Wednesday, July 6

The commercial rupture of Algeria endangers 7,000 million a year, 0.6% of GDP, mainly in gas


91% of Spain’s imports from Algeria in 2021 were gas and other fuels, almost 4,400 million euros in total, according to data from the Ministry of Industry, Commerce and Tourism. Our country bought 40% of all the gas it acquired last year from the North African power. In 2015, this dependence was close to 60%. However, in April, it had dropped to 23.4%, with a historical presence of the United States above 30%, according to a report published this Thursday by the Strategic Oil Reserves Corporation (Cores).

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These data serve to understand the change that in recent months, in the midst of the energy crisis and even before Pedro Sánchez’s abrupt turnaround on Western Sahara, has given the historic energy relationship between Spain and Algeria, after the closure, last autumn, of one of the two gas pipelines that link both countries, the one that passes through Morocco.

And they also illustrate the relevance that the order of the Algerian authorities to the country’s banks to freeze foreign trade operations of products and services with Spain as of this Thursday in response to the Government’s turn in favor of Rabat regarding to the former Spanish colony, contrary to the position of recent decades and international law.

The main contract for the supply of Algerian gas to Spain is the one that links the state giant Sonatrach with Naturgy, which is in force until 2032. The prices of this agreement are reviewed every three years. They have been renegotiating since before the change of position of the President of the Government on the Sahara. After the order to the banks of the African country to “freeze direct debits and foreign trade operations of products and services to and from Spain as of Thursday, June 9″, sources from the Spanish group point out that the operation continues to be ” normal” and without “no problem”.

“Our relations with Sonatrach are good”, stand out from the group chaired by Francisco Reynés. The Algerian group is a Naturgy shareholder with just over 4%. This shareholder relationship has its origin in a 2011 agreement reached after an arbitration between both parties due to disagreements on the price of gas that was unfavorable for the Spanish company.

The “normality” to which Naturgy alludes would be broken if Algerian banks prevent commercial operations, as the Government of the North African country would have ordered financial entities with the right to operate within its borders, together with the suspension of the Treaty of Friendship, Good Neighborhood and Cooperation with Spain, signed on October 8, 2002, against which the European Commission has already positioned itself.

This Thursday, the CEO of Endesa, José Bogas, has hoped that this conflict will not end up having repercussions on the gas that Spain buys from the African country. “I don’t know if I’m confusing my wishes with what is going to be, but I don’t think it will affect the gas we buy in Algeria,” said the executive, whose company is another of Sonatrach’s clients.

According to sources from the financial sector who prefer not to be cited, more details about the financial freeze would have to be known, but in principle it would completely stop the commercial relationship between Spain and Algeria, of 7,000 million in total (adding imports and exports), which, Despite its importance in terms of energy, it accounts for barely 0.6% of GDP (Gross Domestic Product).

Algeria, whose main source of income is hydrocarbons, is the sixteenth trading partner from which Spain buys the most, and the twenty-eighth to which it sells the most, with data from 2021 from the Ministry of Industry, Trade and Tourism itself. The import ratio has grown by 40% in the last 20 years, while the export ratio has increased by 225%. These figures contrast with the growth of the commercial relationship with Morocco, which is our twelfth partner in imports, and the ninth in exports, with increases of nearly 500%, among the largest in the last two decades.

bureaucratic obstacles

“The continuous bureaucratic obstacles (Algeria is ranked 157 out of 190 countries in the ranking doing business of the World Bank in the year 2020) slow down the development of the rest of the sectors and prevent the country from equipping itself with a solid industrial base, by preventing the development of foreign investment”, regrets the latest report from the Economic and Commercial Office of Spain in Algiers (the capital of the country), updated to June 2021.

“Business opportunities in Algeria are limited by certain restrictions,” continues this official guide on the North African country. “The main problem faced by companies in Algeria is the country’s bureaucracy, which can lead to considerable delays in meeting project deadlines and unforeseen complications. Added to this is a changing interpretation of the laws that generates great legal insecurity”, she stresses.

The most important sectors for Spanish exporting companies are: construction machinery and materials, mechanical and electrical equipment, maritime transport, automobiles and transport vehicles; agri-food, plastic, medicines and hospital equipment, renewable energies, waste management and hotel management services.

“A sector that could have enormous potential is agriculture and agri-food processing and marketing, in which there are already important Spanish companies playing a key role in Algeria, such as Dulcesol, Gallina Blanca, Pastas Gallo , etc. On the other hand, Spain’s most relevant investments in Algeria focus on the energy, construction and water sectors”, summarizes the same institution from Algiers.

“Sectors with investment potential would be abundant in Algeria if the conditions for investment were adequate: agriculture, agri-food industry, pharmaceuticals (they import 60% of their needs), health, waste management, as well as hotel management”, concludes the report. report.

The question of Western Sahara

“It is logical that Algeria has suspended the friendship agreement with Spain after its repositioning on the issue of Western Sahara. One can analyze this fact from different points of view but, leaving the moral vision apart from an irrational and unfortunate decolonization process, and focusing on matters of pure strategy, the question would be the following: Was it a matter of prioritizing relations with Morocco over above relations with Algeria?”, asks Nuria Jàvega, professor at OBS Business School.

“If the intelligent and sensible thing to do would be to stay away from alien brawls, abstruse and not very edifying between third parties, reached the point where that is impossible and you have to take sides, it should be done in a big way, in the long term, with a global vision, in perspective and without giving in to threats, counteracting subtle and not-so-subtle intimidation attempts and fully involving the bulk of the European community in the matter to make joint decisions, as it should be when one is part of a club”, he continues.

“Isn’t it more important at times like these to guarantee the supply of gas and even establish itself as an ‘alternative European tap’ than to give in to blackmail with intermittent, unreliable and less encouraging results in terms of containing the African migratory flow? Could it be that there are not much more effective and definitive ways to contribute to stopping the exodus of hunger of thousands of people than fierce corruptible guardians with changing moods and loyalty?”, concludes the professor.



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