Algeria can Help the U.S. if Washington Lets It
In late 2022, several U.S. Representatives called on the U.S. State Department to impose sanctions on Algeria, claiming that a $7 billion arms deal with Russia violated the 2017 Countering America’s Adversaries Through Sanctions Act. The group’s action followed a similar initiative by Senator Marco Rubio, also in September.
Why Algeria, and why now?
Algeria is a major oil and natural gas producer that exports 85% of its gas to Europe. It is independent, doesn’t meddle in neighbors’ affairs, and is close to Russia and China. Algeria is a critic of Israel, opposed the 2003 U.S. invasion of Iraq, and the 2011 NATO intervention in Libya, decried the Abraham Accords, which recognized neighboring Morocco’s claim to Western Sahara, and maintains ties to Syria.
According to the Congressional Research Service, “Algeria has the world’s 11th- and 16th-largest proven reserves of natural gas and oil, respectively, and was the 10th-largest natural gas producer as of 2019. It is also estimated to have the world’s 3rd-largest recoverable shale gas reserves.”
Algeria has the fourth-largest economy in Africa with a 2021 GDP of $167.98 billion. Oil and gas income increased by 70% in the first half of 2022, and energy income is expected to total $50 billion by the end of 2023. The World Bank reported Algeria’s economy “expanded by 3.9% year-on-year during the first nine months of 2021, after contracting by 5.5% in 2020,” largely due to increased European gas demand. Hydrocarbons account for 95% of export revenues and about 40% of government income.
State-owned enterprises comprise over half of the formal economy, but the private sector is hoping the government stays the course on reforms to attract foreign direct investment to the non-energy sector. The government has an uphill climb as Algeria ranks 157 of 190 in the most recent World Bank ease of doing business ranking.
The plan to attract FDI to the non-energy sector is needed to cope with a rising unemployment rate and a dangerously high youth unemployment rate of almost 32%. The plan eliminates the “51/49” requirement for majority Algerian ownership of new businesses, but not for “strategic sectors” – mining, defense, transportation infrastructure, and pharmaceuticals manufacturing
The key is the government not buying social peace via increased social security payments while oil and gas prices are high, as eventually prices will drop and the angry unemployed may force a new government.
Algeria-U.S. relations got off to a slow start in the 1960s but have generally been positive. In the 1950s, the Truman and Eisenhower administrations supported France in Algeria, but President Kennedy endorsed Algerian independence.
Algeria mediated between the U.S. and Iran that resulted in the freeing of the 52 American hostages after 444 days in captivity. Algeria also supported U.S. counter-terrorism operations in the wake of 9/11.
So, why the agita about Algiers?
America’s “with us or against us” mentality doesn’t take account of past cooperation and can’t account for a nation looking after its own interests first.
Recently, Vivian Balakrishnan, Singapore’s foreign minister, speaking on behalf of ASEAN about the U.S. and China, declared, “We are not interested in dividing lines in Asia. Don’t make us choose. We will refuse to choose.” And many countries are seeing the value of belonging to independent fora. The BRICS group may soon welcome Argentina and Iran, and Egypt, Saudi Arabia, Algeria, and NATO member Turkey have expressed interest.
So, what motivates the U.S. policymakers?
They may have concerns about Russian revenue from Algeria, though a $7 billion dollar arms deal pales next to the billions Washington has handed Kyiv. Or they are promoting U.S. defense contractors to capture Algerian sales, though expecting Algiers to junk its entire Russian-supplied inventory is wishful thinking.
Algeria’s relations with Moscow go back to the 1950s when the Soviet Union supported Algeria’s war for independence and was the first to recognize the Provisional Government of the Algerian Republic.
Algeria no doubt noted that the U.S. recently threatened to cut off Saudi Arabia, its biggest weapons customer when it disagreed with its tactics in Yemen. And in 2013, Washington slowed down the delivery of helicopters to the Egyptian military government that ousted the Muslim Brotherhood government. So, in the El Mouradia Palace, they must be thinking, “If this is how the Americans treat their friends…”
The U.S. politicians may think they are defending Israel, though Algeria’s advocacy of the Palestinian cause isn’t news in Jerusalem.
At the recent Arab League summit, Algeria brokered a reconciliation deal between rival Palestinian factions Fatah and Hamas. The reconciliation may not last, and Algeria won’t offer material support, i.e., weapons, to the Palestinian fighters, so the sanctions threat may have been virtue signaling by the U.S. politicians to Israel.
Hopefully, Washington won’t alienate a country with which the European Union seeks a “long-term strategic partnership” for natural gas and electricity. And France is seeking to repair relations via economic cooperation, though China is now Algeria’s biggest trade partner. If Europe expects more energy from Algeria or elsewhere in Africa, though, it may have to pay up to finance the expansion of production or participate in the 1,500-mile Trans-Sahara Gas Pipeline that will send Nigerian gas to Europe via Algeria.
One country that will be investing in Algeria is China, and Algeria will coordinate its national development plans with China’s Belt and Road Initiative via the Five Year Plan for China-Arab Comprehensive Strategic Cooperation (2022-2026).
China is now developing Algeria’s El Hamdania Central Port, Algeria’s largest and first deep-water port. China also helped complete the 750-mile East-West Highway connecting Algeria to Morocco and Tunisia, and about 1,000 Chinese companies operate in Algeria, their way eased by the waiver of the “51/49” requirement.
It remains to be seen if the relationship with China will include port calls by China’s military or the use of Chinese private security companies, which are actively involved in securing China’s BRI investments, but the prospect will be unsettling to Washington, which will be tempted to crack down on Algiers.
Washington can inflict a lot of pain if Algeria draws close to China, but the Algerians will note that America was the prime mover behind the invasion of Iraq under false pretenses, and the attack on the Qaddafi regime in neighboring Libya, both of which destabilized the region, spurring refuges flows that then destabilized Europe.
But Europe may be an effective advocate for Algeria in Washington, if it can make the administration understand that America’s interest in secure energy for Europe is best served by an Algeria that is cordial with the U.S. but independent, advancing itself by mutually respectful relations with practical partners.