Op-Ed: Merger of rival Libyan National Oil Companies may fail

Posted Jul 8, 2016 by Ken Hanly
At the beginning of July, the two rival Libyan National Oil Companies (NOC) — one based in the west in Tripoli and the other in the east in Bayda — agreed to merge.
A Libyan fireman stands in front of smoke and flames rising from an oil storage tank at an oil facil...
A Libyan fireman stands in front of smoke and flames rising from an oil storage tank at an oil facility in northern Libya's Ras Lanouf region on January 23, 2016, after it was set ablaze following attacks launched by Islamic State group jihadists
, AFP/File
The eastern NOC is associated with the House of Representatives (HoR) government and the western NOC with the Government of National Accord (GNA). Only the western NOC has achieved significant international recognition and is regarded by the UN and others as the sole legitimate NOC.
Many governments welcomed the agreement including France, Germany, Italy, Spain, the UK and the US. However, the deal was rejected by Abdullah al-Thanni, the PM of the Tobruk-based House of Representatives (HoR) government according to an article in the Libya Observer. Speaking on Alhadat TV, Al-Thanni said that the agreement was not acceptable until certain conditions were met.
Al-Thanni demanded that 40 percent of net revenues should go to the eastern region and the other 60 percent to the west and south. However, he went further and demanded that salaries and subsidies on fuel, foodstuff, electricity and medicine for the eastern region should come from the 60 percent allocated to the western and southern regions. When the agreement was announced there was no information provided about how revenue was to be divided. Al-Thanni said this was a fair distribution of revenues. It is not clear if there was any agreement on revenue division within the merger agreement.
Al-Thanni also demanded that the headquarters of the National Oil Corporation (NOC) be in Benghazi. It is now in Tripoli. The merger agreement already contained a provision that such a move would happen when security permitted. Al-Thanni said: "We never accept dictations from the Tripoli group; we will not comply with any agreement that violates our 'sovereignty'." The HoR does not accept the Government of National Accord (GNA) as the legitimate government of Libya since the HoR has not yet voted confidence in the GNA. Although the HoR met many times to vote there was either no quorum or in two cases the meeting was disrupted. Some HoR members will not hold a vote until they have assurances that Khalifa Haftar will remain as commander of the Libyan National Army. The Libyan Political Agreement gives the Presidential Council of the GNA that function until a new commander is chosen.
AbdulMagid Reish, head of the Libyan Investment Authority(LIA) recognized by the GNA, hoped that he could reach a similar accommodation with the LIA set up in the east. These seemingly pragmatic agreements nevertheless violate the basic principle that there is only one legitimate government the GNA associated with one National Oil Company and one Libyan National Bank. The UN has warned countries that they should deal only with the GNA and its institutions, not the HoR and its separate parallel institutions, but that is exactly what the GNA has been doing. It is fraught with danger since the parallel institutions and the parallel government can make demands that could scuttle the deals. If the Libya Observer report is accurate, the oil merger is not agreed to and will not be until the further demands of the HoR are met.