Libya Herald | 19.04.2018

By Sami Zaptia

The Chairman of Libya’s National Oil Corporation, Mustafa Sanalla has reported that 30-40 percent of Libya’s fuel is stolen or smuggled. He has called on Operation Sophia to include smuggling of refined fuel as part of its operations. Sanalla has also suggested adding a marker to Libyan fuel to identify it. He also called for a reform of Libya’s subsidy system. Sanalla was speaking at the inaugural Oil and Fuel Theft conference in Geneva yesterday.

Here is his complete speech provided by the Media Department of the NOC.

‘‘It gives me no pleasure to be here as the representative of a country where fuel smuggling is so prevalent, and where fuel smugglers are able to grow fabulously rich at the expense of ordinary law-abiding Libyan citizens.

It is difficult to find accurate statistics on the value of fuel smuggled and stolen in Libya.  But we estimate that between 30-40% of fuel produced and imported into Libya is stolen or smuggled, with a loss to the Libyan people in the order of a billion dinars a year, around 750 million US dollars at the official rate. Imagine what could be achieved to improve the lives of ordinary Libyans with such a huge sum – hospitals, medication, schools, housing.

Of course not all Libyans have stood idly by while this pillage of the country’s resources has been going on. In the NOC and Brega Petroleum Marketing Company, many people are working to combat fuel theft and smuggling. And I would like to highlight the work of the Libyan Attorney General to bring perpetrators to justice.

Some of our international partners have also been active: I particularly welcome the enforcement actions last year of the Italian government against a major international smuggling network, and the sanctions imposed by the US Office of Foreign Assets Control, OFAC, in February this year on individuals and vessels which have engaged in fuel smuggling. I call on others to follow their lead.

When we look at fuel theft and smuggling in Libya, we tend to focus on the huge financial losses to the Libyan state.  But I would argue that the impact of fuel smuggling is much more serious — it is destroying the fabric of the country. The fuel smugglers and thieves have permeated not only the militias which control much of Libya, but also the fuel distribution companies which are supposed to bring cheap fuel to Libyan citizens.

The huge sums of money available from smuggling have corrupted large parts of Libyan society. They are eroding Libyans’ respect for the rule of law, they disillusion those Libyans who want to make a positive contribution to the Libyan democratic transition. Fuel smugglers are well-armed, and well-resourced.  And every day their grip on regions of Libya – and also on neighbouring countries who receive smuggled and stolen Libyan fuel – becomes stronger and more institutionalized.

With the vast profits available, the few actions which have been taken to date have not been enough to create a major disincentive for the fuel smugglers.  And that is why I am taking this opportunity today to announce a major new strategy to combat fuel smuggling in Libya. And I am calling on those present at this conference, on Libya’s friends and neighbours, but above all on the Libyan people themselves, to do everything they can to support it and to eradicate the scourge of fuel theft and fuel smuggling.

Libya produces some fuels from its own refineries, but most is imported. Both imported and locally produced fuels are transferred to storage facilities run by the Brega Petroleum Marketing Company (BPMC), which is 100% owned by NOC. Some locally produced diesel is transferred direct to industrial consumers by pipeline and vehicle tankers. We suspect some of the vehicle tankers are diverted by fuel smugglers to illegal storage sites.

Libyan Fuel Distribution Companies draw fuel from BPMC on the basis of demand from filling stations in their network.  A survey last year confirmed our suspicion that many of these filling stations – particularly those licensed in recent years – are not operational, and the fuel drawn for them is actually diverted to illegal storage sites for onward smuggling. The Libyan Attorney General is conducting investigations into these crimes.

Fuel – predominantly diesel – is transferred from illegal storage sites to small Libyan vessels, who then sell it on within Libyan territorial waters to large international vessels, who in turn sell it on to international end users.

Gasoline diverted to illegal storage sites may end up in the hands of illegal roadside resellers, or organised cross-border smuggling networks.  Gasoline purchased legally may also be smuggled across Libyan land borders.

Displaying a satellite image of an illegal storage and pumping facility in Abu Kammash in Western Libya: The diesel will be transferred from a site like this to a small vessel which will carry out a ship-to-ship transfer.

The fuel will then probably be sold on again, with much of the illegal activity taking place at Hurd’s Bank anchorage just outside Maltese territorial waters.

Fuel smuggled across Libya’s borders is predominantly gasoline. There are small scale smugglers and large-scale smugglers. Vehicles can be modified to carry fuel secretly.

Or the smugglers may just move large quantities openly, usually with armed escorts who can use threats or bribes to get the convoy past any obstacles.

The Tunisian Government has built a ditch and berm to try to prevent illegal movements across unguarded sections of the border, but there are ways for the smugglers to get around it.

Finally, it is not always necessary for fuel to be smuggled – if it can be diverted away from legitimate filling stations, the smugglers can create shortages, making illegal reselling of fuel highly profitable.

What we now have, particularly in Western Libya, is a large group of well-resourced and well-armed criminals, who have a strong interest in frustrating Libya’s transition to a peaceful and law-abiding democracy.  They want Libya to stay as it is, so that they can continue to make their millions.  It follows that the United Nations and the international community – if they are genuine in their declared desire to see Libya change – must make every effort to help prevent smuggling.

The international community has recognized that illegal exports of crude oil threaten the political cohesion of Libya. They have ensured that the mandate of Operation Sophia, under which an international fleet of vessels patrol the Mediterranean just outside Libyan territorial waters, includes the prevention of crude oil.  I now call on the international community to extend the mandate of Operation Sophia to cover the smuggling of refined fuels, which is just as significant a threat to peace in Libya.

The UN Panel of Experts has amassed significant intelligence on those vessels which receive stolen Libyan fuel and sell it on.  There is more information available from AIS systems, satellite imagery, automated ship registries and ship-borne radars.  Together we can hit the smugglers where it hurts, in the wallet, by seizing vessels engaged in smuggling.  If we do this, and they start to lose money and vessels, they will soon stop.  All it takes is international willingness to match the good words about helping Libya with good deeds.  Remember, if there is no international buyer for Libyan fuel, there can be no smuggling.

We at the NOC want to do what we can to help secure convictions of smugglers.  I am meeting here in Geneva with companies which implement fuel marking systems.  Together we will explore whether a system of adding molecular markers to Libyan subsidised fuels would help Libyan and international law enforcers.

Where criminals are identified we should not hesitate to seize their assets, whether these are in Libya or hidden away in offshore accounts.  I call on the international community, including Europol, CEPOL and Interpol, to take every effort to help us in this regard, and to ensure that money stolen from Libya is returned to the Libyan people.  Given the impact of fuel smuggling on the stability of Libya, the international community and the UN should also be examining whether individuals should be sanctioned under relevant UN Security Council Resolutions.

Fuel distribution companies within Libya are another area of concern.  The Chief of Investigations at the General Prosecutor’s office in Tripoli, Sadiq el-Sour, spoke about this at a press conference on 14 March this year. We have not seen enough evidence that the four Libyan distributors of gasoline are taking adequate steps to prevent theft and diversion of fuels intended for sale to the Libyan public. Significant volumes of fuel are being drawn by the fuel distribution companies for delivery to filling stations which are not operational or do not even exist.  I am in contact with Mr Serraj, Head of the Presidency Council, to find a solution which will resolve the situation.  Where crimes have been committed we will continue to work with the Attorney General to secure convictions of those responsible.

It is my hope that together, these measures will help us to turn the tide against the fuel smugglers, and back in favour of the law-abiding majority of Libyan citizens.

But of course, none of the measures I have outlined address the fundamental driver of fuel smuggling: fuel subsidies.  By heavily subsidising fuel in a region with no subsidies, Libya creates massive incentives for smugglers.  Now of course decisions on fuel subsidies are not mine.  They have to be taken by the Libyan Finance Ministry, Economy Ministry and the Central Bank of Libya.  I just have to implement the policy.  But it is my duty as a Libyan to emphasise a simple fact: if the subsidies are intended to make life easier for struggling Libyan families, they are not working.  Rather than having access to plentiful and cheap fuel, too many Libyans are finding their filling stations empty, with fuel only available at a huge premium at some illegal road-side stall.  We all know that the stall holder is not the one making a massive profit.  It is the organised criminals who operate behind the scenes who benefit from the Libyan Government’s expenditure on subsidies.

On 6 March this year the Al-Wasat website reported that fuel smuggling has created such a shortage that Libyans in Zuwara – ironically, one of the smuggling centres — are paying up to 4 dinars for a litre of fuel.  At official exchange rates, that is three US dollars.  So we have a subsidy system which is driving smuggling, and far from having among the lowest fuel prices in the world, some Libyans are paying the highest prices. The Fuel Distribution companies are buying fuel for 0.11 dinars per litre – at black market exchange rates that is 2-3 US cents per litre.  The Libyan Government pays many times that amount on the global market.

There must be better ways of distributing Libyan Government resources. Even direct payments to Libyan families via the family book would surely be a better system.  I call on the responsible authorities to take the necessary bold decisions and deliver a package of far-reaching reforms to the way Libya allocates its wealth.

A word or two before I finish about smuggling of crude oil.  Just because we don’t have a major crude oil smuggling problem in Libya at the moment does not mean that nobody is trying to steal Libyan crude oil.  There are individuals writing letters to everyone they can think of, using NOC letter-headed paper and all manner of fancy stamps and signatures, claiming that they are the real chairmen of NOC, and that international oil companies, Opec and other organisations should have dealings with them only. I have been described by one of them as a member of one of “the gangs that hijacked the NOC’s offices in Tripoli”.  It gives me something new to put on my CV, I guess, although it is difficult to reconcile my description as a “hijacker” with the fact that I was appointed in 2014 by the undisputed Libyan Government.

We need to understand why they are making these ridiculous claims.  I believe they hope that some people who don’t know any better will one day arrange a “unification” of the NOC – which I stress is not divided. Or perhaps they are preparing a figleaf of legitimacy for a future armed takeover of Libyan oil ports and infrastructure, followed by exports of Libyan crude outside of the legitimate NOC process.  This has been attempted a number of times before, and fortunately we have always been able to ensure these efforts have failed. We must remain vigilant in case this is their ultimate aim. Either way I sincerely hope that the international community treats these individuals for what they are – a threat to the integrity of the country.

In conclusion I would like to thank the organisers of this conference for their efforts to highlight the global problem of fuel smuggling, which has not always been given sufficient attention in the past.  We in Libya are suffering from its pernicious effects, but I am confident that with the full support of the international community we can turn the tide against smugglers, and return their ill-gotten gains to the long-suffering people of Libya.

Thank you”.