Western powers say Libya risks bankruptcy as oil price falls

The United States and five of its European allies on Saturday warned that Libya could face bankruptcy if its oil output and prices on international markets continue to fall.

In a statement voicing alarm at the deteriorating security situation in the conflict-wracked North African state, the allies also warned that Libya was on the brink of economic implosion because of a collapse in its production and the sliding value of crude.

“We remain deeply concerned about the economic impact of the political and security crisis on Libya’s future prosperity,” the joint statement read.

“In light of low oil production and prices, Libya faces a budget deficit that has the potential to consume all of its financial assets if the situation does not stabilize.”

The joint statement was issued by Britain, France, Germany, Italy, Spain and the United States.

It was published in the wake of a deadly February 3 attack on an oil field partly owned by France’s Total in which at least 11 workers died, most of them after having their throats slit.

The statement added: “We share the U.N.’s assessment that these attacks constituted a major break in the public pledges made by the main commanders to refrain from actions that could harm the political process. There can be no military solution to Libya’s problems.”

The allies urged the warring factions in Libya to agree a ceasefire and a national unity government through the U.N.-led talks.

“The only people who ultimately benefit from continued fighting over Libya’s oil terminals and cities are terrorists. We are concerned by the growing presence of terrorist organizations in Libya, and by the attacks on the Corinthia last week and on the Mabrook oil field earlier this week.”

Libya’s oil output has collapsed since an Islamist-backed militia alliance launched an offensive in December to try to capture coastal oil export terminals from forces loyal to the internationally recognized government. Global oil prices rallied this week having fallen 60 percent in six months.