Gas Pushes Algeria into the Big Players' Game

Samir Sobh      Al-Hayat     - 09/05/07//

Since Algeria signed on January 21 last in the Algerian capital one of the most important cooperation protocols in the field of gas between Algerian Sonatrach and Russian Gazprom, the EU countries implicitly acknowledge the growing dependency on Algerian gas. On the other hand, these countries and the US fear that this Maghreb country may contribute to the emergence of a global gas cartel.

In this context, we can say that Algerian President Bouteflika is more aware than anyone else how to play the energy card with the view of defending the political and economic interests of his country. When Bouteflika announced on March 13 that the establishment of a gas OPEC is not a bad idea, he wanted to anticipate situations of foreign companies that are preparing to move to meet the new tax on extraordinary profits (TPE), imposed by the Algerian Ministry of Energy and Mines with all possible and appropriate means. Moreover, the laws adopted in this regard confirmed that Sonatrach, which oversees the management of the gas sector in Algeria, would obtain from now on a share not less than 51% of the total oil and gas projects.

In an interview with the Spanish newspaper 'El Pais' on the eve of the visit paid by Spanish King Juan Carlos to Algeria in order to contain differences between the two countries, Bouteflika recalled that his country would definitely be one of the founders of this gas cartel, which would come to light, adding that the emergence of this new organization is "in line with trends that have surfaced through globalization which are pushing producers to come together to defend their interests." Through this confirmation Bouteflika wanted to answer back to a number of European officials, who hinted at several mini symposia and seminars that they would not allow Algeria to play in the stadium of the big players and, therefore, impose its conditions on the gas market in the world.

Nevertheless, despite these implicit threats, Algeria raised the prices of its gas exports to Spain and began to reconsider its previous agreements with Italy. This means it has already started to play with the gas card, not only with the aim to maintain its economic interests, but also to ensure its geo-strategic interests in North Africa and the south of the Mediterranean.

For those interested, more than two years ago, Algeria used this method to culminate its relations with economic partners and identify their degrees according to national interests. However, Bouteflika seems determined to use the gas card to the end in order to strengthen his European, international and even Arab situations. The test of strength, which is underway with the American Anadarko Petroleum Corporation, which is opposed to the new tax imposed by the Ministry of Energy in Algeria, is a clear manifestation of this determination, and will inevitably lead to confrontation. Although the company threatened to resort to international specialized courts, and despite tension with Washington, which did not give consent to the Algerian government's backtracking on the application of an energy law providing for opening the door of this sector to foreign investment, Algeria adheres to its standpoints and will not budge.

The emergence of an axis between Sonatrach and the giant Russian Gazprom in the gas sector should definitely strengthen Algeria's breakthroughs not only in Europe but all over the world as well. Algeria's exports of energy, mostly gas, have increased by about $8 billion, hitting $54 billion last year. It is expected to hit about $60 billion by the end of the current year, which would encourage the Algerian authorities to desperately defend its national interests and, therefore, challenge the policies aiming to strike its future expansion plans.

Add to that the fact that Algeria is currently ranked third at the global level among gas-exporting countries, while Europe buys 70% of its needs from this Maghreb country. It is known that the EU countries store this gas in the pipelines, which extend from Algeria to Spain, Italy, Portuguese and other European countries. Minister of Energy and Mines Chakib Khelil and his colleague Foreign Minister Mohammed Bedjaoui do not conceal Algeria's intention to increase gas prices in the near future and that it holds negotiations with its customers, which constitutes part of Algeria's preemptive strategy set by the government at the end of last year. According to these two officials, Algeria will not only content itself with following the regulations imposed by the global gas market, but it is also convinced of the need to use this card for goals beyond economy to affect foreign policy and the internal social situation. In this respect, there is talk about giving preferential prices to friendly countries, as was the case in the 1970s during the rule of late President Houari Boumediene. However, President Bouteflika always repeats to his visitors that the preservation of the interests and wealth of future generations has become an urgent necessity in this phase.

Algeria has been taking, for months, more clear and pragmatic stances with regard to energy. This is sometimes described by the Europeans as aggressiveness. Officials in Sonatrach respond to this description by arguing that these stands are a result of the objective facts associated with economic interests and change of strategy. In their opinion, the policy adopted to determine the price of gas, although in the past it used to take the political relations or the geographical proximity with a number of European countries into account, is now being taken more carefully in a different way before adopting appropriate decisions. However, some others see it as a form of the 'gas diplomacy', which has begun to play a key role, especially as Algeria is no longer willing to waste its resources or make concessions in this area.

In any case, it seems that this new strategy has begun to bear fruit. The evidence of this is that the French president-elect, Nicolas Sarkozy, addressed this issue while reviewing his future economic orientations, especially in relation to Gas de France. The official did not hesitate to call for the establishment of an exceptional partnership between the two countries in the energy sector, especially at the level of convergence between Gas de France and Sonatrach.

For Sarkozy, the issue does not absolutely mean dependence on Algeria's gas file, but to find the means to circumvent the 'excess offensive' of the Russian exporter. The French president-elect went further by promising that, in the event of his arrival at the Elysée Palace, he would propose serious assistance to Algeria in the field of nuclear cooperation for peaceful purposes. Moscow made the same offer during President Vladimir Putin's visit to Algeria months ago.

All these facts confirm that Algeria has entered the stadium of the big players in the field of gas. It has also been able to push many parties, including the Europeans, the US and Russia, to vie for wining it over, which will allow it to strengthen its standpoints and access to knowledge through the transfer of technology in the field of energy.

*Mr. Samir Sobh is a Lebanese economist