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Libyan rebel oil blocked by sanctions and confusion

Marketplace Staff May 16, 2011

Libyan rebel oil blocked by sanctions and confusion

Marketplace Staff May 16, 2011

Kai Ryssdal: International prosecutors want to get their hands on Muammar Gaddafi. Today, the chief prosecutor for the International Criminal Court in the Hague asked for arrest warrants for Gaddafi and his sons, for the killing of civilians in the crackdown on anti-government rebels.

Meanwhile, one effort to fund those rebels seems to have ground to a halt — or you might say dragged its anchor. Back in April, the first delivery of oil from rebel-held east Libya was shipped and paid for through a deal with the government of Qatar. Since then, though, sanctions originally aimed at Gaddafi and his government have held up the tanker carrying the oil. So the ship — the Equator — and its shipment are stuck.

Emma Farge has been tracking the Equator’s journey for Reuters. Emma, good to have you with us.

Emma Farge: Thanks.

Ryssdal: So this ship was supposed to bring in millions of dollars for the Libyan rebels; it’s off the coast of Singapore now, has been for a couple of weeks. What’s the holdup?

Farge: It’s stuck because there isn’t enough clarification on whether it’s legal or not. So most companies just don’t think it’s worth the risk to buy it.

Ryssdal: The Libyans get the Qatari contract, they sell this oil, the ship sails off into limbo because the sanctions regime is just not flexible?

Farge: It’s not. The problem is that the political will that was there back in February isn’t necessarily there anymore. So especially in the United Nations, you have a divided council, where you have the European powers who are willing to address the issues of the problems with the sanctions regime, but others who are more relaxed, such as Russia and China.

Ryssdal: Now I’m confused, because we are constantly told that sanctions — economic sanctions — will be targeted, they will be smart. And yet here we have, it seems, sanctions that are maybe not all that smart.

Farge: Well the problem is that the sanctions regime was designed before we had a divided Libya. So although AGOCO has been exempted from U.S. sanctions —

Ryssdal: AGOCO, remind us what that is.

Farge: AGOCO is originally a subsidiary of the Libyan NOC, the National Oil Company. But now it is split off from them. So the issue of untangling it legally from the NOC is very complex, no matter how targeted the sanctions are.

Ryssdal: So what might eventually happen with this ship?

Farge: It seems to be stuck off Singapore at the moment. Somebody might buy it, somebody probably has. But as a test case, diplomats, trade sources are saying it hasn’t given the assurances to do further deals with east Libya.

Ryssdal: So the Libyan rebels have made one oil deal, and it may well be their last?

Farge: Well, it’s looking questionable. If these issues can be ironed in terms of the sanctions regime, then they certainly might be able to export some more. At the moment, it’s still up in the air.

Ryssdal: Is there a way to target sanctions so that you can geographically limit them and say OK, this all came from eastern Libya and we can tell by chemical analysis, so this is OK; but the western oil’s not OK?

Farge: Yeah certainly there’s several different types of Libyan crude on the market, so in theory, you could do a test based on the sulfur content of that crude and say it came from this field, which is in rebel hands, or this field, which is in Gaddafi hands. The problem though, of course, is that the frontline is moving all the time, and even now, there’s no consensus on who owns what.

Ryssdal: You know, it seems like the selling of this oil is fine, and that has already happened — it’s the buying of it that’s the problem.

Farge: Yes, indeed. And if there is some issue with this cargo in terms of the legality of it, this could apply all the way down the supply chain. So it wouldn’t just be the original buyer that’s taking the risk, it’s every subsequent buyer until the oil is actually converted into gasoline or jet fuel or something else.

Ryssdal: Emma Farge, a correspondent from Reuters, on the mystery of the Liberian-flagged oil tanker Equator, with Libyan oil on it. Emma, thanks very much.

Farge: Thank you.

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