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Algerian President Abdelmadjid Tebboune greets Russian Foreign Minister Sergey Lavrov in Algiers, Algeria, May 2022. Algerian President Abdelmadjid Tebboune, right, greets Russian Foreign Minister Sergey Lavrov in Algiers, Algeria, May 10, 2022 (Russian Foreign Ministry Press Service photo via AP).

Algeria Makes for a Risky Partner to Help Solve Europe’s Energy Crisis

Wednesday, May 11, 2022

The war in Ukraine has exacerbated Europe’s energy crisis, leaving the European Union desperately seeking alternative sources of supply to reduce its dependence on Russian fossil fuels. Among the states in the Middle East, North Africa and Central Asia the EU has turned to in efforts to diversify its energy supplies, Algeria has been identified as a promising source of additional supplies of natural gas. But diplomatic obstacles and production limitations, as well as Algiers’ commercial links to Moscow, mean that expectations management are in order when it comes to Algeria being a cure for Europe’s energy woes.

Among the other countries that have been identified as potential alternative suppliers, including Qatar and Libya, most would not able to replace Russian natural gas exports to Europe anytime soon due to technical obstacles. Germany is in talks with Qatar for additional liquefied natural gas, or LNG, exports, but those discussions have reportedly hit a snag. Azerbaijan has also agreed to increase deliveries through available pipelines linking its fields to European markets, but there are limits to the amount of extra production it can divert.

As a result, Italy, Spain and Greece have separately turned to Algeria, North Africa’s biggest natural gas producer with vast additional reserves, to boost supplies. Despite being one of Europe’s largest natural gas suppliers, providing 8 percent of the EU’s gas imports in 2021, Algeria has received limited serious attention as an exporter of gas in recent years. Years of underinvestment by leading international companies, as well as Algeria’s complex fiscal terms, byzantine bureaucracy and complex political environment resulted in missed opportunities to enhance the country’s position in the global gas market. Meanwhile, new trends in the global energy market, including the emergence of new gas suppliers and Europe’s efforts to reduce its dependence on hydrocarbons as part of the green energy transition, have also undermined the country’s potential.

The Russian invasion of Ukraine has now upended that logic. In April 2022, Italy, which previously depended on Russia for 40 percent of its natural gas supplies, and Algeria inked a new deal that will provide Rome with an additional 9 billion cubic meters, or bcm, of natural gas per year in 2023-2024. This will be on top of the 22.5 bcm Italy imported from Algeria in 2021, amounting to a combined 50 percent of Italy’s gas imports.

According to open data sources, the TransMed pipeline linking Algeria to Italy has the capacity to pump the increased volume. And Algeria possesses the necessary natural gas reserves to increase its deliveries to Europe through existing pipelines and via LNG shipments. However, it cannot do so at its current production capacity limits, and increasing its output would require additional exploration and development of gas fields. It would also require additional investments in export infrastructure, in which Algeria has not invested much in recent years due to soaring domestic consumption.

Algeria has assured its European partners such as Italy’s Eni, France’s Total, Portugal’s Galp Energia and Spain’s Repsol that it could meet growing energy demands for Algerian natural gas through the end of 2022. But it will not be able to significantly increase the volume of gas deliveries to Europe in a short timeframe.

Algeria has the potential to help fill some of the gaps left by Europe’s efforts to wean itself off Russian energy. But there are obstacles that need to be addressed before that potential can be realized.

Another sticking point when it comes to Algeria’s natural gas exports to Europe is its ongoing tensions with neighboring Morocco over Western Sahara, which Morocco occupies. Algeria and Morocco have long been at odds over the territory’s claims for independence, which Algeria supports, as well as over their own border demarcation dispute and broader competition for regional influence. Tensions over the Western Sahara issue led to the closure in 2021 of the Maghreb-Europe gas pipeline, which had delivered natural gas to Spain via Morocco for the past 25 years, taking 12 bcm offline. From the beginning of 2022, Algeria began delivering around 10 bcm of natural gas to Spain exclusively through the MedGaz undersea pipeline that bypasses Morocco.

The unresolved diplomatic standoff between Algeria and Morocco over Western Sahara remains volatile, as illustrated by the tensions created by Spain’s recent decision to accept Morocco’s plan for expanded autonomy for the territory under Rabat’s sovereignty as the most realistic solution to the standoff. As such, it could easily complicate Algeria’s future energy cooperation with the EU. And while the MedGaz pipeline remains a fallback option, the export of additional gas volumes to Spain via Moroccan territory will require an easing of diplomatic tensions first.

In addition to these regional tensions in North Africa, the EU may face another diplomatic obstacle to closer energy cooperation with Algeria: Algiers’ long and close partnership with Russia, particularly with regard to big-ticket weapons purchases. According to SIPRI’s latest report on the global arms trade, Russia remained Algeria’s largest arms supplier in 2015-2019, accounting for 67 percent of Algerian defense imports, followed by China at 13 percent and Germany at 11 percent. Notably, the Algerian government did not issue a statement condemning Russia’s invasion of Ukraine. Moreover, revenues generated by European purchases of Algerian natural gas may indirectly circle back to the Russian economy due to the existing military contracts between the two states. As a result, Algiers’ close relationship with Moscow raises additional questions about Algeria’s suitability as an energy partner for the EU.

Amid the EU’s current energy crisis and ongoing uncertainty over future supplies, Algeria has the potential to help fill some of the gaps left by Europe’s efforts to wean itself off Russian energy. But there are still technical and political obstacles that need to be addressed before that potential can be realized. If Algeria could successfully meet Europe’s increased demand, it stands to make sizeable profits. And the considerable energy gap in the European market presents an invaluable opportunity for the rise of another natural gas giant on the continent. But supplying Europe with additional natural gas in a short timeframe will be a herculean task for Algeria, and depending on Algeria to do so will be a gamble with no small risk for Europe.

Fuad Shahbazov is a policy analyst covering regional security issues in the South Caucasus. He is a former research fellow at the Center for Strategic Studies of Azerbaijan and a former senior analyst at the Center for Strategic Communications, also in Azerbaijan. He has been a visiting scholar at the Daniel Morgan School of National Security in Washington. Currently, he is a master’s degree candidate in Defense and Diplomacy at the University of Durham in the U.K. He can be found on Twitter at @fuadshahbazov.

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