Europe turns to Algeria for natural gas
European countries are rushing to sign cooperation agreements with Algeria, but the country’s production capacity is hampered by structural challenges.
In a nutshell
- Europe desperately needs Algeria’s natural gas
- Security and infrastructure issues could hinder cooperation
- Algiers is unlikely to cut ties with Moscow to please the West
On September 5, European Council President Charles Michel landed in Algeria, Africa’s biggest gas exporter, to reiterate the need for collaboration at an extraordinarily difficult moment for Europe’s energy supply. Mr. Michel called the North African country a “reliable, loyal and committed partner in the field of energy cooperation.”
The war in Ukraine has not only led to geopolitical shifts in Europe, Russia and Asia, but also on the African continent. Suddenly faced with an extraordinary energy crisis, European leaders began appearing in Africa’s leading oil and gas capitals. Italian Prime Minister Mario Draghi, French President Emmanuel Macron and German Chancellor Olaf Scholz have crossed the Mediterranean often in recent months. Algeria, after years of self-isolation, has been a popular destination even though on March 2, Algeria abstained in the United Nations vote on the Russian occupation of Ukraine. Algiers wants to leave the door open to all international players. In fact, both Russia and the United States came knocking in recent months.
This year, Algeria has been the focus of European attention as never before.
In July 2022, the Italian oil company Eni, American Occidental and French Total signed a $4 billion oil and gas production-sharing contract with Algeria’s state-owned Sonatrach, which would supply countries like Italy with significant volumes of natural gas. The agreement is highly important. Before the Russian occupation of Ukraine, Algiers provided the European Union with only 11 percent of its gas needs, compared to 47 percent from Russia. The African country exports about 83 percent of its gas to Europe, most of it to Italy and Spain, which in 2021, received 65 percent of Algeria’s gas exports. Still, now the country has a limited production capacity that seriously jeopardizes these expansion plans. Exploration, infrastructural development and investments are all badly needed.
One of the most relevant projects in this regard is the Trans-Saharan gas pipeline, which would significantly increase the flow of supplies to Europe. The plan was confirmed in late July by the energy ministers of Algeria, Nigeria and Niger, thus making Algeria a key country in energy trade. About 70 percent of the pipeline will pass through Algerian territory, enabling the country to earn considerable royalties that will ultimately increase Sonatrach’s investment capacity. Only a few weeks ago a new oil field was discovered in the southwest part of the country, Hassi Illatou East-1, which holds between 48 million and 150 million barrels according to preliminary estimates.
Is Algeria the only right answer?
In recent years, Algeria’s foreign relations were at times fraught with tensions over territorial claims in Western Sahara. The Polisario Front, an organization demanding self-determination from Morocco, has received military and financial support from Algiers over the last decade. In June 2022, Spain sided with Morocco in the conflict, and in retaliation, Algiers suspended its 2002 cooperation treaty with Madrid – a possible violation of EU trade laws.
This is not the first time Western countries have sided with Morocco – the Trump administration had recognized Moroccan sovereignty over the disputed area – but never had Algiers responded so aggressively. Morocco has been increasingly assertive over the issue, winning allies abroad. In response, Algeria has sought to intensify relations with historical partners such as Italy and France. In May 2022, President Abdelmadjid Tebboune traveled to Rome to sign a new agreement to make Algeria Italy’s leading energy supplier.
These recent deals have permitted Algiers to implement social security measures and subsidies for its citizens. Still, Algeria has been criticized for several human rights violations, like political repression and mistreatment of minorities – matters on which Europe will have to turn a blind eye for now. Certainly, the country’s energy wealth will ease pressure on the rulers to address long-standing issues like youth unemployment and economic reform.
Uncomfortable past, bright future
Algeria celebrated the 60th anniversary of its independence on July 5, 2022. This year, the country has been the focus of European attention as never before. Paris has tried to mend postcolonial rifts, as demonstrated by President Emmanuel Macron’s three-day trip at the end of August after five years of absence. The French president was accompanied by a delegation of 90 people including six ministers and several business leaders like the CEO of energy company ENGIE.
Although this has been a remarkable year for Algeria, the Tebboune administration – democratically elected in 2019 – does not seem up to the task, and not only in terms of international relations like the tensions with Morocco or Spain show. There is ample proof that the Algerian political class remains profoundly corrupt.
Given the ongoing terrorist threat and regional tensions with Morocco, the increase in energy revenue will likely go into the coffers of Algeria’s powerful military apparatus.
Mr. Tebboune came to power with the military’s support in the aftermath of the 2019 Hirak uprising. But many segments of the Algerian population do not support him, and dissent has to be kept under a lid. Algeria’s army is still a profoundly influential political actor.
Scenarios
Given the ongoing terrorist threat and regional tensions with Morocco, the increase in energy revenue will likely go into the coffers of Algeria’s powerful military apparatus.
The collaboration between the Algerian military and Russia will likely come into the spotlight. Although the army has tried to maintain a certain neutrality, between 2016 and 2020 Moscow sold about $4.2 billion in arms to Algiers, becoming its primary supplier. Despite the geopolitical scene having changed because of the war in Ukraine, nothing suggests that there will be a shift away from Russia in this regard.
Closer ties to Russia and democratic backsliding
This is the most likely scenario, since relations between Algiers and Moscow are decades old, and there is an equally long-standing pattern of military interference in the country’s political life. Further rapprochement with Russia would certainly be exploited to increase tensions with Morocco and the nations that support it, as has already happened with Spain. Europe will need to reassess its priorities and decide if it wants to overlook human rights violations and Algiers’ friendship with Moscow.
Algeria aligns with the West and turns away from Russia
This eventuality is very unlikely. But in this case, the country’s transition to a functioning democracy would likely accelerate. Western investment would increase, not only in infrastructure but also in the fight against corruption, which is the real endemic evil in Algeria.
Armed conflict erupts over tensions with Morocco
If this were to happen, the international community would be called in, increasing the polarization of external actors for or against Morocco, especially now that Algeria’s energy role is so important. Russia would benefit from this outcome since it would increase overall friction between Europe and North African countries. But this is an unlikely scenario in the short to medium term.
