Libyan oil trade
has been paralysed as banks decline to clear payments in dollars due to
U.S. sanctions, trading sources told Reuters on Tuesday.
The move follows a
decision by major U.S. oil firms to halt trade with Libya and will
complicate deals for European firms to buy Libyan oil.
Around half of
Libya’s oil output, or more than one per cent of global supply, has
already been choked off by lethal clashes between rebels and forces
loyal to Libyan leader, Muammar Gaddafi. Oil prices hit their highest
levels since September 2008 on Monday.
“Banks don’t want
to finance the system in Libya, so for the moment no one is getting
money for oil. There are big problems for payments,” said a senior
trader with a European oil company.
Sources at or close
to major European buyers of Libyan crude, including Italy’s Eni and
Saras, said the decision by banks to stop export financing of Libyan
crude had virtually brought all transactions to a halt.
“It’s not a matter
of choice; there is an embargo on U.S. dollars coming in and out of
Libya,” said a trader with one of the firms, referring to banks’
resistance to clear payments in the U.S. currency.
“All U.S. dollar
transactions are being blocked,” the trader said, adding that it was
not clear at this stage if payments were possible in other
currencies.Western countries, the European Union, and United Nations
have imposed sanctions on Libya and frozen government assets in
response to forces loyal to Gaddafi firing on protesters.
“Sometimes, it is
easier not to trade at all than to trade with many caveats,” said an
oil trader working for a major international bank, adding longer-term
EU law interpretations could reopen some paths for trade.
“If you can prove
that money from oil purchased goes back to accounts not controlled by
Gadaffi and family, perhaps you could argue that you are buying oil for
humanitarian purposes and that the money would flow back into the
country,” he said.
Most estimates
suggest around half of Libya’s 1.6 million barrels per day (bpd) of oil
production capacity has been suspended due to clashes between
government forces and rebels. Reuters
