Explainer-What's behind Libya's oil shutdown

(Reuters) - Libya's latest oil shutdown has pushed up global energy prices. This explains the situation.

HOW DID WE GET HERE?

Since the 2011 NATO-backed uprising that toppled Muammar Gaddafi and thrust Libya into chaos, access to its oil wealth has become the biggest prize for all political factions and armed groups.

Both small local groups and major national ones have previously shut down oil production as a tactic to demand a bigger share of state revenue or political changes.

Libya's current political stalemate emerged from the faltering peace process that followed a split in 2014 between warring eastern and western factions that set up rival governments.

In 2020, there was a ceasefire with the collapse of an eastern assault on Tripoli and a move towards reunifying the state in the run-up to a planned election in December 2021 under Abdulhamid al-Dbeibah's interim Government of National Unity.

That effort failed leaving eastern and western factions at loggerheads again and competing over access to state energy revenues, with the latest standoff focused on control of the Central Bank of Libya (CBL).

Eastern factions, including the House of Representatives (HoR) parliament led by speaker Aguila Saleh and Libyan National Army (LNA) under commander Khalifa Haftar, oppose the Tripoli-based Presidency Council's bid to oust CBL governor Sadiq al-Kabir.

WHO IS BLOCKADING LIBYAN OIL FACILITIES?

For much of Kabir's 13-year tenure as CBL governor, eastern factions wanted to ditch him and for a while they backed an alternate governor heading a parallel central bank based in the east. But it is now they who demand he stay in place.

HoR speaker Saleh warned last week of an oil shutdown if Kabir was deposed.

On Sunday, protest groups in the oil regions, often a front in recent years for eastern authorities, said they were occupying energy fields and shutting them down.

The HoR then issued a statement to say that Libya could not produce or export any oil because of the protests.

Haftar, whose LNA remains in military control of all the areas where the shutdowns are taking place and who analysts say has developed a lucrative alliance with Kabir in recent months, has called the move to replace him illegal.

WHAT DO THEY WANT?

In short, eastern factions have one simple demand: return Kabir to his post as CBL governor.

Behind that stance is the endless tussle among rival Libyan factions for control of energy revenues.

The last major shutdown, in 2022, ended with Prime Minister Dbeibah in Tripoli replacing the veteran National Oil Corporation head Mustafa Sanallah with Farhat Bengdara, long seen as close to Haftar.

That move facilitated a tacit alliance of convenience between Dbeibah in the west and Haftar in the east, with looser controls over Libya's lucrative oil sector and fuel imports, and state money splurged in spending across the country.

When Kabir fell out with Dbeibah last year and started tightening the Government of National Unity's purse strings, the stage was set for a confrontation.

IS THERE ANY PROSPECT OF A DEAL?

Nobody looks willing to back down now.

Eastern factions are betting that by depriving the central bank of any more funds, and by making it harder for the bank to work internationally by contesting its legitimacy, the Tripoli authorities will be forced to cave in.

The central bank is the sole legal repository for Libyan oil revenues and it pays state salaries across the country. If those functions are compromised by the current crisis, Libyans will soon feel the pinch.

However, the pain will affect both sides and Tripoli authorities may think the alternative of backing down and in effect ceding any influence over the bank, the sole source of state spending, would be worse.

Meanwhile, Libya's wider political dispute shows no sign of resolution and international diplomacy to resolve it through elections has stalled.

If either side is contemplating armed action to resolve the dispute over the central bank, worse could be in store.

HOW LONG COULD AN OIL BLOCKADE LAST?

Oil blockades have become a familiar tactic in Libya's chaotic, violent politics since the 2011 ousting of Gaddafi.

However, while smaller localised shutdowns have sometimes been resolved within days, larger blockades tied to major political or military struggles have sometimes lasted months.

The longest major blockade, when Haftar stopped nearly all production in 2020 for eight months, was only resolved as part of a wider agreement when his assault on Tripoli collapsed.

(Reporting by Angus McDowall; Editing by Ros Russell)