A US Treasury Department official said that since Libyan rebels are not subject to sanctions against Gaddafi, they can sell oil under their control after retaking a number of oil fields and terminals in eastern Libya over the weekend.
“The rebels are not part of the government of Libya. They are not subject to the sanctions,” the official said.
However, the rebels must first establish clear lines of control and payment systems that do not involve Libya’s National Oil Corp, its central bank nor any other government entity, the official said.
UN diplomats echoed similar sentiments, helping to clarify the clouded status of rebel-held oil, which could provide vital revenues to forces trying to topple Gaddafi.
“There is no UN embargo on Libyan oil,” a UN Security Council diplomat told Reuters on condition of anonymity. “The rebels can sell oil. But they can’t do it through the Libyan National Oil Corporation.”
No special permission would be needed from the Security Council’s Libya sanctions committee, which oversees compliance with the sanctions, for the rebels to sell oil, envoys said.
The Treasury on February 25 banned US transactions with Libya’s state oil producer, the central bank and other state entities in an effort to cut off revenues to Gaddafi’s regime, in line with sanctions imposed by the UN and European Union.
It later put another 14 subsidiaries of the National Oil Corp, or NOC, on its blacklist, which also seeks to freeze any Gaddafi regime assets under US jurisdiction.
With the backing of Western air strikes, Libyan rebels have retaken the main oil terminal cities in eastern Libya, including Es Sider, Ras Lanuf, Brega, Zueitina and Tobruk. They were advancing toward Gaddafi’s hometown of Sirte on Monday.
No comment on Qatar plan
The Treasury official declined to comment on a Libyan rebel plan announced on Sunday that would have Gulf oil producer Qatar market crude pumped from eastern Libyan fields that are no longer under Gaddafi’s control.
Qatar became the first Arab country to recognize the rebels as the Libyan people’s legitimate representative.
The US official emphasized that the Treasury has not altered any of the sanctions on Gaddafi’s regime, which involve freezes on more than $US32 billion in assets. But the sanctions do not apply to Libyan entities that are outside of the government and outside of Gaddafi’s control.
One of the NOC subsidiaries subjected to sanctions but controlled by rebels is Benghazi-based Arabian Gulf Oil Co, or Agoco. Its status remained unclear on Monday, but the Treasury had opened the door to a possible lifting of sanctions at the time the exploration, production and refining unit was blacklisted.
“Treasury will continue monitoring the National Oil Corporation’s operations in Libya,” it said at the time. “Should National Oil Corporation subsidiaries or facilities come under different ownership and control, Treasury may consider authorizing dealings with such entities.”
Many risks
Ali Tarhouni, who is in charge of economic, financial and oil matters for the Libyan rebels, said output from the east Libya oil fields under rebel control was running at about 100,000 to 130,000 barrels per day. Prior to the political unrest, Libya was producing about 1.6 million barrels per day, or almost two per cent of world output.
Although the clouds over rebel-held oil may be starting to clear from a sanctions standpoint, there are many practical hurdles to oil traders loading up tankers.
Trading sources told Reuters they did not think the latest developments would easily unblock Libya’s oil trade, which has been suspended for weeks due to sanctions and heavy fighting.
Firms buying crude would have to be absolutely sure that they are not violating any sanctions before they proceed and establish clear title to the oil, traders said. Finding ship owners and insurers willing to handle cargoes worth tens of millions of dollars may be difficult.
“We need to understand who we are trading with, what sort of company is selling crude, who controls it, who manages it,” a trader with a major oil company said.
Rebels advance on eve of Libya crisis talks
Rebels advanced west towards the birthplace of Libyan leader Muammar Gaddafi on Monday, firing mortars and heavy machineguns in sporadic clashes with loyalist forces.
Emboldened by Western-led air strikes against Gaddafi’s troops, the rebels took the town of Nawfaliyah and moved towards Sirte, Gaddafi’s home town and an important military base, in the sixth week of an uprising against his 41-year rule.
As the rebels pressed forward in the east, Gaddafi’s troops were patrolling an area near the centre of Misrata after shelling the previously rebel-controlled western city for days.
The government in Tripoli said it had “liberated” Misrata from rebels and declared a ceasefire there.
Diplomatic activity accelerated on the eve of a 35-nation meeting in London on Tuesday to discuss the crisis in the oil-producing North African country.
Italy proposed a deal including a ceasefire, exile for Gaddafi and dialogue between rebels and tribal leaders. The rebel leadership ruled out compromise with Gaddafi’s followers. “We have had a vision from the very beginning and the main ingredient of this vision is the downfall of the Gaddafi regime,” spokesman Hafiz Ghoga told reporters in the rebel stronghold of Benghazi.
Qatar became the first Arab country to recognise the rebels as the sole legitimate representative of the Libyan people. Libyan state television called the move “blatant interference”.
Russia criticised the Western intervention that has turned the tide in the conflict, saying it amounted to taking sides in a civil war and breached the terms of a United Nations Security Council resolution.
Green flags in Misrata
The French and British leaders called for supporters of Gaddafi to abandon him and asked Libyans opposing him to join a political process to pave the way for his departure.
“Gaddafi must go immediately,” President Nicolas Sarkozy and Prime Minister David Cameron said in a joint statement. “We call on all his supporters to drop him before it is too late.”
In the nine days since the start of the Western-led bombing, the motley volunteer force of rebels has pressed half-way along the coast from its stronghold of Benghazi towards the capital Tripoli and regained control of most major oil terminals in the OPEC member state.
A US Treasury Department official said the rebels could sell Libyan crude without being subject to US sanctions if they conducted the transactions outside the National Oil Corporation and other entities in Gaddafi’s administration subject to sanctions.
With its finances under pressure, the rebel leadership said it hopes to restart oil exports within a week.
Some energy traders said that, sanctions aside, they could not touch Libyan oil because of shipping and legal risks.
On Monday the rebels met sporadic resistance as they continued their advance in convoys of pick-up trucks with machine guns mounted on them.
Just west of sandy, barren Nawfaliyah, bursts of sustained machine gun fire and the whoosh of several rockets could be heard, and plumes of black smoke rose ahead.
“Those are from our guns,” said Faisal Bozgaia, 28, a hospital worker turned rebel fighter, pointing to the smoke.
Rebels said occasional ambushes by Gaddafi forces had pushed them back but that they later regained their positions.
“We are advancing one, two kilometres at a time,” rebel Khalif Ali, 22, said in the town of Harawah, west of Nawfaliyah.
But the rapid advance is stretching rebel supply lines.
“We have a serious problem with petrol,” said a volunteer fighter waiting to fill up in the oil town of Ras Lanuf.
Reuters correspondent Michael Georgy, reporting from Sirte to the west, said he saw police and military but no sign of fighting.
Soldiers were manning checkpoints and green Libyan flags flapped in the wind. Militiamen fired AK-47 rifles defiantly into the air. “If they come to Sirte, we will defend our city,” said Osama bin Nafaa, 32, a policeman.
In Misrata, Gaddafi soldiers manned checkpoints and took up position on rooftops. Some house fronts were smashed, smoke was rising from several areas and gunfire rang out constantly across the city.
Several civilians approached a group of journalists, some of them woman and children waving green flags.
“Civilians are happy,” said an army official who declined to be named. “Everything you are hearing is a lie. The function of our army is to save the people and to protect the leader. We cannot kill our own people.”
A rebel spokesman in another western town, Zintan, said forces loyal to Gaddafi had bombarded the town with rockets early on Monday, Al Jazeera reported.
Turning point
Western-led air strikes began on March 19, two days after the UN Security Council authorised “all necessary measures” to protect civilians from Gaddafi’s forces. But from the outset, the mission has faced questions about its scope and aims, including the extent to which it will actively back the rebel side and whether it might target Gaddafi himself.
The start of allied bombings proved a turning point for the rebels who were hemmed into Benghazi at the time.
Russia, which abstained in the UN vote, said Western attacks on Gaddafi’s forces amounted to taking sides.
“We consider that intervention by the coalition in what is essentially an internal civil war is not sanctioned by the UN Security Council resolution,” Foreign Minister Sergei Lavrov told a news conference.
NATO chief Anders Fogh Rasmussen told the BBC: “We are there to protect civilians — no more, no less.”
France, which dropped the first bombs of the campaign nine days ago, said the coalition was strictly complying with UN terms. It said its planes struck a command centre south of Tripoli belonging to Gaddafi’s forces on Sunday and Monday.
The Defence Ministry in London said British Tornado aircraft destroyed Libyan government ammunition bunkers in the Sabha area of Libya’s southern desert in the early hours of Monday.
“He (Gaddafi) is still capable … of inflicting further great bloodshed on the people of his own country. So we must maintain our efforts absolutely in line with international law,” British Foreign Secretary William Hague told BBC television.
On Sunday, NATO agreed to take full command of military operations in Libya after a week of heated negotiations.
The United States, which led the initial phase, had sought to scale back its role in another Muslim country after the wars in Iraq and Afghanistan. An alliance spokeswoman said on Monday the transition would take a couple of days.
Libya accused NATO of “terrorising” and killing its people as part of a global plot to humiliate and weaken it.
The government says the Western-led air attacks have killed more than 100 civilians, a charge denied by the coalition which says it is protecting civilians from Gaddafi’s forces and targeting only military sites to enforce a no-fly zone.