Leadership and Democracy LabWestern Social Science

Implications of Donald Trump’s Presidency on the Libyan Energy Sector

Team Leader: Michael Brown

Analysts: Graeme Allison, Jessie Dhillon, Kavisha Patel, Nicholas Terry, Alycia Wettlaufer,

Donald Trump’s presidency has the ability to drastically impact the international oil market, thereby having potential implications on a recovering Libyan energy sector. His volatile stance on foreign policy and trade could have a negative and destabilizing effect on Libya’s economic recovery. Donald Trump’s support for the Keystone XL Pipeline and other similar projects will reduce the long-term need for foreign oil and reduce the potential market for Libyan oil as it tries to restore post revolution production levels.

Donald Trump once heavily supported intervention in Libya. Early in 2011, before the United States of America joined the North Atlantic Treaty Organization (NATO) force to oust Gaddafi, Trump argued for American action. Despite having personal business connections with Muammar Gaddafi, he initially supported bombing Libya . Trump is on record saying, “on a humanitarian basis, immediately go into Libya, knock this guy out very quickly, very surgically, very effectively, and save the lives.” This is because Trump believes that the Islamic State of Iraq and the Levant (ISIL) has taken over oil supplies in Libya and is heavily funding themselves through it. The Libyan reaction to Donald Trump’s successful bid for the White House has been very optimistic. Factions that are friendly to the Government of National Accord (GNA) hope Trump's "anti-ISIS" stance will mean his administration continues to support the GNA. However, Donald Trump’s public stance on American intervention in Libya has flipped back and forth recently, highlighting his potential volatility on the matter. During the 2016 election cycle, he called US intervention in Libya a colossal failure.

When speaking about foreign policy, President-Elect Donald Trump has expressed a clear opinion on the role of the United States abroad. Described as an isolationist, Trump advocates for less involvement in NATO, describing member states as freeloaders, as well as advocating for stronger ties with Russia. He aims for a decreased dependence on American intervention across the world.  However, his “America First” policy is most pertinent to the Middle East and Northern Africa, notoriously unstable regions. Trump has called George W. Bush's invasion in Iraq a failure, and that is has entirely destabilized the Middle East, as well as he has spoke of how Iran is a major problem, and that he is the only one who could deal with it. Most pertinent to the Libyan energy sector is his volatility on Libya. 2011. His desire to pull out of the Middle East, fuelled by his isolationist policies, could damage what stability there is. There is a high likelihood that further destabilization will worsen the civil war that continues to drag on in Libya, destabilizing the energy sector and damaging the position of the National Oil Corporation.

The election of Donald Trump has the potential to make the bonds between Libya and the United States stronger. Trump has promised to re-engage with Libya and bring about its reconstruction. This will mean, among other things, bringing one million barrels of oil to the market per day. But, because Trump knows that ISIL has a foothold in Libya, he will try to restrict Libyan immigration into the United States. This policy may create potential tensions. Trump’s friendliness with Moscow raises the probability of renewed conflict over Libya's oil reserves. This will likely curtail rising Libyan oil production. Trump must carefully consult with, control, and corral the competing and divergent interests of the Libyan government and regional powers in order to rebuild the energy sector.     

The stated long-term energy policy of the Trump administration is to eliminate the need for foreign energy imports and to encourage the use of natural gas and other domestic sources of energy. They plan on diversifying the fuel supply for automobiles to reduce the demand for foreign oil in the American economy. These policies will lead to a reduced need for Libyan energy resources and less of an incentive for the United States to remain involved in the country’s future.

Donald Trump has expressed interest in the building of the Keystone XL pipeline from Alberta, Canada to refineries in Illinois and Texas in the United States. In May of 2016, Trump discussed the pipeline, saying, “I would absolutely approve it, 100 per cent, but I would want a better deal. I want it built, but I want a piece of the profits. That’s how we’re going to make our country rich again.” The former chief of staff of the U.S Department of Energy under George W. Bush’s administration, Joe McMonigle, believes that the Keystone XL pipeline will be prioritized by the Trump administration. The approval of the pipeline will boost the domestic oil production of the highly integrated market between Canada and the United States. Increase in domestic oil will reduce the need for foreign oil from the Organization of Petroleum Exporting Countries (OPEC), making it more difficult for the Libyans to restore production and revenues through an American market.

The Libyan energy sector will be entering a potentially vital stage of its recovery as the government looks to take back oil fields held by rebel factions and restore their lucrative revenue streams. His unpredictable future stances on many issues that are important to the health of the international oil market make it difficult to pinpoint potential reactions. From what we do know from past statements, President-Elect Donald Trump’s short-term agenda may temporarily aide in their recovery and build on their relationship. However, his long-term stance on eliminating America’s dependence on foreign oil will reduce the size of the market available to Libya and other oil producing nations.