The shock of Russia's invasion of Ukraine continues to send ripples around the world, including to some unexpected places. At the United Nations General Assembly's emergency special session this week, Algeria was among 35 nations to abstain in response to a resolution condemning Russia's "aggression against Ukraine" and demanding that Russia immediately withdraw its forces. Algeria's ambassador echoed that vote with a lukewarm statement promoting "efforts and diplomatic calls aiming at de-escalating the current situation and adopting dialogue."
Coming from a nation that once prided itself as a leader of the global anti-colonial struggle, Algeria's abstention may have seemed surprising. After all, its bloody, eight-year war of liberation against France that ended in 1962 inspired similar resistance struggles worldwide. After its independence, Algeria directly assisted anti-imperialist movements across Africa and beyond, earning its capital, Algiers, the moniker "Mecca of the revolutionaries." In more recent years, the Algerian government has decried foreign incursions into Iraq, Libya and Mali, and it continues to support Western Sahara's independence claims against neighboring Morocco. It fiercely defends its own sovereignty, bristling at any perceived interference by outside powers.
But with the rapidly escalating war in Ukraine, Algeria's anti-imperialist heritage is counterbalanced by its historically strong links to Russia. An influential member of the Non-Aligned Movement during the Cold War, Algeria nonetheless knit close ties to the Soviet Union, where many of its political and military leaders trained. In the past two decades, Russia has accounted for some three-quarters of Algeria's arms purchases. Moscow has forgiven billions of Algerian debt and was among the first places Algeria's leaders turned for support when a mass protest movement erupted in 2019, forcing the resignation of long-serving President Abdelaziz Bouteflika. Algeria's links to Ukraine, by comparison, are much less robust.
While Algeria considers this special relationship with Russia useful, it is not without limits. Russia has been repeatedly rebuffed in its attempts to establish a naval base in Algeria, and initiatives to diversify the countries' economic linkages beyond weapons have been slow to materialize—even as Algeria has deepened its economic ties with Europe, most notably in the energy sector. On the security front, Algeria's relations with Western powers are also mixed. While not among the designated Major Non-NATO Allies in North Africa and the Mediterranean, Algeria has participated for two decades in NATO's Mediterranean Dialogue, along with Morocco, Tunisia, Egypt, Israel and other states in the region. The Algerian military's cooperation with Western counterparts has expanded around counterterrorism since 9/11, but Algeria has steadily resisted Western pressure to increase its involvement in security operations against Islamist insurgencies in the Sahel.
Skeptical of Western intentions, many Algerians themselves were initially receptive to Russian messaging around the Ukraine invasion, including President Vladimir Putin's claims that NATO and the West had provoked the conflict. On social media, some also joined the chorus accusing NATO countries of racial double standards for defining "just war" and refugee policies differently for Ukrainians than for Arabs and Muslims. The announcement that an Algerian student had been killed in Ukraine's second-largest city, Kharkiv, in the first days of the war was, for many, a reminder that this was not Algeria's fight.
This mix of factors, both domestic and international, historical and contemporary, helps explain Algeria's abstention at the U.N. as an attempt to avoid offending either side in this high-stakes conflict. But for all the complex calculus it has imposed on Algerian diplomats in recent weeks, the implications of the Ukraine crisis for Algeria's immediate economic outlook have been more clearly positive. However, this rosy initial picture may grow more mixed in the months ahead.
For all the complex calculus it has imposed on Algerian diplomats, the implications of the Ukraine crisis for Algeria's immediate economic outlook have been more clearly positive. However, this rosy initial picture may grow more mixed in the months ahead.
- Andrew Farrand
The most evident and immediate impact on Algeria began even before Russian forces launched their invasion—in the form of rising energy prices. Algeria, which collected two-thirds of its state revenues from oil and gas sales a decade ago, had seen that figure fall to less than 50 percent of late, due to flagging prices and rising cost of its extensive public subsidies, worth $17 billion in 2020. By the end of 2021, its once-abundant foreign currency reserves had dwindled, and no longer sufficed to cover the coming year's imports. In December, President Abdelmadjid Tebboune signed a new finance law that increased taxes and laid the groundwork for reducing subsidies. But as oil and gas prices soared in parallel with tensions in Ukraine, Algerian authorities saw their fortunes turning, and quickly abandoned cutbacks. In mid-February, Tebboune canceled most of the tax increases and subsidy reforms, then unveiled a new unemployment stipend for jobless youth.
Following Russia's invasion, energy prices have risen further; Algerian oil now fetches prices over five times its April 2020 value, when rates tumbled amid the COVID-19 pandemic. European importers hope Algeria might help fill the gap created by sanctions on Russia, whose position as the continent's largest provider of natural gas and oil could soon end. Algeria already supplies energy to Europe, covering nearly 12 percent of EU gas imports, including via pipelines to Spain and Italy, and 3 percent of oil imports in 2020. Just this week, Italy's foreign minister led a delegation to Algiers, returning with new deals in hand for more Algerian gas. Others will hope to follow suit.
Alongside energy, the war in Ukraine will also affect Algeria's economy through food prices, especially for grains, which have reached record highs in recent days. Ukraine and Russia together account for nearly a third of the world's wheat exports, much of which may now be inaccessible due to the fierce fighting in Ukraine and international sanctions on Russia. Algeria, one of the world's largest wheat importers, already saw popular discontent flare last year over food price inflation and shortages of staple goods. In recent years, Algeria sourced wheat from a mix of European and North American providers, chief among them France. But after a diplomatic falling-out last year, Algeria dropped French imports and pivoted toward Russia.
Algerian officials have outlined ambitious plans to reduce the country's dependency on foreign grains, but realizing them is far from guaranteed, especially amid a severe region-wide drought. With world commodities markets upended by the sanctions on Russia, the promises of Algerian authorities that the Ukraine conflict "will not impact" Algeria's grain supply defy belief. More likely, a global scramble over scarce supplies could prompt further price rises for grains and other critical imports, partly offsetting Algeria's windfall from rising energy prices.
Algeria's authorities may believe that Europe's increasing dependence on Algerian oil and gas will reduce external pressure to both diversify its economy and respect human rights. But the Ukraine war has already prompted major policy shifts in Europe and will likely trigger more still.
- Andrew Farrand
While little is certain in this turbulent period, Algerian officials appear confident that the current geopolitical dynamics roiling Europe will benefit their fiscal situation, and thus their capacity to maintain strict control at home. The regime's stability has been in question of late. In 2019, Algerians protested en masse against increasingly flagrant corruption, shoddy public service delivery and the long-entrenched elites' staunch refusal to enact reforms or share power. Thanks to the pandemic and a severe crackdown that has seen hundreds of activists, journalists and civic leaders unjustly imprisoned, the protest movement, known as the Hirak, ceased street demonstrations last year. The popular frustrations that sparked it, however, remain.
In contrast to their short-term optimism, many of the dynamics unleashed by Russia's invasion of Ukraine may well weaken, not reinforce, the position of Algeria's ruling elites in the medium and long term. Despite newfound demand for energy supplies in Europe, Algeria's capacity to expand energy production is constrained by a legacy of underinvestment and mismanagement in the oil and gas sector. In January, officials announced a set of multiyear investments in energy infrastructure and extraction, but their impact won't be felt for years. One pillar of the government's efforts to expand domestic production is likely to be shale fracking, which sparked major protests when attempted previously in 2015 and 2020, forcing authorities to shelve the projects. Expect local communities concerned about water supplies, which are already threatened by drought and desertification, to mobilize against fracking projects again.
Even if Algeria does manage to expand its energy production, there is no guarantee that exports will increase apace, as the country is obliged first to satisfy domestic demand, which has surged in recent years and will likely grow further. Government plans to satisfy some domestic demand through renewable energy are in their infancy and advancing slowly. More importantly, the continued focus on energy exports at the expense of other sectors will only further entrench Algeria's dangerous overreliance on hydrocarbons, leaving it vulnerable to future market swings and ill-placed to overcome other shocks, whether political, climate-induced or otherwise.
Finally, the authorities in Algiers may believe that Europe's increasing dependence on Algerian oil and gas will reduce external pressure to both diversify Algeria's economy and respect human rights. But the Ukraine crisis has already prompted major policy shifts in Europe and will likely trigger more still. In the energy sector, a redoubled campaign to embrace renewable energy across Europe and reduce reliance on authoritarian regimes like Russia's looks likely. The European Union may well conclude that appeasing illiberal governments is no longer worth the price in any sector, and adopt a less transactional, more principled approach to its foreign policy. Such a shift would surely complicate relations with Algeria's rulers, sensitive as they are to perceived affronts to their sovereignty. But it might just herald a new chapter in relations between Algerians and the wider world.