August 23 2016
In response to POLITICO’s article titled “EU’s energy hopes for Algeria tied to leadership change”, and to International media on Algeria, I would propose this present contribution about security and economic relations of Algeria with the European Union, eventually contributing to an objective debate.
The wish, in the face of the seemingly long lasting fall of the price of oil, would be some smooth ‘snap of fingers’ change in the policy of the Algerian Government that sped up reforms in order to avoid destabilization of the country and potentially the region. This was confirmed to me during my conference at the invitation of the European Parliament and recently by officials of the European Union (EU). Certainly, action against terrorism of the ANP and security forces is strongly welcomed by the international community, but in the future to share expenses by a regional agreement. It was however never a question of either the EU or the USA to freeze economic cooperation with Algeria.
According to POLITICO, citing an anonymous source in the EU, Brussels would undertake to help Algeria to combat immigration, which affects the European continent, to diversify its economy, to provide financial support and would try to develop investment plans in exchange for an economic opening of the country in the energy sector in return for a security of supply in gas. According to European officials cited in the article, Algeria has only two choices: either develop its gas production and become "the Norway of the South" for the EU, or leave its gas industry decline, and due to growth in its domestic demand, turn into a net importer of this product. Meanwhile Europe (ditto for the USA) remains very critical of the 51 / 49 percent rule, that always gives the advantage to SONATRACH and to Algeria on all exploited deposits related contractual arrangements, Algerian legislation being considered "the worst of all regions.
According to this same source, the current Algerian Government, focusing not on the ground but rather on laws as per its prevalent bureaucratic jurisdictional vision, whereas it is a matter to address the malfunctioning of the social body, it went for timid structural reforms, instead of to develop its renewable energy production to meet the internal demand and diversify its economy to get out oil exports rentier revenues, thus avoiding high social tension. This assessment is by no mean new since at the last EU / Algeria meeting on energy, a few months ago, the EU experts had already made it clear that even if Europe opened its borders, what would Algeria export outside the hydrocarbons. They did make known that immediately the fixed long term contracts which expire between 2018/2019, Algeria as does already Russia (Berlin agreement) for a part of its explorations in gas are in line with the so-called “spot” free market.
Also at the meeting of Algiers, the need to move towards energy efficiency (savings of 20 / 30%) had been highlighted with the option of a local energy Mix, encouragement of renewable energy and review the policy of subsidies, and any ensuing balance exported. As per the current law of hydrocarbons (any law is never retroactive) with international disputes cascading over SONATRACH, that was developed in the $100 a barrel of oil context had now to be relaxed especially with respect to taxation with a view to encourage both private national and international investment.
This would concern other competitive sectors to define clearly what is strategic and what it is not; the new investment code and the mining sector with high investment costs, and low profit, unlike the utopian and speculative view of the current Minister of Industry, would have little impact without comprehensive reforms aimed at improving the business climate. For the Algerian Government, POLITICO’s comments are "subjective and incongruous speculation" reminding "the structuring and sustainable relationship between Algeria with the EU in the field of energy is highly strategic in nature and certainly set itself above subjective speculation. Europe must avoid this mercantilist vision and through a win / win partnership help Algeria settle a productive economy and stabilize its social body as provided for by the association agreement that implies a revision of the existing accords, and not to question the overall architecture.
According to the reading of international experts, the most important message is not related to energy, but concerns rather the geo-strategic stakes in the region, including their safety aspects. Indeed, without structural reforms, there is no effective economic stimulus, that could lead to serious social tensions which could destabilize the entire region to end up with a massive Algerian immigration to Europe. This would explain the wish for non-oil related investments linked to the reforms on behalf of the EU (seeing to its own interests) but to also those of the US. It is by the way a strategic mistake, in this twenty-first century, to oppose the USA to Europe about Algeria and North Africa generally.
Tactical but non-strategic differences exist however. Algeria for the major powers is a great country of which the Algerians themselves do not always seem to measure its importance, and who should play in the future the role of a pivotal country in the Mediterranean region and Africa. This would require more than morality of officials, speeding up the micro-economic and institutional reforms, reorientation of economic policy taking into account the new mutations, in energy, economic, and global policies.
The various analyses of the World Bank, the IMF, the EU, do not teach us much, but only reiterated those made previously by many Algerian experts (see our different contributions 2010/2016).
But the required Algerian reforms do not depend on the EU but on Algerians before all else and this requires a clear political will for a controlled liberalization reconciling economic efficiency and deep social justice through the strategic role of the State in its regulatory role.
Indeed, a careful reading of the contents of POLITICO’s article shows that it is a win-win partnership, that is the guarantor of the stability of Algeria and hence the region, through a change for a healthy Governance which will accelerate reforms, assuming a certain coherence and visibility in its approach, a strategic vision of political, security and economic, whilst taking account of the new world and a minimum of social consensus.
Dr. Abderrahmane Mebtoul, University Professor, Expert International, email@example.com
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