The New York Times reports: One of the two factions battling for control of Libya took steps on Sunday to divert incoming oil revenue away from the central bank and into its own new account, a steep escalation in the contest over the country’s vast wealth.

Libya’s oil and money are the prizes that have driven much of the competition among militias and factions in the nearly four years since the overthrow of Col. Muammar el-Qaddafi, and as the fighting on the ground has slashed oil revenues, the legal and political battle for control of Libya’s assets has become overt and intense.

Over the past nine months, the many local militias that sprang up around Colonel Qaddafi have now broken into two warring coalitions, each with its own provisional government. Officials of the Central Bank of Libya, which holds the country’s roughly $90 billion in foreign reserves and receives the income of the National Oil Corporation, say they have tried to stay neutral, continuing to pay government salaries and consumer subsidies in the territory controlled by the rival governments.

But the faction that is recognized internationally as Libya’s legitimate government, now based in the eastern cities of Tobruk and Bayda, has repeatedly sought without success to exert control over those assets. On Sunday it fired the latest salvo in that battle.

That government’s prime minister, Abdullah al-Thinni, issued a directive for the National Oil Company to stop passing incoming revenue to the central bank and instead to direct those funds to its own bank account in the United Arab Emirates, a major backer of Mr. Thinni’s government and its faction.

The move could now set off a host of sweeping consequences, potentially including a breakup of the bank, a drastic rebalancing of what has appeared to be a stalemate in the day-to-day battle between the two factions or a Western intervention to seize and manage the bank’s foreign reserves.

But how the situation might play out is difficult to predict, in part because the prime minister’s directive appeared to contradict the position of the Western powers toward the status of the bank and the larger Libyan conflict. [Continue reading…]