Algeria, ambiguous beneficiary of the war in Ukraine

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A priori, the situation is virtuous for Algeria. The surge in hydrocarbon prices due to the war in Ukraine is mechanically bailing out the coffers of a country rich in the third largest oil reserves in Africa (behind Libya and Nigeria). The breath of fresh air offered by these prospective revenues – estimated by the International Monetary Fund (IMF) at 58 billion dollars in 2022 (i.e. 54 billion euros) – is precious at a time when the regime is trying to restore its sitting after the turbulence of the Hirak protest movement, in 2019 and 2020.

In addition, the European quest for alternatives to Russian gas raises Algeria’s strategic profile on the regional scene. Increasingly courted, Algiers seeks to project itself as a partner ” reliable “, according to official rhetoric, especially with Italy, with which friendship is displayed ostentatiously. Today the source of 11% of Europe’s gas imports, Algeria is destined to expand its supplier status over time. And at the same time lie the analysts who speculated on his diplomatic isolation following the Hirak crisis and the offensives of the Moroccan rival on the Western Sahara issue.

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But appearances are deceptive. The windfall effect produced by the war in Ukraine does not detract from the acuteness of the challenges that never cease to pose themselves to a dysfunctional Algerian economy, oil income obliges. The top of the state is acutely aware of this. The Algerian President, Abdelmadjid Tebboune, had himself denounced this hegemony of hydrocarbons – source of 95% of the country’s exports and 60% of its tax revenue – as being “fatal to intelligence and the spirit of initiative”. At the end of 2018, a report by the International Crisis Group (ICG) described an Algerian model ” breathless “. In order to tear themselves away from it, calls for a “industrial diversification” have been growing for fifteen years.

An aging productive apparatus

However, the temptation to dip into hydrocarbon revenues in order to buy social peace with subsidies, to which were added the vested interests of windfall networks, got the better of these desires to explore alternatives. The downturn in oil prices from 2014 (a barrel fell from the 80-110 dollar range in 2011-2013 to 40-60 dollars in 2015-2017) had certainly revived the reflection more seriously than ever. But the rebound in international prices fueled by the war in Ukraine (a barrel was trading at 117 dollars in early June) could weaken this sense of urgency and postpone maturities again. “The risk is that the rise in prices will have a counter-productive effect on the structural reforms announced”emphasizes Rachid Mira, associate researcher at the Center for Economics at the University of Paris-Nord.

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