Challenges of Energy Security in Europe: Can Algeria be an Alternative to Russia?Opinions |Author: IFIMES | November 9, 2022, Wednesday // 11:06| views
Geostrategic tensions between Russia and European states after the "special military operation" in Ukraine, launched by Russian President Vladimir Putin on 24 February 2022, have put Europe in a position to make difficult and delicate decisions regarding supply of energy products, such as "oil and natural gas." The issue became prominent after the Western countries introduced sanctions against the Russian energy sector. Europe is trapped between limited internal energy resources and its dependence on import. Following the imposition of sanctions on the Russian energy sector, EU countries are fighting against time to find alternative energy sources in order to reduce energy dependency on Russia.
The interdependence of Russia and European states in the area of power-supply derives from the fact that before the Ukraine crisis the EU was one of the main economic and trade partners of the Russian Federation. Namely, it covered around 50% of Russian foreign trade, and power-supply is the main and most important axis of relations between the two sides. The EU imports 90% of its natural gas consumption, with Russia providing more than 40% of the overall natural gas consumption in the EU. Russia also accounts for 27% of oil imports and 46% of coal imports. Furthermore, around 168,300 kilometers of gas pipeline network on the European continent depends on Russian gas.
On the other side, Russia was dependent on the European energy market, as more than 80% of Russian oil and natural gas production was directed to the European market. Furthermore, Russia imported from the EU more than half of technological goods required for its oil and natural gas industry.
EU explores alternatives to Russian natural gas
In the context of the EU's commitment regarding diversification of energy supply and attempts to "break free" from Russian energy products, it redirected its attention to Qatar hoping to find quick solutions for the European market, after the country announced increase of the liquefied natural gas production from 77 million tons per year to 126 million tons by 2026. The Qatar gas cannot be an alternative to Russian gas for a number of important reasons, including lack of a network of gas pipelines from Qatar production plants to European gas pipeline networks (Turkey). Qatar notified the EU that it is bound by long-term contracts, which had been in place for the last three decades with Asian states, and theoretically could export only 10-20% of its production to Europe. Such solutions are short-term and cannot be sustainable bearing in mind the relatively high costs of transport of liquefied natural gas by vessels, which require special plants for its conversion from liquid to gas, prior to its use.
After the failure of the attempts to replace Russian gas using alternative producers such as Qatar, US and Azerbaijan, EU turned to Algeria as one of the largest exporters of natural gas in the world, as well as, because of its geographical proximity to Europe. Algeria could be one of the long-term solutions as it will actually not be able to replace the supply of Russian gas to Europe due to the enormous difference in production of the two countries and the capacity of the Algerian gas pipelines towards Europe, which amount to around 32 billion m3, in comparison to 300 billion m3, which is how much Russia provided to Europe annually before the introduction of sanctions.
Algerian natural gas: Can it become an alternative to Russian natural gas in Europe?
Prior to the outbreak of the war in Ukraine, Algeria supplied around 13% of required natural gas to the EU, while Russia supplied around 47%. In the context of EU efforts to "move away" from Russian natural gas, Algeria emerges as a "savior" of the European continent, as it ranks 11th on the global list of countries by natural gas proven reserves and third on the list of countries by shale gas reserves, right after China and Argentina.
Algeria can be an alternative to Russian gas as it supplies gas to Europe through the Trans-Mediterranean Pipeline (TransMed) and by tankers for liquefied natural gas. Currently, Algeria is the second largest supplier of gas to Italy, right after Russia. Algeria also exports gas to Spain through two gas pipelines. Specifically, the Maghreb–Europe Gas Pipeline (MEG), which goes through Morocco, and the Medgaz pipeline, which is a submarine gas pipeline between Algeria and Spain. France and Portugal are supplied with Algerian gas through Spain.
Algeria can use the newly emerged circumstances to supply gas to Europe and acquire enormous additional revenues to the state budget, which had a deficit in the previous period. In Algeria, the energy sector is the focus of a broad spectrum of official and academic interests aimed at establishment of a strong energy industry, which would facilitate investments in the sector.
In early April 2022, Algerian President Abdelmadjid Tebboune signed a presidential decree on establishment of the High Energy Council, tasked with development of the energy sector, finances, energy transition, renewable energy and scientific research. The Council is chaired by the Algerian President. Members of the Council include the Prime Minister, Minister of Energy, Minister of Foreign Affairs, Minister of Internal Affairs, Minister of Finance, Minister of Energy Transition and Renewable Energy and Minister of Scientific Research.
The announcement of establishment of the High Energy Council comes at a time of specific geopolitical circumstances at the global level, that is in a sensitive period bearing in mind the challenges that the Algerian energy sector is facing, particularly as the infrastructure and production capacities are still a far cry from the ambitions and capabilities.
European politicians rush to Algeria
In the last period a large number of European leaders and officials visited Algeria. French President Emmanuel Macron arrived to Algeria on 25 August 2022 for a three-day official visit. The visit took place after a major crisis in the relations of the two countries, which was described as unprecedented in terms of its scale.
After the visit the French media reported that Algeria intends to increase its delivery of natural gas to France, but did not reveal details about additional quantities. During the visit, President Macron welcomed the agreement brokered between Algeria and Italy regarding supply of additional quantities of natural gas.
The visit culminated in the "Algerian declaration for a renewed partnership", which reflects the desire of the two countries to "open a new era in the relations" and adopt" a concrete and constructive approach focused on future project and youth". It is important to remind that the relations between France and Algeria had deteriorated earlier, specifically after the statement of French President Emmanuel Macron, from October 2021, in which he asked "Was there an Algerian nation before French colonization?". Nevertheless, relations with Algeria became important for France overnight, because the "Russian special military operation" in Ukraine had led to increase in the European demand for North African natural gas, as well as because of the increased migration across the Mediterranean Sea.
On 5 September 2022, President of the European Council Charles Michel suddenly visited Algeria and met with President Tebboune and a number of officials.
After the meeting with President Tebboune, Michel stated "Given the international circumstances that we are all aware of, energy cooperation is obviously essential, and we see Algeria as a reliable, loyal and committed partner in the field of energy cooperation".
Michel added that his meeting with the Algerian President "was extremely fruitful and forward-looking ... both parties share the same ambition, to give a new impetus to the quality of relations between Algeria and the European Union".
The European official also referred to the requirement to review the Association Agreement signed with Algeria (which entered into force in 2005), so that it serves common interests of both sides.
In this context, it is worth reminding of the controversial and racist address by Josep Borrell to future diplomats at the opening of the European Diplomatic Academy in Bruges from October 2022, in which he said "Yes, Europe is a garden. We have built a garden ... Most of the rest of the world is a jungle, and the jungle could invade the garden." He also said that instead of building walls, the diplomats should "go to the jungle".
For years already Algerian officials and experts have been calling for renegotiation of the agreement on partnership with the EU that had caused enormous losses to the economy of Algeria, which is not able to compete with its European partners.
Algeria signed an agreement with the EU on trade partnership in 2002 and it entered into force on 1 September 20055. The agreement envisaged gradual abolition of customs duties on goods and services on both sides. However, the Algerian companies were not able to compete with their European counterparts, as the Algerian economy is primarily dependent on export of energy products.
According to unofficial data, since 2005 Algeria suffered losses amounting to around 30 billion dollars, primarily as a result of abolition of customs duties and movement of goods and services in one direction, specifically from EU to Algeria. In October 2021, Algerian President Abdelmadjid Tebboune instructed the government to reassess and reconsider the agreement.
On 9 October 2022, French Prime Minister Élisabeth Borne arrived to Algeria for a two-day visit. She was accompanied by 16 ministers. During the visit the two governments held the fifth session of the High-Level Intergovernmental Committee (CIHN), a first since 2017.
On 10 October 2022, Algerian Minister of Energy Mohamed Arkab and European Commissioner for Energy Kadri Simson opened the fourth annual High-Level Energy Dialogue between Algeria and EU in Algiers, a first since 2016. Then, from 11 October to 12 October 2022, the second Algeria-EU Energy Business Forum was organized.
The recent period also saw several visits by Italian officials to Algeria. The visits culminated in the signing of several agreement, the most important of which is a nine-billion dollar agreement on supply of Italy with additional quantities of natural gas.
Italian Minister of Foreign Affairs Luigi Di Maio visited Algeria on 28 February 2022. Then, Italian Prime Minister Mario Draghi, visited Algeria on 11 April 2022 and agreed the supply of additional quantities of natural gas.
Mario Draghi returned to Algeria for another visit on 18 July 2022 for the fourth bilateral summit of the two countries, which resulted in the agreement on additional quantities of natural gas in exchange for Italian investments into agriculture and industry.
During the visit he also announced a major investment by the Italian Eni, French Total and American Oxy-Occidental Petroleum Corporation companies in development of oil and gas fields in South-Eastern Algeria worth four billion dollars.
Algeria – European Union
Relations between Algeria and EU have remained balanced relations, despite the crises that occurred in specific periods. There is no doubt that the Ukraine war and common interests of the two sides contributed to their renewed cooperation despite the disagreements regarding the alliance between Algeria and Russia and the issue of human rights in Algeria.
Algeria as the largest African and Arab country with a total area of 2,381,000 km2, population of 44 million and 1,622 km-long coastline on the Mediterranean is important for Euro-Mediterranean cooperation at all levels. Around two thirds of Algerian export are to the EU, which makes the EU a major trade partner of Algeria. In 2020, the bilateral trade reached the level of 24.9 billion Euro.
In the context of new European economic policies, analysts believe that so far the Algerian economy has had no benefit from the association agreement with the EU. Algeria should initiate the process of review of the agreement and seek bigger benefits for its economy and particularly the production sectors. The global energy crisis -and particularly the lack of natural gas- is a historic opportunity for Algeria.
Bearing in mind the current international circumstances, Algerian economy can have major benefits from direct European investments into the oil sector and renewable energy (solar energy). Given its geographical position, Algeria has one of the largest solar deposits in the world. The insolation time almost exceeds 2,000 hours per year and can reach even up to 3,900 hours, particularly in the highlands and the desert.
Analysts believe that the Algerian government should accelerate the necessary economic reforms and modernize its legislation to be ready for the arrival of the announced foreign investments. The urgently needed reforms include, inter alia, improvement of the business climate in the country and real application of law on investments, elimination of administrative barriers and improvement of the effectiveness of the banking system.
The International Institute for Middle East and Balkan Studies (IFIMES) from Ljubljana, Slovenia, regularly analyzes developments in the Middle East, the Balkans and around the world. IFIMES made an analysis of the challenges of energy security in Europe and the role of Algeria in this context. We bring the most interesting parts of the analysis titled "2022 Algeria- Challenges of energy security in Europe- Can Algeria be an alternative to Russia?"
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