomy over the nation’s oil resources, or a return to a stronger centralized government? Reed: As long as there’s transparency in the industry and people can trust the national oil company, it shouldn’t matter where it’s located or how it’s structured. Perhaps the only way to restart Libyan oil production in the East is to adopt a constitution that fixes the problems in the east and make it an equal partner. The Libyan government has to both make this explicitly clear, and follow through. How the oil industry is structured won’t matter if the revenue is going to the people. SAFE: How can U.S. foreign policy help encourage a return to stability for Libya and its oil industry? Reed: It’s very challenging. The simple answer: the Libyans themselves are the ones who need to reconcile and build trust. The U.S. can’t do that for them but it can stay engaged politically, encourage the constitutional process, and try to keep both sides from coming to blows. The Obama administration is facing many crises; Libya hasn’t been a top priority, even though events are still unfolding, and the United States and NATO have a stake. The best course of action is to stay engaged. Right now, the average American associates Libya with 40 years of Qaddafi, a controversial intervention, and the murder of four American diplomats in 2012, not to mention the Lockerbie bombing. The story that isn’t being told is why a stable Libya is worth investing in and working toward. The military intervention against this tanker is an encouraging sign that the United States can juggle crises and act when it has to. SAFE: Anything else to add? Reed: The biggest unanswered question that remains is, who was behind that tanker? Somebody lost a lot of money trying to pull this thing off—between paying for the charter, the crew, and the Suez Canal toll. It will take a bit of intrepid journalism to figure that one out. Hopefully we will get an answer soon.