A tanker smuggling $2 million worth of marine gas oil from Libya was stopped in Albanian waters, exposing a $5 billion fuel-smuggling problem. The fuel, originating from Russia, evades European sanctions. The podcast investigates Libya's oil reserves, fuel subsidies, and fuel smuggling, as well as the impact of Russia's oil market shift and the challenges of resolving the subsidy program.
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Quick takeaways
Up to 40% of fuel imported to Libya under a subsidy program in 2022 is being smuggled out, amounting to $5 billion in fuel smuggling.
Russian fuel exports to Libya have surged over 10-fold, making Russia the top exporter of refined petroleum products to the country, which then makes its way into European countries that have imposed sanctions on Russian fuel.
Deep dives
Fuel smuggling and the $5 billion trade
Fuel smuggling in Libya has become a widespread problem, exacerbated by a crude-for-fuel swap program introduced in 2021. An investigation into the smuggling of refined fuel reveals that up to 40% of fuel in the subsidy program is being smuggled, amounting to $5 billion in 2022. The program, although legal, evades scrutiny from the central bank and other government institutions. This trade in smuggled fuel, much of it sourced from Russia, poses challenges for Libya's economy and raises questions about where the fuel is going.
Libya's oil industry and fuel subsidies
Libya, home to Africa's largest oil reserves, relies heavily on oil exports for revenue. However, the country lacks the capacity to refine its crude oil and relies on imported refined fuel. Decades-old fuel subsidies, including energy subsidies, have artificially kept fuel prices low in Libya, making it cheaper than water. Importantly, the introduction of a crude-for-fuel swap program has further increased the availability of cheap fuel in Libya, contributing to fuel smuggling.
Russian oil and fuel imports into Libya
Since Russia's invasion of Ukraine in 2022, Western countries have imposed sanctions on Russian oil and fuel products. As a result, Russia has turned to Libya as a buyer for its oil and fuel, as there are no sanctions on Russian products in the country. Russian fuel exports to Libya have surged over 10-fold, making Russia the top exporter of refined petroleum products to Libya. This has led to a significant increase in smuggled Russian fuel making its way into European countries that have imposed sanctions on Russian fuel, using ships like the Queen Majeta.
In September 2022, a tanker called the Queen Majeda was stopped by authorities in Albanian waters, stuffed to the gills with $2 million worth of marine gas oil. The ship was coming from Libya’s port of Benghazi. And according to the Albanian authorities, the oil they were carrying was being smuggled out of the country illegally.
The Queen Majeda was just the tip of the iceberg of Libya’s $5 billion fuel-smuggling problem, Bloomberg’s senior global business reporter K. Oanh Ha discovered. She learned from the head of Libya's audit bureau that as much as 40% of the fuel imported to Libya under a subsidy program in 2022 was smuggled out. And by tracking shipping data, Ha found that a lot of the fuel exiting through illicit trade originally came from Russia. The fuel then made its way from Libya into European countries that have banned Russian fuel imports.
In today’s episode, Ha unravels the mystery of the Queen Majeda – and reveals how Russian fuel flows through Libya to dodge European sanctions.