Libya’s returning oil wealth could bring back cheap fuel, food and foreign goods in a subsidy-based system in the most optimistic scenario. But as oil prices and production rise, the future of new political developments hangs in the balance in a growing power struggle between Russia and the United Nations.

Last week, the U.N.-backed Government of National Accord (GNA) in Libya announced plans to reshuffle its leadership, which it hoped would be a way to bring influential General Khalifa Haftar—the GNA’s key rival—into the Tripoli-based organization’s ranks.

Cairo hosted members of both parties to discuss cooperation between Haftar’s House of Representatives/Libyan National Army based in Tobruk and the GNA – which vowed a “180 degree turn” in relations if Haftar agreed to take a role within its hierarchy. But the meeting never happened.

Egyptian President Abdel Fattah el-Sisi could not convince Haftar to accept a position within the GNA’s governing structure, rendering the meeting fruitless at a crucial moment for the next stage of Libya’s reconstruction. More than ever, the presence of a strong U.N.-backed GNA with Haftar’s support is necessary to keep Russian interests at bay.

As highlighted by the Huffington Post last week, Russian President Vladimir Putin is paying his dues to solidify Moscow’s foothold in Libya after all but guaranteeing the future of President Bashar Al-Assad in Syria.

Haftar – a U.S. citizen who lived in Virginia for 20 years -- has travelled to Moscow twice in the past six months for meetings with senior Russian military and defense officials. Leading up to the swearing in of U.S. President Donald Trump, the general toured a Russian aircraft carrier parked right off of the Benghazi coast, where he held a video conference with Defense Secretary Sergei Shoigu. Related: Did The Bakken Fall Too Far Too Fast?

Putin maintains that his country has observed the terms of the U.N.’s weapons embargo to any military organization other that its own GNA, but Russian military advisors have been offering their services to the LNA with increased enthusiasm in recent months.

The relative stability of the status quo could fall apart at any moment – jeopardizing the progress that the unified National Oil Corporation (NOC) has made in recovering oil production to levels seen only in the last days of dictator Muammar Ghaddafi.

New figures from the NOC marked oil production at 700,000 barrels per day, on track to meet its 1.7 million bpd production goal for March 2018, when all oil facilities will be at full capacity. The increasing revenues are crucial for the reconstruction of the country’s major industrial areas as the Arab Spring-sparked civil war wraps up.

So far, the NOC has been able to reliably secure areas with the presence of foreign oil and gas multinationals.

“Eni and Total are working there with no problems, so the situation is improving every day in Libya and I’d like to take this opportunity as an introduction for those who have interest to work in Libya,” NOC board member Jadalla Alaokali said in an interview during the Cairo talks. “More than 45 percent of the land is still virgin, hasn’t been explored, so we still have large areas that haven’t been discovered, so the opportunity is there.”

Domestic turmoil led fellow members of OPEC to exempt Libya from the restrictive terms of a recent deal to cut output and reinvigorate oil prices. Unencumbered by the production limits endured by its rivals, Tripoli now has an opportunity to benefit from US$50+ oil prices without stalling new exploration projects.

Russia is making another major move on Libyan oil. Russia’s state-owned Rosneft just signed investment and crude oil purchasing agreements with the NOC, agreeing to invest in exploration and production.

Burgeoning Russian influence and new wealth could mean weapons contracts for Russia, which lost a few billion in arms deals after the fall of Ghaddafi. Installing Haftar in a Ghaddafi-style government would be Moscow’s surest route to recovering those upended contracts. Related: Can Canada’s ‘Gas City' Replicate Qatar’s Success?

Observers should take new developments in the North African state with a grain of salt. An assassination attempt on Fayes al-Sarraj prime minister of the GNA -- like the one that happened just this morning in Tripoli – could cause the political arena to erupt with a vengeance.

"The prime minister’s convoy came under fire as it passed by a government complex held by supporters of the national salvation government [led by Khalifa al-Ghawiel]," a member of the presidential council told Anadolu Agency anonymously. Al-Ghawiel, who disbanded the GNA’s rival General National Congress (GNC) in April, only to revolt and reestablish it in October, would have gained notoriety had the attack succeeded.

In 2015, the U.N. established the unity GNA to end the conflict between Haftar’s HoR and the GNC. The unwelcome return of the latter, and its latest attempt at a political knockout, guarantees forceful clashes between militias affiliated with both groups.

At any point, all momentum could be thwarted by a strategic explosion or murder, ending fragile truces. And the stakes only grow higher as Libyan oil wealth returns.

By Zainab Calcuttawala for Oilprice.com

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