Will Oil Bring Muammar Gaddafi Down?

Gaddafi's fuel stores are insufficient for the military and civilian challenges he faces. Algeria could pull the rug from under him

By Henry Smith

Gaddafi's deputy foreign minister Khaled Kaim last month called on Algerians to provide Libya with fuel. Photograph: Keystone USA-ZUMA/Rex Features

Despite suggestions of a change in Nato's approach towards the Libyan conflict, particularly the possibility of a negotiated settlement, the outcome may eventually hinge on something much more basic: supplies of fuel.

This was perhaps most visible in Nato's recent strikes on refuelling depots used by loyalist forces near Brega. The most easterly town under Muammar Gaddafi's control, Brega is reportedly the most heavily defended urban centre after Tripoli. Gaddafi's motivation here is clear. If he loses Brega the opposition will gain almost total control of Libya's eastern oil network, with access to a rumoured 2m barrels of stored crude.

But perhaps even more significantly, Gaddafi's deputy foreign minister, Khaled Kaim, last month called on Algerians to provide Libya with fuel. Speaking to an Algerian newspaper, Kaim argued – accurately – that although Libya's domestic refining capabilities have been reduced, UN resolutions do not prohibit the supply of fuel.

Although largely ignored in international media, Kaim's comments betray the strategic importance of overland supplies for both the maintenance of Gaddafi's army and his ability to control domestic civilian pressures. A lack of fuel reduces Gaddafi's ability to conduct his military campaign, which continues on three distinct geographical fronts, but can also exacerbate social tensions among civilians through a lack of transportation, refrigeration and air-conditioning. Social tensions could become a matter of particular concern for the regime during Ramadan, which starts on 1 August.

Ramadan also constrains Nato, with the recent flurry of statements from French and Italian ministers regarding negotiations in part an acknowledgement of the sensitivities facing military intervention in August.

Before the conflict, Libya received four shipments of diesel and eight of gasoline each month. Deliveries at ports have significantly fallen during the conflict (there were reports of the coalition using extralegal measures to prevent docking), but the EU's blacklisting of Gaddafi-controlled ports control on 7 June ended the regime's ability to persuade traders that docking was actually legal.

Libya's refining capabilities were insufficient for consumption before the conflict, but territorial losses since then have made the refinery at Zawiyah integral to sustaining Gaddafi's campaign. The plant was reported to be running at a third of its capacity of 120,000 barrels per day, but in mid-June opposition forces cut supplies by blocking the pipeline supplying it at Rayayna.

Gaddafi's limited domestic fuel stores and crude stocks are insufficient for the military and civilian challenges he faces, making overland supplies from Tunisia and Algeria (as suggested by Kaim) crucial to his position.

Tunisia – where the interim government is stuttering through an uncertain reform process – has tried to maintain a degree of neutrality. This is partly due to fears that Gaddafi forces could attack Tunisia's southern oil infrastructure. The Tunisian security forces are already overstretched under domestic pressures and would face difficult challenges containing such strikes.

In mid-May the Tunisian authorities showed greater willingness to criticise the Tripoli regime after a spate of border incursions, but it appears to have been short-lived. Tunisia then came under pressure from the Libyan opposition's Transitional National Council (TNC) following credible reports in late June that a Tunisian bank had provided letters of credit for traders to supply Gaddafi with fuel. However, with smuggling networks ongoing, it is doubtful whether this, and pressure from the EU and Qatar, will persuade Tunisia to adopt a tougher line.

Speculation has swirled regarding the extent of Algerian support for Gaddafi but in the absence of decisive evidence this remains open to conjecture. However, it can be said with certainty that Algeria retains the ability to decisively pull the rug from under Gaddafi's feet, principally by blocking supplies crossing the border at Gadhames – though so far it has chosen not to.

Algeria publicly denies supporting Gaddafi. Its allies have accepted these denials but the recent flurry of high-level visits to Algiers betrays the country's significant role in the conflict. Notable guests include Qatari Emir Sheikh Hamad al-Thani, French foreign minister Alain Juppé, and the head of the US Africom command, General Carter Ham – all significant partners in the coalition against Gaddafi.

The international community has little leverage over Algeria, however. Given the centrality of oil to its economy, it has little need to bow to external pressure. This is unlikely to change without a significant reduction in oil prices or the emergence of a domestic opposition movement, but demonstrations are currently limited to the demands of single-issue groups, such as professional bodies and students – meaning a shift in position towards Gaddafi appears unlikely.

Through its airstrikes on Brega Nato has tacitly acknowledged the importance of fuel, but without a squeeze on Gaddafi's overland supply lines he will remain capable of sourcing fuel stocks. Consequently, the collapse of Gaddafi's government does not appear imminent as Ramadan approaches.

When considering the role of fuel, the humanitarian aspect of squeezing supplies should not be neglected. The Libyan economy is characterised by centralised distribution for vital food and medical supplies. Consequently, fuel shortages will exacerbate pressures on the civilian population. Amid the uncertainty of a transitional or post-Gaddafi period, resuming domestic capacity will be crucial to prevent further unrest and instability.

-This commentary was published in The Guardian on 13/07/2011
- Henry Smith is a Middle East political risk analyst, with a particular focus on Libya, at the independent risk consultancy Control Risks