Gas revenues save Algeria’s finances, but it is forced to open its most closed economy in the world – today 24

Europe is actively seeking to break away from Russian gas, and this gave Algeria a strong boost with an increase in its resources, but this will not last long, according to experts, causing the country to demand measures to restructure the local economy and make more open in the years to come.

Following Russia’s invasion of Ukraine, demand for oil and gas surged and energy revenues soared, prompting Algerian authorities to spend lavishly on social welfare and take a more assertive stance externally after years of declining wealth and politics. riots with a mass protest movement.

President Abdelmadjid Tebboune announced expected increases in public sector wages, pensions and unemployment benefits, to return to the model of generous social spending that Algerians have long been accustomed to.

The government has taken a bolder stance towards European countries that have become more dependent on North African gas after the Ukraine war, such as Spain, in the context of Madrid’s position on the Moroccan Sahara issue.

“The government is no longer under the same social and political pressure that it faced in 2019 and 2020,” said a government consultant. “The (Algerian) movement is over, Covid-19 is under control and income is increasing,” he added.

The contrast is marked between the present and the recent past.

In 2019 and 2020, weekly protests rocked the ruling establishment, leading the military to topple veteran President Abdelaziz Bouteflika and other prominent figures.

The sharp drop in energy revenues and foreign exchange reserves after a slump in 2014 has reduced government spending, further fueling the turmoil.

Fears and concerns have increased with the faltering of the energy sector, the reduction of investment in oil and gas fields to a minimum, the drop in exports and the flight of talent from the state-owned company Sonatrach, whose boss has been changing every 20 months. on average. in recent decades.

But rising global oil and gas prices following Russia’s February 24 invasion of Ukraine helped stabilize the situation, filled state coffers and boosted confidence.

However, analysts say Algeria has no choice but to press ahead with potentially difficult reforms to protect its economy from future downturns in the energy market.

Tebboune promised this and moved to boost trade with some African countries, but the government’s efforts to open up one of the world’s most closed economies have made little progress so far.

“Yes, revenues are increasing,” said a former government minister. But the economy still needs reform.

Greater weight

The energy crisis in Europe not only raised prices, but increased demand for gas supplies from sources that would not be affected by the Ukraine war, giving Algeria more weight.

Supplies from Algeria cover more than a quarter of the gas demand in Spain and Italy, and Sonatrach is the third largest exporter to Europe after Russia and Norway.

Sonatrach said that oil and gas profits this year will reach $50 billion, compared to profits of $34 billion last year and $20 billion in 2020, while official statistics indicate that non-oil exports will exceed $7 billion, a record figure.

Rules encouraging foreign participation in the Algerian energy sector helped increase investment and develop new projects.

In June, Sonatrach announced a new discovery in (Hassi R’Mel), the largest gas field in the country. The new discovery adds between 100 and 340 billion cubic meters of gas condensate to reserves, with additional production expected to reach 10 million cubic meters of gas per day from November.

At the same time, an expanded agreement on massive gas supplies to Italy could serve as a reminder to European countries of the benefits of friendship with Algeria.

Spain, which depends on Algerian gas, changed its position this year to decide to support the proposal for autonomy in the Moroccan Sahara: Algeria withdrew its ambassador and cut some commercial deals. Although he has confirmed compliance with the terms of the gas supply contract, he may not show a clear amount of generosity in the scheduled price negotiations.

“There is no doubt that the gas card served Algeria well,” said a retired Algerian energy official. They are getting closer and not a day goes by without European countries calling the authorities to talk about possible sales.”

Income

Despite the heightened diplomatic leverage that has accompanied rising energy demand, Algeria is likely to continue to focus on maximizing revenue by raising prices, to appease the population after a growing outcry.

“I am happy to receive 13,000 dinars a month,” said Mona Belkacem, a 24-year-old graduate who is among the nearly one million Algerians receiving unemployment benefits after spending three years looking for work.

In a speech this month, Tebboune said he is committed to raising wages and unemployment benefits as long as there is additional income this year, adding that Algeria is fighting to “restore dignity.” State benefits and wages are expected to increase next year.

It is unclear whether financing the heavily state-dependent economic model that Algeria has relied on for decades will impede reforms aimed at increasing employment and wealth through the private sector.

In the longer term, authorities must realize that economic frustrations can provoke public unrest despite tightening security measures.

The leaders of the “Hirak” have been repeatedly detained since the demonstrations subsided and the number of participants dwindled during the pandemic, failing to achieve their ultimate goals of ridding the ruling elite and removing the army from politics.

Among them is Samir bin al-Arabi, one of the movement’s prominent figures, who was arrested twice and served a term in prison on charges including compromising the country’s security and publishing publications that harm national interests.

Ben Larbi says the movement will continue. “Now we have to find new forms of peaceful struggle for freedom of justice, freedom of the press, accountability and government transparency,” he added.