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By Suleiman Al-Khalidi
TRIPOLI (Reuters) - No end is in sight to the worst disruption to Libya's oil industry since the civil war in 2011 as armed groups, security guards and oil workers with tribal loyalties shut down pipelines and oil ports across the country.
Central state power is already tenuous and separatist groups are exploiting the stoppages, but the government risks bloody clashes with tribal militias if it sends ill-equipped nascent army units to capture oil terminals held by armed groups.
"These militias are intoxicated with power," said a senior Libyan official, adding that Prime Minister Ali Zeidan's strategy was to appease oil workers and apply tribal mediation with caveats and incentives to end the standoff.
Zeidan, accused of allowing corruption to flourish, can ill afford to prolong a crisis that the government says has already cost more than $2 billion, threatening Libya's healthy foreign currency reserves, power supply and remnants of law and order.
Libya's oil production has fallen to just over 10 percent of capacity due to a month-long disruption by armed security guards who shut the main export ports in the east and center over pay demands.
In the past week the strikes have spread to the western coastal ports and armed groups have also closed taps on pipelines from major oil fields, threatening the major north African oil producer with economic paralysis.
"It's a tribal war to terminate the political process. They want a body that represents the tribes," Noman Benotman, president of Quilliam, a counter-terrorism think tank, said. "Practically the government is dead, technically it is still there."
"DECLARATION OF WAR"
Calls for federal rule have become stronger since Gaddafi's overthrow in 2011, fuelled by complaints in the east that it has not been given a fair share of Libya's wealth, and the weakness of the central government.
Any military move by Tripoli to deploy troops to retake control of the port terminals would be "considered a declaration of war", federalist Ibrahim al Jathran told cheering crowds gathered in the eastern coastal town of Ajdabiyah on Monday.
Jathran, ousted this month as chief of the Petroleum Facilities Guards in the eastern region for leading strikers, is head of a self-governing political council announced in the oil town of Ras Lanuf on August 17.
The federalists say they are not separatists and only want a bigger role and better distribution of wealth.
Most of Libya's oil is in the east, separated from the more populous west by a vast desert. The federalists are consolidating control over the east, steeled by the conviction that Tripoli let them down in the fight against Gaddafi.
Karim al-Barase, a federalist activist, said federalists were planning to set up a new oil company in the east to handle the region's oil exports transparently and ensure they were not stolen "by a corrupt elite that was no better than Gaddafi".
Despite tough talk of bombing any tankers that tried to ship oil bought independently of the state, Zeidan has steered away from any mention of sending the army to capture the oil fields, saying he sought a peaceful end to the standoff.
"Those who expect the government to resolve the security situation overnight are not seeing the situation clearly," he said on Wednesday.
Industry executives give countless examples of how armed groups and tribal militias disrupt work in oil fields as far away as al-Feel and Essharara in the southwest to Sarir, Amal, and Nafoora in the southeast.
Some demands are purely monetary.
In the giant El Feel field in the deep southwest, local and foreign workers are confined to camp as militias from the desert area negotiate in the town of Zintan, around 136 km (85 miles) southwest of Tripoli, with a government-backed military council on how much they must get to end a siege of the pipelines, a Western based oil company executive said.
Bentoman said central power stretched only to Misrata in the east and Janzour in the West. "Outside, they have no power without authorization of local leaders. The southern part of Libya is the wild west. There is no presence of government."
Even on the outskirts of Tripoli, the country manager of a supplier of oil equipment said it was forced to enlist members of a militia to guard the company. "You don't need to call all the staff to get a strike, just five disgruntled people can disrupt work," he said, on condition of anonymity.
Protesters are tapping into widespread disenchantment with Libya's new rulers, saying little has materialized in improved living conditions despite the country's oil wealth.
"The first enemy is corruption with the continued corruption that state institutions are practicing," said Abu al-Qassem al-Mashay, chief researcher at a government think-tank.
Critics have accused corrupt officials of loading crude at export terminals without using meters and strikers openly accuse top officials of squandering the country's wealth.
Oil Minister Abdelbari al-Arusi denied the allegations and said the prime minister had set up a judicial commission to investigate. He blamed federalists for the oil crisis.
"They have force and by force they have prevented vessels from loading and brought tankers that are outside the state's legitimacy and wanted to transfer these funds to their private accounts," he said.
Industry executives say the tribal protesters have been emboldened by neighboring Egypt's crackdown on the Muslim Brotherhood to attack its Libyan ideological ally, the Party of Justice and Construction, the second largest bloc in parliament.
The party opposes federalism and many of the rebels accuse it of expanding their influence in the oil sector.
"Our movement has shaken the crowns of the oppressors who have exploited Libya's wealth. The Brotherhood have hijacked the state and parliament and this group has seized control of all aspects of the Libyan state. They have infiltrated the oil ministry with their armed groups," Jathran said.
Analysts say months of successive sieges of government buildings and sits-in by former anti-Gaddafi fighters claiming benefits that forced officials to cave in to their demands had encouraged workers in the oil industry to follow suit.
"At the moment you have a bunch of opponents of the government who are taking this action for different reasons, whether for jobs in a refinery or whatever... It's not concerted, but it's adding up to a major problem," said one Western diplomat.
Paralysis in government is growing with senior posts unfilled due to factional squabbling involving liberal forces aligning themselves with former Gaddafi supporters against the Justice and Construction Party.
With the crumbling authority of Zeidan's government, many fear militias allied to the Muslim Brotherhood known as the Shields will clash with tribal militias led by former Gaddafi supporters and now backed by the secularists and liberals.
"The government is in a very weak position," said Geoffrey Howard from Control Risks. "They don't have a monopoly on the use of force and it's very unlikely that they will do anytime soon ... Many armed groups have forces that are equal or stronger to the government."
(Additional reporting by Julia Payne and Emma Farge in London; editing by Philippa Fletcher)