Libya's largest oilfield and a second major one in the southwest began shutting down on Sunday after forces loyal to renegade military commander Khalifa Haftar closed a pipeline connecting them to the coast.

The escalation threatened to strangle the country's finances and overshadowed an international peace summit in Berlin on Sunday.

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Libya has been producing about 1.2 million barrels per day (bpd) of oil in recent months, and all major fields lie in areas controlled by Haftar's eastern-based Libyan National Army (LNA).

The National Oil Corporation (NOC) said guards under LNA command shut down the pipeline leading to the coastal city of Zawiya on Sunday, forcing the corporation to limit oil production at the El-Sharara and El-Feel oilfields.

Haftar - whose army is bearing down on the capital Tripoli with the backing of Egypt, the United Arab Emirates (UAE), and reportedly Russian mercenaries and African troops - attended the one-day summit in Germany despite abandoning truce talks last week.

"The situation there [eastern Libya] remains very chaotic. Four major oil terminals have been blocked by pro-Haftar protestors including armed groups and militiamen," Al Jazeera's Mahmoud Abdelwahed in Tripoli reported.

El-Shahara oilfield is the country's biggest with a production capacity of 320,000bpd, while El-Feel is second at 70,000bpd.

"If these two major oilfields are blocked, then the country is losing a majority of its production capacity given that the five major oil terminals under the control of pro-Haftar forces are currently blocked," Abdelwahed noted.

El-Sharara is operated by the NOC in a joint venture with Spain's Repsol, France's Total, Austria's OMV, and Norway's Equinor.

Oil as a weapon

The Tripoli-based NOC, which says it is neutral and deals with all parties in Libya's conflict, has warned that any shutdowns could have a lasting effect.

"The oil and gas sector is the lifeblood of the Libyan economy and the single source of income for the Libyan people," NOC Chairman Mustafa Sanalla said on Friday. "They are not cards to be played to solve political matters."

Libya has had no stable central authority since leader Muammar Gaddafi was overthrown by NATO-backed rebels in 2011. For more than five years it has had two rival governments in the east and the west, with streets controlled by armed groups.

Haftar, the east's most powerful figure, has won backing from a range of foreign allies for an assault to capture Tripoli in the west, while Turkish support for Tripoli's effort to repel him has turned the conflict into a proxy war.

Thousands of people have been killed and more than 150,000 displaced by fighting for the capital.

Lay down arms?

Haftar quit a Turkish-Russian summit a week ago and escalated the conflict on Friday when eastern oil ports were shut down.

While the focus on Sunday was to create a lasting ceasefire so talks can restart, diplomats are worried that both sides would use any lull in fighting to re-supply their front lines.

"Both sides and their backers are not willing to lay down arms," said a Western diplomat.

A draft communique calls on all parties to recognise the NOC as a sole entity authorised to sell Libyan crude, and urges them to refrain from attacking oil facilities.

US Secretary of State Mike Pompeo and European and Arab leaders also attended Sunday's summit, and Haftar's forces published pictures of him meeting German Chancellor Angela Merkel and French President Emmanuel Macron. The UAE sent its foreign minister.

Leaders will not attempt to broker a power-sharing agreement between Haftar and the internationally-recognised prime minister, Fayez al-Sarraj.

Both al-Sarraj and Haftar met Merkel on different occasions. Al-Sarraj could be seen hugging Turkish President Recep Tayyip Erdogan, while Macron and Haftar were both seen smiling in photos when they met in a corridor.