With US, and now Canadian and Korean warships all converging on Libya, the developed world is certainly sending Tripoli a very loud and clear message. And with Libyan defense forces obviously a joke in comparison to the offensive being slowly mounted against it, one wonders what if any defense tactic the Northern Africa country has. The answer: oil. From Reuters: "Libya hopes tensions with Western countries over a popular revolt in the country do not reach the stage where the Tripoli government considers oil as a political weapon, a top oil official said on Wednesday. Shokri Ghanem, chairman of Libya's National Oil Corporation, also told Reuters in an interview that Libya's troubles had created the country's worst energy crisis in decades and Libyan supply disruptions to world markets could push oil above $130 a barrel in the next month if troubles persist." Yet as Saudi Arabia has used every chance to make it all too public, the kingdom supposedly has more than enough capacity to pick up the slack, should war break out and Libya go ahead and set fire to its wells. So it is surprising that the Arab League roundly rejected "foreign intervention" in Libya, putting US offensive forces in a tight bind, should it decided to proceed with an attack.
More on the realization that Libya is openly considering its oil reserves as its last true natural defensive trump card:
Oil markets will be watching closely to see if the departure of oil workers fearful of violence in Libya will further cut output in the world's 12th largest exporter.
Ghanem said crude oil output had dropped to 700,000-750,000 barrels per day after the flight of most of the foreign workers who make up about 10 percent of the Libyan energy industry's labour forces, including some in key positions. Before the crisis Libya pumped 1.6 million bpd.
Asked if Libya would resort to using oil as leverage, or a political weapon if the United States and other Western countries stepped up pressure on Libya over its handling of the revolt, Ghanem said:
"I hope we are not reaching any stage where we are talking about using this (oil) as a political force," he said.
"We hope that all things will be solved before we go into any complications of any matters."
As for how arabs view a potential incursion into Libya...
he Libya crisis is an internal Arab affair and there should be no foreign intervention, the Iraqi foreign minister told the opening session of an Arab League meeting in Cairo Wednesday.
Iraqi Foreign Minister Hoshiyar Zebari, delivering the opening remarks at the Arab foreign ministers meeting in Cairo, said the Libyan leadership must make brave decisions to stop violence and respect the "legitimate rights" of the people.
He called on the ministers to stand in silence in memory of Arabs killed in a wave of pro-reform protests that have swept the leaders of Egypt and Tunisia from power and are challenging the rule of others in Bahrain, Libya and Yemen.
He said the Arabs confirmed their "desire for no foreign intervention" in Libya.
Wednesday's meeting is expected to reiterate the body's condemnation of Gaddafi, but the draft resolution will also stress "the unity and integrity of Libyan soil."
And after all this, one would think there would be some flight to safety to the dollar.... and one would be wrong. The DXY has traded to the lowest levels in the overnight session, as the EUR jumps, and the USDCHF continues probing all time lows, as the dollar continues to wallow in its irrelevance. Additionally, silver which just hit $34.80, is also not suffering from any flight to safety speculation.