By Ulf Laessing and Ayman al-Warfalli
BERLIN/BENGHAZI, Libya (Reuters) - Forces loyal to eastern commander Khalifa Haftar have shut off production at all Libya's major oil fields, an escalation that threatened to strangle the country's finances and overshadowed an international peace summit in Berlin on Sunday.
Haftar, whose self-styled Libyan National Army (LNA) is bearing down on the capital Tripoli with the backing of Egypt, the United Arab Emirates, Russian mercenaries and African troops, attended the one-day summit in Berlin despite having abandoned talks over a truce last week.
Turkey has rushed troops to Tripoli to help an internationally recognized government resist Haftar's assault. Up to 2,000 fighters from Syria's civil war have also joined the battle, a U.N. official said on Saturday.
Libya has had no stable central authority since dictator Muammar Gaddafi was overthrown by NATO-backed rebels in 2011. For more than five years it has had two rival governments in the east and the west, with streets controlled by armed groups.
Haftar, the east's most powerful figure, has won backing from a range of foreign allies for an assault to capture Tripoli in the west, while Turkish support for Tripoli's effort to repel him has turned the conflict into a proxy war. More than 150,000 people have been displaced by fighting for the capital.
Haftar quit a Turkish-Russian summit a week ago and escalated the conflict on Friday when eastern oil ports were shut down. Libya's National Oil Corporation (NOC) said the shutdown was directly ordered by Haftar's forces and would cut oil production by 800,000 barrels a day.
On Sunday, as international leaders were gathering in the German capital, the NOC said the major southwestern fields of El Sharara and El Feel were closing after forces loyal to Haftar shut a pipeline.
Any lasting closure could hit Tripoli hard since the government relies on oil revenues to fund its budget.
"We call on all parties concerned to redouble their efforts for a sustained suspension of hostilities, de-escalation and a permanent ceasefire," said a draft of a communique to be discussed at the summit, reviewed in advance by Reuters.
Diplomats said a joint military commission would monitor the truce, but details were unclear. The draft did not say whether the LNA needed to pull back, stating only: "We call for the redeployment of heavy weapons, artillery and aerial vehicles and their cantonment."
If the LNA did not pull back, then Haftar would book a huge territorial gain from his main power base in Benghazi, some 1,000 km away from Tripoli.
A call for a ceasefire from Russia and Turkey helped reduce fighting a week ago, Russian President Vladimir Putin said ahead of a meeting with Turkish counterpart Tayyip Erdogan on the sidelines of the conference.
"We don't lose hope that dialogue will continue and the conflict will be solved," Putin said.
UNWILLING TO LAY DOWN ARMS
Italian Foreign Minister Luigi Di Maio called the summit a "point of departure" for achieving a ceasefire and blocking a flow of arms into Libya that has accelerated with Haftar's offensive.
Italy, the former colonial power, has a particular interest in Libyan security as the main destination of hundreds of thousands of African migrants sent across the Mediterranean by smugglers until a sharp downturn in flows in 2017.
But since the NATO bombing campaign that helped overthrow Gaddafi, Western countries have stepped back from playing a decisive role in Libya, allowing Russia, Turkey and Arab states to take the lead as outside powers with the most clout.
While the focus is on creating a ceasefire so that talks can restart, diplomats are worried that both sides would use any lull in fighting to re-supply their frontlines.
"Both sides and their backers are not willing to lay down arms," said a Western diplomat.
The draft communique calls on all parties to recognize the NOC - which says it is neutral and deals with all parties in Libya's conflict - as sole entity authorized to sell Libyan crude, and urges them to refrain from attacking oil facilities.
U.S. Secretary of States Mike Pompeo and European and Arab leaders also attended the summit, and Haftar's forces published pictures of him meeting German Chancellor Angela Merkel and French President Emmanuel Macron. The UAE sent its foreign minister.
Leaders will not attempt to broker a power-sharing agreement between Haftar and the internationally recognized prime minister, Fayez al-Serraj.
Both Serraj and Haftar met Merkel on different occasions. Serraj could be also seen hugging Erdogan, while Macron and Haftar were both seen smiling in pictures when they met in a corridor.
In a column published by Politico on Saturday, Erdogan called on Europe to support Turkey's work in Libya providing military support to Serraj's government.