Speaker 1: Hi, It's Sarah Holder, host of Big Take Today. We're
Speaker 1: bringing you a story that's the result of a year
Speaker 1: long investigation carried out by my colleague Juan ha It's
Speaker 1: a story about a Libyan oil tanker named the Queen Majada,
Speaker 1: a delivery that doesn't go as expected, and an investigation
Speaker 1: that has global implications.
Speaker 2: So the story really starts on September eighth.
Speaker 1: September eighth, twenty twenty two. The Queen Madata is docked
Speaker 1: in the port of Benghazi, where it's spent the last
Speaker 1: few days being loaded up with fuel.
Speaker 2: The captain himself has just been hired by the operator
Speaker 2: just a few months ago, and a lot of the
Speaker 2: crew are also new as well. What's interesting is that
Speaker 2: where they're going is Albania, and they actually have been
Speaker 2: making deliveries to Albania already. They've had two successful deliveries,
Speaker 2: you know, and they're saying, this is a third delivery
Speaker 2: to Albania. It's to the same buyer, with the same paperwork.
Speaker 2: We shouldn't have any problems.
Speaker 1: The ship leaves Libya and spends the next four days
Speaker 1: crossing the Mediterranean to get to Europe.
Speaker 2: It gets into Albania in waters close to the port
Speaker 2: of Jurists and that's when the captain says, everything becomes
Speaker 2: a big surprise.
Speaker 1: So what happens when the ship enters Albanian waters?
Speaker 2: So the ship stops in Albanian waters near Duris Port
Speaker 2: and they're waiting for instructions to discharge. The captain says
Speaker 2: he notices a small vessel come toward the Queen Majeda.
Speaker 2: It turns out the small vessel is actually an Albanian
Speaker 2: Coast Guard patrol boat and an officer of the Coast
Speaker 2: Guard officer comes on board. The captain of the Queen
Speaker 2: of Jeda says, you know, I didn't think anything was wrong.
Speaker 2: I served him tea as he looked through the paperwork,
Speaker 2: and he even said, you know, the officer told me, oh,
Speaker 2: don't worry, this is routine, nothing, nothing big. But then
Speaker 2: about an hour later, the captain sees this bigger Coast
Speaker 2: Guard ship come alongside the Queen Majeda, and that's what
Speaker 2: he knows. Something was very wrong.
Speaker 1: So what did the bigger Coastguard ship have to say?
Speaker 2: The bigger Coast Guard ship then comes alongside the Queen
Speaker 2: of Jeda and the investigators jump on board. And they
Speaker 2: find a ship that's been loaded with fuel to the max. Right,
Speaker 2: they found that the ship's ballast tank, which is normally
Speaker 2: filled with water to keep it stable, has been loaded
Speaker 2: with thousands of leaders of fuel. And the ship is
Speaker 2: carrying paperwork that says it was carrying fuel from Libya
Speaker 2: from a Libyan authority called the break Up Petroleum Marketing
Speaker 2: Company that's an arm of the country's state owned National
Speaker 2: Oil Corporation. But the problem is that that paperwork, as
Speaker 2: our reporting showed, is fake.
Speaker 1: The arrest of the Queen Magata for alleged fuel smuggling
Speaker 1: would open so many questions.
Speaker 2: For one, how big was this problem, Where was a
Speaker 2: fuel coming from? What got it there? It was really a.
Speaker 1: Mystery, a mystery that would bring one around the world
Speaker 1: from her home base in Hong Kong to Albania and Tunisia.
Speaker 1: And it would follow how the capture of a Libyan
Speaker 1: tanker in albai Waters opened a window on a five
Speaker 1: billion dollar trade in smuggled fuel, much of it coming
Speaker 1: from Russia around sanctions and into Europe. I'm Sarah Holder,
Speaker 1: and this is big take from Bloomberg News. Before we
Speaker 1: get into the rest of the story, it's helpful to
Speaker 1: start with a primer on oil and gas in Libya.
Speaker 2: So Libya is home to Africa's biggest reserve of oil,
Speaker 2: So they've got all of this unprocessed crude that can
Speaker 2: generate billions of dollars. And in fact, the oil industry
Speaker 2: is the main revenue generator for Libya, and it's a
Speaker 2: big oil contributor to the region of course to the
Speaker 2: global market as well.
Speaker 1: Even though Libya has these huge oil reserves, what it
Speaker 1: doesn't have is the capacity to refine it all and
Speaker 1: turn it into products like gas and diesel for cars,
Speaker 1: trucks and boats. So for decades the country has largely
Speaker 1: sold its crude oil abroad and used the proceeds to
Speaker 1: import refined fuel.
Speaker 2: It's interesting in Libya is that you know, since Momarket
Speaker 2: Kadaffi took over Libya in nineteen sixty nine after a
Speaker 2: coup in which he deposed the king, there was a
Speaker 2: period of turbulence and violence and political instability, and there
Speaker 2: was a lot of repression and a lot of control.
Speaker 2: The population was very unhappy, and as a way to
Speaker 2: make the populace more happy and less discontent, he then
Speaker 2: of course offered all of these subsidies, including energy subsidies
Speaker 2: and food subsidies, those subsidies that happened in the nineteen seventies,
Speaker 2: and those subsidies are still in place today.
Speaker 1: And how cheap is the gas in Libya right now?
Speaker 2: Gasoline is so cheap in Libya that it actually is
Speaker 2: cheaper than water. So you know, a leader of fuel
Speaker 2: is actually cheaper than a leader of water. I mean,
Speaker 2: that's that's how crazy it is. And in the end
Speaker 2: they're paying basically pennies. It's essentially three cents for a
Speaker 2: leader fuel if you look at, of course the neighbors
Speaker 2: into Europe. I mean in Europe people are paying two
Speaker 2: dollars a lead at the pumps. Obviously there's a big
Speaker 2: price differential there. And because of that, it's a market
Speaker 2: that's also ripe for fuel smuggling as well.
Speaker 1: Through her reporting, Lan says she learned that fuel smuggling
Speaker 1: has been going on for decades in Libya, but in
Speaker 1: twenty twenty one the government there started a program that
Speaker 1: has made the problem worse.
Speaker 2: So in twenty twenty one, the government stalls on improving
Speaker 2: a national budget and there isn't money allocated for the
Speaker 2: national oil Corporation to import fuel for the country. So
Speaker 2: the then chairman of the National Oil Company, Mustafa Snala,
Speaker 2: comes up with a program. It's essentially a crude for
Speaker 2: fuel swap program in which Libya's unprocessed crude oil is
Speaker 2: sold to these foreign energy companies and it's exchange for
Speaker 2: refined fuel. So the whole point of that program was
Speaker 2: to give the National Oil Corporation the ability to import
Speaker 2: fuel without having to use hard current see cash to
Speaker 2: pay for it, and the foreign energy companies at some
Speaker 2: point would of course settle their bill if they owed
Speaker 2: money in that transaction. So what we've been told, you
Speaker 2: know the swap program, which by the way, is legal, right,
Speaker 2: there's nothing illegal about it, and it is used in
Speaker 2: other countries. What's interesting about the swap program is it
Speaker 2: does make it easier in Libya to procure fuel without cash,
Speaker 2: but it also evades, you know, the scrutiny of the
Speaker 2: Central Bank and other government institutions.
Speaker 1: Wansa's local and foreign officials have expressed a lot of
Speaker 1: concern over the program. One of them was college chech Sheek,
Speaker 1: the head of the Libyan Audit Bureau.
Speaker 2: He was one of the few officials who actually welcomed
Speaker 2: us and really wanted to talk about fuel smuggling. Though
Speaker 2: everyone on the ground knows that fuel smuggling is a
Speaker 2: huge problem, no one really wants to talk about it
Speaker 2: and really be accountable for it. So College Checkshek actually
Speaker 2: met us in Tunisia. He flew in with three assistants
Speaker 2: and he had all this paperwork and he really wanted
Speaker 2: to share the problem of fuel smuggling in Libya. And
Speaker 2: I think for him, he says that he really wants
Speaker 2: it to stop because he sees it as a huge
Speaker 2: sap on Libyan's resources. So sex Shek told us that
Speaker 2: as much as forty percent of fuel in the subsidy
Speaker 2: program is being smuggled, and you know, by those calculations,
Speaker 2: that's about five billion dollars in twenty twenty two. I mean,
Speaker 2: that's a huge, huge number for country like Libya.
Speaker 1: One, says Schechhek pointed to the implementation of the CRUD
Speaker 1: for Fuel swap program as a catalyst that's taken the
Speaker 1: country's fuel importing to a new level.
Speaker 2: Once the crewed first swap program starts in twenty twenty one,
Speaker 2: the fuel subsidy program just explodes and the audit Bureau
Speaker 2: says that the fuel program jumped by more than seventy
Speaker 2: percent to the equivalent of twelve point eight billion dollars
Speaker 2: in twenty twenty two. That's sixty two billion dinars. That's
Speaker 2: a huge jump from twenty twenty one, and you know,
Speaker 2: to put it in perspective, that's almost half the national budget.
Speaker 1: This has gone on at a time when the World
Speaker 1: Bank says Libya's economy has actually contracted. So if the
Speaker 1: economy wasn't growing and that fuel wasn't being burned inside
Speaker 1: the country, why was the country importing so much more
Speaker 1: fuel and where was it going? That's after the break,
Speaker 1: We're back before the break. Wanha was telling us about
Speaker 1: her conversation with the head of the Libyan Audit Bureau
Speaker 1: and how long time fuel subsidies and the introduction of
Speaker 1: a crude for fuel swap program have made fuel much
Speaker 1: much cheaper in Libya than in nearby countries.
Speaker 2: So fuel smuggling has been an entrenched problem in Libya.
Speaker 2: In previous years, there was a lot of fuel that
Speaker 2: was being smuggled inland in trucks to the neighboring countries.
Speaker 2: There was a period of time where there was also
Speaker 2: fuel being smuggled by sea.
Speaker 1: And then in February of twenty twenty two, Russia invades Ukraine.
Speaker 2: And it causes this huge shift in the global market
Speaker 2: for oil and refined fuel products. Right Western countries of
Speaker 2: course respond by imposing sanctions on Russian oil and fuel
Speaker 2: products because they want to thwart Moscow's ability to raise
Speaker 2: funds for the war. The problem for Russia, of course,
Speaker 2: is that it's now lost access to the United Nations
Speaker 2: countries and the EU had been the biggest market for
Speaker 2: Russia's hydrocarbons. So now it's having to basically look elsewhere
Speaker 2: to sell its oil and fuel products. So it's looking
Speaker 2: to the Middle East, it's looking to Asia.
Speaker 1: And Russia found an interested buyer in Libya.
Speaker 2: Because Libya doesn't have any sanctions against Russian oil or
Speaker 2: fuel products, and so there's no reason why Russian oil
Speaker 2: and fuel cannot come to.
Speaker 1: Libya, and it really has come to Libya. Since the
Speaker 1: invasion of Ukraine, Russian fuel exports have served more than tenfold.
Speaker 2: I mean it's big numbers. I mean it's two point
Speaker 2: five million tons in twenty twenty three from just two
Speaker 2: hundred and sixty thousand tons the previous year, and that
Speaker 2: makes Russia now that top exporter of all refined petroleum
Speaker 2: products to Libya, and it took edged out Greece and
Speaker 2: it counts for about twenty eight percent of Libya's total supply.
Speaker 2: What's really startling is that that number was actually just
Speaker 2: four percent in twenty twenty one. What we're finding out
Speaker 2: is that the oil and fuel that's coming from Russia
Speaker 2: doesn't stop there in Libya. We also know from the
Speaker 2: paperwork that Libya then is exporting diesel gas, oil gasoline
Speaker 2: two countries in Europe that have imposed sanctions on Russian fuel,
Speaker 2: countries like Spain and Italy, France, Belgium, these are all
Speaker 2: places that don't accept Russian fuel Russian oil, but because
Speaker 2: it's coming from Libya, it's finding a loophole to get
Speaker 2: into those countries.
Speaker 1: And it's moving on ships, ships like the Queen Majata.
Speaker 1: After the Queen Megata was detained in September twenty twenty two,
Speaker 1: the crew spent six months in an Albanian jail and
Speaker 1: they've since been on house arrest on the ship.
Speaker 2: The crew this week actually were charged with trading and
Speaker 2: transporting smuggled goods, and the prosecutors there asked for a
Speaker 2: five year prison sentence.
Speaker 1: And what about the owner of the ship. Has he
Speaker 1: been charged with anything.
Speaker 2: At this point Nuri Eldawadi, the Libyan businessman who owns
Speaker 2: the ship, has not been charged.
Speaker 1: So how is the head of the National Oil Corporation
Speaker 1: responding to the investigation.
Speaker 2: So Farhat Bengdara is the chairman of the National Oil
Speaker 2: Corporation and he said, you know an email to me
Speaker 2: that fuel smuggling is a huge problem, but that he
Speaker 2: couldn't provide an estimate for the scale or put a
Speaker 2: rough dollar amount to what's being smuggled. You've also got
Speaker 2: the prime minister, Prime Minister de Beta in Libya saying
Speaker 2: that he his administration really wants to look at lifting
Speaker 2: and ending the fuel subsidies. And he's right now pulling
Speaker 2: Libyans on a proposal that would end the subsidy program
Speaker 2: and instead give Libyans a lump sum amount or cupon
Speaker 2: of some sort that they can use to buy fuel.
Speaker 2: So the question is, how is that going to resolve itself?
Speaker 2: Is their political will to really end the subsidy program?
Speaker 2: And how would you meet legitimate need of poor people
Speaker 2: in Libya who do need access to cheaper fuel if
Speaker 2: you end the subsidy program. It's a hard, difficult problem,
Speaker 2: and our sources say it's probably not likely going to
Speaker 2: be resolved anytime soon.
Speaker 1: Thanks for listening to Big Take from Bloomberg News. I'm
Speaker 1: Sarah Holder. This episode was produced by David Fox. It
Speaker 1: was edited by Nicole Beemsterbor and Robert Friedman. It was
Speaker 1: mixed by Alex Sugiura and Blake Maples. It was fact
Speaker 1: checked by Alex Sugiura. Our senior producers are Naomi Shaven
Speaker 1: and Jilda de Carly. We get editorial direction from Elizabeth Ponso.
Speaker 1: Nicold beamster Borg is our executive producer. Sage Bauman is
Speaker 1: Bloomberg's head of Podcasts. Thanks for tuning in. We'll be
Speaker 1: back tomorrow.