The implications for Algeria of Russia’s invasion of Ukraine are potentially profound. Washington is pressing the regime to decide between Moscow or the West. If it chooses Moscow, dire political and economic consequences are likely. If it chooses the West it is likely to get the full backing of the US and European countries such as Germany and Italy, in developing both conventional and unconventional gas reserves. As far as the latter is concerned, there are reports of at least US$100 billion being on the table over the next five years.
If this goes hand in hand with urgently needed reform of its economy and archaic bureaucratic and obsolete institutional structures, foreign investment can also be expected to flow into agriculture, agribusiness and tourism, sectors that, certainly when compared to neighbouring Morocco, are grossly under-developed.
Despite Algeria’s vituperative stance towards Spain, it is unlikely it will cut its gas supplies to the Iberian peninsula for fear of more costly international arbitration cases. We would also expect current hostility towards Spain to mellow in the not-too-distant future.
The new gas supply deal with Italy has been met with considerable scepticism over the condition of the aged Trans-Mediterranean (a.k.a. Enrico Mattei) pipeline and whether Algeria can actually supply an additional 9 BCM a year. A more positive view is that Italy’s pledge to undertake significant investments in partnership with Sonatrach — not only in E&P, but also renewable energy, and carbon capture and storage — may enable Algeria to meet its newly increased gas export commitment, although perhaps not until 2023 or even 2024.
France’s presidential election was crucially important for Algeria. If Marine Le Pen had succeeded in capturing the Elysée Palace, which fortunately she did not, the implications for Algeria and its people would have been disastrous.
Increased summer water shortages, along with rapidly declining purchasing power and the increased cost of living, is a dangerous cocktail that threatens serious social unrest, possibly as soon as Ramadan is over.This excerpt is taken from Algeria Focus, our monthly intelligence report on Algeria. Click here to receive a free sample copy.
The April 2022 issues of Algeria Focus also includes the following:
- Russia’s war in Ukraine presents Algeria with a difficult choice of direction
- Politics in brief: New transport minister; Tebboune issues presidential pardon; Khelil’s arrest warrant; Toumi gets six-year sentence; Liberté newspaper closes.
- Spain assists with extradition of Mohamed Benhalima
- Algeria closes market to Spanish beef
- Algerians take some comfort from Macron victory
- Threats from drought; strike action; and overseas opponents
Economy & Business Development
- Sonatrach shuns Western oil firms for Chinese companies
- Sonatrach announces new discoveries