Reaching out: Taking on a broader role on the regional and global stage

Algeria’s foreign relations are transforming as the country expands its trade and economic partnerships outside of Europe and North America and assumes a greater role in regional political and security issues.

From the 1960s until the mid-1980s, Algeria’s economic development policy focused on hydrocarbons exploration, state centralisation and self-sufficiency. The new state’s foreign policy was largely founded on the principles of national sovereignty and freedom from external influence. As a result, Algeria became a proponent of increased cooperation between countries in the global South and a vocal member of the Non-Aligned Movement in the 1960s, supporting a number of independence movements throughout the Cold War.

ECONOMIC EXPANSION: Algeria joined OPEC in 1969 and became an increasingly important energy exporter as exploration picked up in the 1970s, which helped to pave the way for an increasingly active role in regional diplomacy. This accelerated in the late 1980s in line with greater domestic political and economic openness. Foreign trade began to undergo liberalisation in 1988, when a constitutional amendment abolished the restriction on imports. Algeria accelerated liberalisation efforts at the end of the 1990s unrest, and trade rules were again relaxed under its association agreement with the EU, which entered into force in 2005.

Energy exports continue to dominate Algeria’s economic relationships; hydrocarbons account for 96% of export revenue and up to 98% when derivative products are included. The US was the largest individual export market by volume in 2012, accounting for 16% of Algerian exports, followed by Italy with 15.8%, Spain with 10% and France with 8.9%.

DIVERSIFYING TIES: Today, Algeria is in the midst of expanding its foreign partnerships, both with regard to trade and foreign investment. The government first began to boost trade beyond Europe and North America in the early 2000s, and today China, Turkey and Brazil are among Algeria’s top 10 trade partners; Argentina and South Korea have also become the sixth and 10th-largest sources of Algeria’s imports, respectively.

China has most notably risen through the ranks to become an important economic partner and is now Algeria’s 10th-largest export market and the second-largest source of imports. Algeria is also the fifth-largest recipient of Chinese foreign direct investment (FDI) in Africa, following other resource-rich countries South Africa, Sudan, Nigeria and Zambia.

NEW AVENUES: Algeria further relaxed its trade restrictions in its bid for accession to the World Trade Organisation, a process that started in 1998. The 11th round of negotiations was held in Geneva in April 2013, and Algerian authorities expressed contentment with progress made in the last session. According to local press reports, Algeria still has progress to make regarding intellectual property issues and easing restrictions on foreign investment in services. Once complete, this should help to further expand Algeria’s role on the global stage.

A series of bilateral discussions in the last six months of 2013 indicate that authorities are working to channel FDI into the non-hydrocarbons economy to encourage diversification and job creation. For example, Algerian officials have recently called to increase collaboration with Kuwaiti businesses in the areas of domestic housing and construction projects, and for South Korean firms to contribute their technological expertise to the development of industrial operations, particularly in chemicals, pharmaceuticals and mechanical manufacturing. State efforts to strengthen foreign economic partnerships and channel FDI into key non-oil sectors should help provide the capital and knowledge transfer necessary to jump-start local industry.

GREATER REGIONAL ROLE: Algeria is also deepening its ties at home in North Africa. To date, regional commercial relationships remain limited; trade with its fellow Maghreb countries increased by 26.3% in 2012 for a total value of $2.87bn, but this represents less than 3% of Algeria’s total foreign exchange volume. However, increasing integration on political and security issues, as well as joint development projects, bode well for the region.

Algeria is a participant in several organisations meant to foster economic and political cooperation. It is a member of the Arab Maghreb Union (AMU), created in 1989, which groups together Algeria, Libya, Mauritania, Morocco and Tunisia in a collaborative platform for political, security, economic and development issues. At the July 2012 AMU Council of Ministers summit in Algiers, member states concluded a joint security strategy to protect the primary transportation routes in North Africa. Algeria also pushed for the creation of an integrated economic block that would encourage collaboration in high-potential areas such as agriculture, water resources, infrastructure and renewable energies. Mourad Medelci, the former minister of foreign affairs, told OBG in 2012 Algeria is increasingly allowing for a broader regional component to its national development projects, particularly regarding transport lines, electricity and fibre-optic networks.

ADDITIONAL PLANS: The AMU project is complemented by the broader Union for the Mediterranean (Union pour la Méditerranée, UPM). The UPM, headquartered in Barcelona, was launched in 2008 as a continuation of the Euro-Mediterranean Partnership established in 1995. The UPM provides a platform for 43 countries in Europe, North Africa and the Eastern Mediterranean to collaborate on business creation and trade, as well as key issues such as renewable energy, maritime and land transport, civil protection and higher education.

However, regional integration is complicated by Algeria’s stalemate with Morocco over Western Sahara. While Algeria has supported the claims of the Western Sahara independence movement, the Polisario, Morocco considers the area critical to its territorial integrity. The Algeria-Morocco border was closed in 1994 as a result of the dispute, although intermittent negotiations involving Morocco and the Polisario continue, with Algerian aid.

COMMON SECURITY CONCERNS: Growing collaboration between Maghreb countries is particularly important to efforts to confront persistent security concerns in the Maghreb and the Sahel, an arid, sparsely populated region that stretches across North Africa, separating the Sahara from the grasslands to the south. The principles of national sovereignty and non-interference have been central to Algeria’s foreign policy since independence, but the spate of political revolts in the region and the persistent security threat posed by militants in the Maghreb and Sahel has pushed leaders to adapt these positions to the changing context.

Algeria’s support was integral to the success of the joint French- and African-led military operation in northern Mali in early 2013. Algeria initially sought to avoid military action and encouraged dialogue with rebel groups. However, leaders took a pragmatic approach in late 2012 and accepted the possibility of a military operation in Mali in order to address the security vacuum created by continued political instability. This was critical, both to allow French planes to pass through Algeria’s airspace and to have the buy-in of a growing regional power.

LOCAL CAPABILITY: Algeria is in a unique position to address shared risks and act as a regional stabiliser. According to a report by the US-based think tank Carnegie Endowment, Algeria had the largest defence budget in the region, estimated at $10.3bn in 2012, and has extensive military and counterterrorism experience from both the independence struggle and the protracted conflict of the 1990s. It is also a leading member of several regional and global counterterrorism forums and a key partner of the US in its effort to contain extremism in North Africa.

State and military leaders showed an aggressive response to the January 2013 attack on the In Amenas gas plant in south-eastern Algeria. In Amenas is jointly run by Sonatrach, BP and Statoil, and accounts for roughly 10% of Algeria’s overall natural gas output at full operation. Militants held the facility and its workers hostage for several days in early January; the Algerian military retook the facility, which saved many of the hostages but resulted in the deaths of 37 foreign workers. The government has a well-known zero-tolerance policy for terrorism and has further increased security in southern areas.

Algeria remains committed to managing security risks in North Africa to maintain a stable environment for continued economic growth. This includes both protecting natural resources and creating a platform for common development projects. With a number of promising projects on the horizon, including the completion of the Mediterranean Solar Plan as well as the first Trans-Maghreb Highway, opportunities for economic cooperation are growing.