166 captures
04 Apr 2011 - 24 Feb 2021
About this capture
1 April 2011 Last updated at 03:24 ET
Libyan rebels look to compete with Gaddafi through oil
By Aidan Lewis
BBC News
Fighting has raged around some of Libya's key oil installations
Libya Crisis
In pictures: Sirte battle
Vying for power
Where is Gaddafi?
Profile: Sirte
Since Libya's uprising began in February, the north of the country has become a battlefield and the production of oil - which generated most of the country's income - has slowed dramatically.
In the west, Col Muammar Gaddafi is thought to be using huge reserves of cash, and possibly gold, to pay those fighting to keep him in power.
In the east, rebels trying to topple his regime have appeared weak in comparison, relying on the UN-backed international military mission to make gains.
They want to shore up their position by exporting oil, which would potentially give them billions of dollars to buy supplies and arms, and bolster their credibility as a future government.
The rebels say they are already producing up to 130,000 barrels a day and hope to raise this to 300,000 barrels in coming weeks. They say damage to oil infrastructure has been limited.
But they still face big challenges.
International companies have pulled out staff while retaining rights over the exploitation of oil, the security situation remains unstable, and Libya's oil industry is subject to international sanctions.
Help for rebels
Col Gaddafi has framed Western intervention as an oil grab and made overtures to potential buyers in China and India. He has threatened to sue any oil company that does business with the rebels.
Allowing Agoco to trade independently is absolutely essential not only from a strategic but also from a humanitarian point of view”
John Hamilton
The rebels "are ready with the infrastructure, they've got people in the fields, at the terminals, there are a lot of people there who know what they're doing", says John Hamilton, a Libya expert at British risk analysis firm Cross-Border Information.
"But they need the financial structure in place. That's something they're working to put in place but they need international co-operation to achieve."
There are signs that this co-operation may be arriving.
US and UN officials have said sanctions do not apply to rebel oil sales - even though the US listed the rebel-controlled Arabian Gulf Oil Company (Agoco) as one of those targeted.
Qatar has also offered to assist the rebels in selling oil, and may be able to help them avoid difficulties over ownership rights, according to Greg Priddy, an oil analyst with Eurasia Group consultancy.
But Mr Priddy said eastern Libya needed 100,000 barrels of oil a day just for its own use, and it would take some time before rebels could start earning large sums from exports. "It's not something that's going to happen in the next couple of months," he said.
Before the conflict began, Libya was producing 1.6 million barrels a day, accounting for about 2% of world output. Some 70% of the oil comes from the east.
Libya holds Africa's largest crude oil reserves, and its oil, most of which was being sold to Europe, is especially valued because of its light, low-sulphur quality.
Cash and gold
The International Energy Agency said that by mid-March, Libyan oil production had "slowed to a trickle", and that exports could be off the market for many months.
[Gaddafi's reserves] are being used for financing the recruitment of mercenaries, for buying armaments, and for financing the war”
Ibrahim Dabashi
Libyan defector
With an economy that is heavily dependent on oil, the resumption of oil sales could become more important as the conflict drags on.
"My personal view is that allowing Agoco to trade independently is absolutely essential not only from a strategic but also from a humanitarian point of view, and Libya is in serious need of resources to support the people there and allow life to go on," says Mr Hamilton.
"The east needs to be ready in a sense to come to the aid of the west when Gaddafi goes."
So far, Col Gaddafi has shown no sign of going, but part of the international plan for wearing him down involves cutting him off from assets and cash held abroad and future oil revenues.
This could take time, partly because the Libyan leader is said to have built up a huge reserve of funds that he is now drawing on.
The International Monetary Fund has estimated the value of Libya's gold reserves at $6bn (£4bn). And Ibrahim Dabbashi, the Libyan deputy representative to the UN who has defected to the rebels, says the cash reserves, which would be easier to use for direct payments, are worth "tens of billions".
He says it was widely believed among senior Libyan officials that a stash of this money and gold was moved to the Libyan south in shipping containers during the 1990s.
"Now we know clearly that these amounts are being used for financing the recruitment of mercenaries, for buying armaments, and for financing the war," Mr Dabbashi said.
Gaddafi handouts
It is not known how fast Col Gaddafi might be getting through his funds, but he has certainly been displaying new levels of largesse.
Fuel shortages have been reported in Tripoli
Early on in the rebellion his government gave away 500 dinars ($400; £250) to every family, and said it would raise state salaries by up to 150%.
Some loyalists in Tripoli were given as much as 17,000 dinars, a new car and a weapon.
And foreign mercenaries, of whom there are thousands, were reportedly being paid as much as $10,000 to sign on, with a daily wage of up to $1,000.
In one sign that it was under pressure the Libyan central bank has begun recirculating old, large banknotes.
Fuel shortages have also been reported, though Mr Priddy said that as long as Col Gaddafi retained control of the Azzawiya refinery, he was likely to have enough petrol for military operations.
He said that in the east, the rebels should have enough fuel if they could retain control of the country's other big refinery, at Ras Lanuf.
A rebel source in the eastern port of Tobruk confirmed that the rebels had enough fuel, but said they could do with more cash. He said they were negotiating with British officials to take possession of hundreds of millions of Libyan dinars printed in the UK.
With international backing and the prospect of selling oil, the rebels are confident they have the momentum on their side, even if Col Gaddafi is able to hang on in the longer term.
In the shorter term, the main hope remains that the Gaddafi regime will crumble from within.
"It would have to be a combination of the military pressure that's now being exerted and sanctions, and the impact that has on the people around Gaddafi - providing them with incentives and pressuring them to move over to the rebels or desert, or leave the country," says Wolfram Lacher, a Libya expert at the German Institute for International and Security Affairs.
"That's the only real scenario in which I can see Gaddafi's demise in the short term."
More on This Story
Libya Crisis
Features and Analysis
In pictures: Sirte battle
Images from the Libyan city of Sirte, where transitional government forces have been battling Gaddafi loyalists.
Vying for power
Where is Gaddafi?
Profile: Sirte
Hunt for Gaddafi
Pain resurfaces
Chaotic fighting
Loyalists sit tight in Sirte
Islamists keen to engage
Migrant backlash
Painting Gaddafi
The final phase?
After Gaddafi
Jalil: Crowd pleaser
Waiting for the oil to flow
Quest for justice
Gaddafi: African asylum seeker?
Where are the weapons?
Conflict images
'Mass killing' sites
Islamists among rebels?
Profiles & Maps
The Gaddafi story
Gaddafi's co-accused by the ICC
Profile: Saif al-Islam Gaddafi
Gaddafi family tree
Key figures in rebel council
Profile: Mustafa Abdul Jalil
Libya conflict: Q&A
Coalition firepower
Gaddafi's bolt-hole
Where do Nato countries stand?
Where is al-Qaeda?
Related Internet links
UK Foreign Office statement on Libya conference
The BBC is not responsible for the content of external Internet sites
Share this page
More Africa stories
French woman held in Somalia dies
A 66-year-old French woman kidnapped from Kenya by Somali gunmen has died, say French officials.
Botswana call to change gay laws
Africa 'set to grow 5% in 2011'
Top stories
Greece MPs back austerity plans
Ohio police hunt escaped animals
Carla Bruni 'gives birth to girl'
Army chief warns US over Pakistan
New clashes at Chile mass protest
Features & Analysis
Why the sun set on an American town called Empire
Is America illegal?
Lawyers debate the Declaration of Independence
Damned lies and statistics
Can official accounts of Mexico drugs war's death toll be trusted?
24 hours of news
Striking photos from around the world
Most Popular
Ohio police hunt escaped animals
Viking boat burial find 'a first'
Is America built on a lie?
Carla Bruni 'gives birth to girl'
IQ 'can change in teenage years'
Army chief warns US over Pakistan
'Broadband giant' heads skyward
In pictures: Exotic animals escape Ohio game reserve
French woman held in Somalia dies
Greece MPs back austerity plans
Elsewhere on BBC News
New chapter
Why South Korean students are being told to scrap their textbooks and go digital
US President Bush was 'not told the truth' about waterboarding, says a former FBI agent
News feeds
E-mail news
About BBC News
Editors' blog
BBC College of Journalism
News sources
World Service Trust
About the BBC
BBC Help
Contact Us
Accessibility Help
Terms of Use
Privacy & Cookies
Advertise With Us
Ad Choices
BBC © 2011 The BBC is not responsible for the content of external sites. Read more.
HomeUS & CanadaLatin AmericaUKAfricaAsia-PacEuropeMid-EastSouth AsiaBusinessHealthSci/EnvironmentTechEntertainmentVideo