Europe Tackling Libyan Oil Shortage, Euro Debt, Envoy Says

Europe isn’t worried about the loss of Libyan oil supplies or Libyan leader Muammar Qaddafi’s threat to cut off contracts with Western energy companies, the European Union’s envoy to Washington said.

“I am told that there is not, for the moment, a problem in terms of oil supply” caused by the drop in Libya’s oil exports, Joao Vale de Almeida, the EU’s ambassador to the U.S., said in an interview yesterday at Bloomberg’s Washington bureau.

“The market is sufficiently liquid to allow us to look for other suppliers,” he said.

Before the crisis, Libya was Africa’s third-largest oil producer after Nigeria and Angola, pumping 1.6 million barrels a day, according to Bloomberg estimates, or 1.8 percent of world oil supply.

While Libya sells most of its crude and fuel across the Mediterranean to Europe, exports have fallen to a trickle and may be halted for “many months,” because of damage to oil facilities and international sanctions on Libya prompted by Qaddafi’s military assault on opponents, the International Energy Agency said March 15.

Eni SpA, Italy’s largest oil company, France’s Total SA and Spain’s Repsol YPF SA are among European companies that have evacuated their staffs and scaled down their production in the North African state, the IEA said. Austria, Ireland and Italy are the European countries most reliant on Libyan crude imports, which make up more than 20 percent of each country’s purchases, the organization said.

Qaddafi ‘Lost Trust’

Qaddafi declared on state-run television March 15 he had “lost trust” in Western nations and companies and would grant future oil contracts only to China, India and Russia. Germany, whose leaders have publicly opposed a military intervention in Libya, has acted differently from other western states, Qaddafi said, and German companies might still be allowed to invest or get contracts.

Critics, including European Parliamentarians yesterday in Brussels, have blasted the 27-nation EU for indecisiveness over how to respond to the violence in Libya, where pro-Qaddafi forces appear to be routing the opposition. EU member states France and the U.K. have pushed for urgent action, such as imposing a no-fly zone to block Qaddafi’s forces from bombing rebels and civilians, while Germany has opposed any path that would lead to war or the involvement of German troops.

British liberal-democrat Edward McMillan-Scott, a member of the European Parliament, complained yesterday that the EU’s mixed messages “have demonstrated our impotence.”

EU ‘Ready to Consider’

Vale de Almeida said the EU is “ready to consider” a no-fly zone, “provided there is a clear evidence of the need of that and that this is a required solution.” Group of Eight foreign ministers were unable to agree on endorsing a no-fly zone in Paris earlier this week.

Vale de Almeida, who represents the EU’s foreign policy in the U.S., defended the union’s deliberations on Libya, saying it was swift to support democratic forces, to recognize the opposition, to adopt sanctions against Qaddafi and to provide humanitarian relief. Decisions on military action, he said, must be left to the United Nations Security Council and have a “solid legal basis.”

“Are we taking longer than anybody else deciding on what to do in Libya? Has anybody taken quicker decisions?” Vale de Almeida asked. “I don’t agree with an assessment that says that Europe is taking too long. No. I would say that Europe has acted collectively, allowing some margin of expression of different positions inside the union.”

European Debt

Asked about the European debt crisis, Vale de Almeida said discussions are continuing among EU member states on whether to cut the interest rate on the loan European nations are providing to Ireland.

At a meeting of euro-area leaders in Brussels on March 11, Irish Prime Minister Enda Kenny refused to raise the country’s 12.5 percent company tax rate in return for a 1 percent interest rate cut in the EU loan.

“The discussions continue among member states about that,” Vale de Almeida said. “I don’t think anyone has put this off the table.”

Speaking a day after Portugal’s debt rating was cut by Moody’s Investors Service, Vale de Almeida, who is Portuguese and served as head of cabinet for European Commission President Jose Manuel Barroso, said EU officials “clearly supported the efforts made by Portugal” to improve its public finances when they met last week.

Interest Rates

Higher interest rates set by the European Central Bank may exacerbate the challenge for Portugal, Moody’s said, as the government in Lisbon tries to rein in the euro region’s fourth-biggest budget gap and avoid following Greece and Ireland in resorting to bailouts. Portugal is raising taxes and carrying out the deepest spending cuts in more than three decades in a battle to restore investor confidence.

“We believe Portugal is on the right track” and “will manage to reach its objectives of fiscal sustainability,” Vale de Almeida said.

Last week, EU leaders agreed to widen the scope of the euro’s rescue fund, authorize the purchase of government bonds and ease the terms of Greek bailout loans while toughening sanctions for nations that breach EU fiscal rules.

The European debt crisis has prompted a “small revolution” in the EU’s economic governance, Vale de Almeida said. Two years ago, such wide-ranging rescue measures would have been “unthinkable,” he said.

Russian Engagement

Asked about relations with Russia, Vale de Almeida said the EU’s policy has been one of “engagement, of cooperation.”

“We are condemned by geography to live together,” he said, calling Russia and the EU neighbors with “complementary” economies. “They have resources; we have the market and technology.”

The EU has supported Russia’s accession to the World Trade Organization, he said, explaining, “we want them to join a rule-based international system. We want them to enforce the rule of law in the economic field. And we see this as a good opportunity for our business.”

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