Between Spain and Algeria, a diplomatic crisis with serious economic consequences

In the province of Castellón, on the east coast of Spain, an entrepreneur from the National Association of Frits, Glazes and Ceramic Pigments (Anffecc) laments, on condition of anonymity, the effects of the rupture, announced on June 8 by Algeria, of the treaty of friendship, good neighborliness and cooperation which has linked the two countries for twenty years: “Immediately, customs stopped distributing our products to our customers. And the transit boats no longer wanted to load the goods in the Spanish ports, not having the guarantee of being able to unload in Algeria. »

Algiers has also decided to freeze “the bank domiciliations of foreign trade operations of products and services from and to Spain”, continues the entrepreneur: “Invoicing through another office in another country is also impossible, because any Spanish certificate of origin is automatically blocked. In our case, this means losing 20% ​​of our sales. » According to Anffecc, the severance of commercial relations has already cost the sector more than 50 million euros, including the‘Algeria was until then the second market behind Italy.

Four months after the adoption of these reprisal measures against Madrid following the decision of the government of socialist Pedro Sanchez to support the Moroccan plan on Western Sahara, the damage can already be quantified. Between June and July, the cessation of transactions between the two countries resulted in a loss of 235 million euros for the Spanish economy: exports to Algeria amounted to 66 million euros in June and barely 28 million in July, or 94 million euros over the two months, compared to 329 million in June and July 2021, according to statistics from the Spanish Ministry of Tourism, Industry and Commerce.

Overpriced airline connections

Madrid wanted to believe that the anger of Algiers, which supports the Sahrawi separatists of the Polisario Front, would be short-lived. “Algeria is a reliable partner”, has not stopped repeating the Minister of Foreign Affairs, José Manuel Albares. Alas, it is clear that the conflict is here to stay.

In an interview with the Algerian news site ASD published on October 4, the president of the Algerian-Spanish Circle of Commerce and Industry (CCIAE), Djamel Eddine Bouabdallah, confirmed that “Since June 8, there is no exchange” between the two countries “except gas and oil” and “the most penalized companies are Algerian industrial SMEs”in particular the ceramics, paper and spare parts sector, as well as “the water desalination plants, whose maintenance was carried out by Spanish companies”.

The Spanish association of veal producers, Provacuno, has also complained about the situation. “Before 2020, Algeria was our first export destination outside the European Union [UE], with nearly 20,000 tonnes sold per year. With the pandemic, the country restricted imports, and in 2021 we were only able to sell during Ramadan. The diplomatic crisis has prevented flows from recovering”underlines its director, Javier Lopez.

As with ceramics, the sector is afraid of losing market share that cannot be recovered once the crisis is over… while other countries are likely to benefit from this situation. While Spanish exports to Algeria have collapsed, French exports have also increased by 32% in the first half of 2022.

In addition, air links between the two countries have become very rare and overpriced since Air Algérie decided to no longer serve Spain and Algiers refused Iberia to resume pre-pandemic frequencies.

The gas bill could go up

For Spain, however, the most important thing is to maintain gas flows. Until November 2021, Algeria supplied it with almost half of its imports via two undersea gas pipelines: the Medgaz, between Almeria and Beni Saf, and the Maghreb-EU gas pipeline, which crosses the Strait of Gibraltar and passes through the Morocco. But in October 2021, Algiers cut the flow of the latter due to a crisis with Rabat. As a result, Algeria only supplies a quarter of the gas imported by Spain, through Medgaz and LNG carriers – a volume that has not yet been affected by the diplomatic crisis between the two countries. .

“Algeria has started up a fourth compressor on the Medgaz to increase its flow to Spain and we have asked it to continue maintenance tasks on the gas pipeline which passes through Morocco, as we hope it can at a time to return to operation. Each time, we could see that it is a serious country, underlined the Spanish Minister for Energy Transition, Teresa Ribera, during an interview with the World early September. The relationship with Algeria is a strategic and historical relationship that goes far beyond gas and which I am sure will return to normal as soon as possible. »

If deliveries have continued relatively normally in recent months, the bill, on the other hand, should increase considerably. Algeria has been renegotiating with difficulty for months with the Spanish Naturgy and the Algerian company Sonatrach the revision of the prices of the gas supply contract. Until now, the tariff applied to Spain was linked to the price of Brent. Or Algiers wants it to be now fixed on the TTF index of the Dutch market, very superior and used as a reference in the rest of Europe. If the terms of the contract are protected by a confidentiality clause, the bill, according to experts, could climb by 70% for Spain.