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