Algeria’s narrow window for change
Oil and gas have long powered Algeria’s stability. President Tebboune’s New Algeria seeks bold diversification, but success may remain elusive.
In a nutshell
- Oil and gas exports sustain Algeria’s regional and European clout
- Tebboune seeks structural change amid limited political space
- Bureaucracy and weak private sector hinder investment
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Algeria’s rentier model has historically provided domestic political stability and enhanced its international influence. This system relies heavily on external revenues to sustain the state, primarily from oil and natural gas exports. While hydrocarbons continue to support the government’s legitimacy and international standing, this approach has become economically unviable and politically less effective.
Algerian President Abdelmadjid Tebboune has a narrow window of opportunity to lay the foundations for a transformation. Despite some positive signs, it remains unclear whether he will succeed.
President Tebboune’s challenge is rooted in the very origins of the Algerian state. The rentier model that emerged after independence has proven resilient precisely because it fuses hydrocarbon revenues with military-political patronage and extensive social subsidies. This historical legacy explains both the system’s stabilizing power and the repeated difficulties of moving beyond it.
From independence to the Hirak movement
Algeria gained its independence from France after a violent war of liberation that culminated in July 1962. The military became a central pillar of the new single-party socialist state dominated by the National Liberation Front, the movement that had led the struggle for independence. Political pluralism was introduced in 1989, following widespread protests driven by economic hardship, falling oil prices and growing political discontent within a rapidly deteriorating social context.
The period of political openness was short-lived. In 1991, following the first round of parliamentary elections, in which the Islamic Salvation Front emerged victorious, the country plunged into a civil war that stretched throughout most of the 1990s. This chaotic era, often referred to as the “black decade,” was characterized by intense violence between the Algerian army and various Islamist insurgent groups.
President Abdelaziz Bouteflika’s two-decade rule from 1999 to 2019 was marked by a dual process of stabilization and consolidation. His national reconciliation policy helped end large-scale violence and restore institutional stability. However, it also further entrenched the military’s role as the ultimate political authority. This legacy shaped the government’s response to the Arab Spring. Initially insulated from the unrest, Algeria faced its own wave of mass protests with the Hirak movement in 2019.
The protests, which spread from Algiers to several other cities, directly challenged the ruling elite’s plan for President Bouteflika to serve a fifth term. Demonstrators called for a transition to a civilian, not military, state. Bouteflika, weakened by a stroke in 2013, was ultimately forced to resign in 2019 after the army invoked Article 102 of the Constitution. This allowed the Constitutional Council to declare the presidency vacant on the basis of of serious illness or incapacity. The speaker of the upper house then assumed interim powers until new elections were organized.
An exhausted model and a ‘New Algeria’
The man who succeeded Bouteflika was Abdelmadjid Tebboune, a career civilian administrator with a technocratic background. During his first presidential term, there was significant continuity: The military and intelligence services retained ultimate power, while a certain degree of political repression of civil liberties persisted. Nevertheless, President Tebboune also introduced reforms aimed at revitalizing the country’s political system and economic model.
The old system of rent redistribution contributed to stabilization during the early 2000s by providing generous social subsidies, lowering unemployment rates, improving living standards and fostering the growth of a middle class. Oil and gas revenues enabled the regime to maintain elite cohesion through a patronage network linking the military – whose spending nearly quadrupled between 2000 and 2012 – to various political parties and interest groups.
External shocks, the Hirak protests and the collapse of oil prices have since highlighted the fragility of Algeria’s economic model. Despite the energy sector’s underperformance − caused by heavy state control, bureaucratic constraints and an environment that stifles investment and innovation − Algeria still relies heavily on hydrocarbons. Oil and gas account for more than 90 percent of export income and 60 percent of budget revenues.
The lack of economic diversification and the fragility of the private sector continue to impede growth in a country where almost two-thirds of the population is under 30 and around 30 percent of its youth are unemployed.
Rising hydrocarbon prices and the reconfiguration of energy supply chains following the Russian invasion of Ukraine have given Algeria a brief but valuable opportunity to initiate structural change. President Tebboune’s concept of L’Algerie nouvelle (“New Algeria”) may lack widespread support but is a leadership transition that prioritizes pro-industrial reforms through flagship projects such as the Bled El-Hadba integrated phosphate venture.
Programs aimed at empowering the youth include investments in the still-emerging tourism sector, which holds substantial potential. There’s also a commitment to enhancing the country’s legal and regulatory framework, particularly with the introduction of a new investment law.
Voting with their feet
Migration plays a crucial role in shaping Algeria’s growth and stability, as well as its standing on both regional and international fronts. It is also a source of friction with countries to the north as Algeria functions as both a place of origin and a transit hub for diverse migration flows, spanning regional and intercontinental routes. Hundreds of thousands of Algerians themselves have moved abroad, mainly to Europe. Current estimates suggest that the Algerian diaspora comprises between 5 and 7 million people, with the largest community residing in France.
Every year, thousands of Algerians, most of them young and educated, attempt to leave the country, either through legal channels or irregular means, in search of better opportunities. For the authorities, these flows present both challenges and benefits. They signal widespread frustration and a brain drain that hampers development and innovation. At the same time, remittances ease economic pressure and reduce the political volatility of a large, underemployed young urban population.
Algeria also serves as a key route for sub-Saharan migration to Europe. Its expansive southern borders and northern coastline along the Mediterranean Sea make it a crucial route for migrants traveling from Mali, Niger and other regions of West Africa to Europe. This situation has also increased Algeria’s leverage over southern European countries, which struggle to contain illegal migration into the continent.
Strategic realignment abroad
President Tebboune is attempting to reshape Algeria’s international positioning as it faces growing external challenges. The deteriorating security situation in the Sahel has heightened security risks for Algeria along its southern border, making it vulnerable to infiltration attempts, smuggling networks and cross-border militant movements. Mr. Tebboune’s presidency has also been characterized by rising tensions between Algiers and Rabat, particularly following the 2021 diplomatic break between the two countries. This rupture was prompted by Algeria’s decision not to renew the transit agreement for the Maghreb-Europe Gas Pipeline.
The main point of contention between Algeria and Morocco is the status of Western Sahara. Algeria backs the Polisario Front’s claims for full Sahrawi independence, while Morocco, with growing international acceptance, has established control over the territory. After the pipeline shutdown, Algeria lost export flexibility; for instance, Spain reduced its share of Algerian gas imports by half.
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Algeria is recalibrating its foreign policy in response to the rise of multipolarity, embracing a strategy of strategic ambiguity. It maintains strong ties with Russia (historically an ally) and China while also strengthening its partnerships with the United States. In addition, Algiers is reaching out to middle powers such as Turkiye and Gulf nations and working to foster closer relations with European countries, particularly those across the Mediterranean, through economic diplomacy.
Energy security and migration are two of the European Union’s most pressing challenges, making Algeria a highly relevant partner for European countries. Following Spain’s shift in position regarding Western Sahara, Algeria responded by sharply downgrading political relations and expressing strong diplomatic displeasure, including suspending certain bilateral commitments. In contrast to its strained relationship with Madrid, Algiers has notably strengthened its ties with Rome in recent years. This includes enhanced energy cooperation through increased gas exports, infrastructure projects and strategic partnerships, as Italy seeks to diversify its energy sources.
Relations with France are strategically important but remain structurally tense due to the legacies of the colonial period and the challenges created by the presence of a large Algerian diaspora there. A notable example is the ongoing debate over visa policies for Algerian citizens.
Scenarios
Algeria’s future will be shaped by a structural paradox: While hydrocarbons provide stability at home and enhance the country’s leverage abroad, they also confine it to a vulnerable, inflexible economic model that looks set to persist.
Most likely: Algeria clings to its hydrocarbon-dependent status
In the most likely scenario, efforts at economic diversification and structural changes to state administration continue to lack public support, and Algeria adopts a status quo adaptation strategy, where hydrocarbons remain the backbone of both domestic legitimacy and foreign policy influence. Its gas exports continue to bolster its international standing, especially in Europe. The country’s international stance will still be shaped more by pragmatism than by ideology, visions of a better future or historical connections.
This scenario provides some internal stabilization. However, when combined with ongoing outward migration, it also reduces the urgency for major structural reforms to address economic inefficiencies, including excessive bureaucratization and a subsidy-based economic policy.
Less likely: Social disruption and political transition
In a less likely yet still possible scenario, Algeria could face another cycle of social upheaval in the medium term, driven by persistent economic dissatisfaction as the system of rent redistribution collapses, leading to a tumultuous political transition.
This scenario may arise from changes in European energy policy or further escalation of violence and instability in the Sahel, necessitating increased defense spending in the context of a fragmented Maghreb.
In this situation, there would not only be a change in leadership but also a reshuffling of the elite. This scenario could further destabilize the Sahel and pose major concerns for European countries along the Mediterranean, as it would likely increase migration pressure.
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