Algeria: The Risks of slipping into deeper political crisis[Over]April 14, 2011 20:17PM By Eugen Iladi, Independent ExpertThe dramatic events in Tunisia and Egypt, where long-serving presidents have been ousted within weeks of each other by “street-led people’s revolts”, are inspiring demonstrators in other Muslim countries to demand structural political change. Libya is currently gripped by deep political crisis, as is the tiny Gulf Monarchy of Bahrain, whilst revolts are ongoing in Yemen, Morocco and Iran. Furthermore, Algeria seems to be one of the next countries possibly hanging in the balance, where the prospect of regime change must now be a question of serious concern. Algeria is a country of vital importance both to the stability of the wider-Maghreb and Sahel-Sahara region as well as to European interests. The country is a major energy supplier to international markets. Sonatrach, Algeria’s national oil and gas champion is crucial to the country's ability to generate public revenues and any disruption would simply lead to more strife in the country. Sonatrach and Algerian oil and gas resources are important not just to Algeria: the European Union's security of energy supplies, U.S. energy interests, as well as Russia's energy investments all stand to suffer if Algeria becomes unreliable. Add to that fears of an Islamist resurgence in the country and, worse, the existing Al Qaeda threat in the Maghreb, and we are witnessing a very volatile concoction in a region not far removed from civil war and unresolved border disputes. Expert Opinion: Algeria is hobbled by its government’s inflexibility As parts of the Arab world are consumed by civil disobedience against their long-standing ruling regimes, the response of some of the impacted governments is confusing and troubling, to say the least. Algeria, one of North Africa’s largest oil and gas exporters is rocked by recent protests; the country is facing instability and the potential of rapidly going the way of Egypt and Tunisia. President Abdelaziz Bouteflika’s regime has sent mixed signals in the face of increasing discontent and street actions organized in recent weeks by a loose coalition of opposition forces, civil society groups and unions. In an attempt to defuse pressure against his government, the president indicated that he would soon lift a state of emergency that’s been in place for the past 19 years. He also said he would attempt to reduce unemployment, mediate a worsening housing crisis, and allow more political freedom, including the right to demonstrate peacefully. In addition, his regime has taken steps to reduce the cost of staple foods by importing large quantities of grains. But protests remain banned and demonstrators have been met with brute force by about 30,000 police officers deployed in Algiers. For all the appeasement signals from the top, Algeria’s regime remains adamantly opposed to legitimate popular demands. Authorities also resorted to disrupting Internet service and attempting to block Facebook accounts to prevent the demonstrators from organizing. This hardball is nothing new for Algeria’s political and business elite. Inflexibility is a trademark of the regime and its state-owned enterprises. One recent business dispute stands out as proof that Algerian officials, when faced with controversy, respond with rigidity that is often counterproductive. Sonatrach, Algeria’s state owned oil and gas producing company, has demanded nearly $2 billion from the Spanish gas company Gas Natural Fenosa. Sonatrach claims is based on the price fluctuations in natural gas delivered from 2007 to 2009 to Gas Natural Fenosa. The problem is that the amount is so outsized that, if paid, it could undermine Spain’s economic and political stability. Sonatrach is the de facto hard currency earner for Algeria, bringing in 98 percent of foreign currency receipts. As such, it is tempting for Sonatrach to press the claim and seek to collect every penny of the $2 billion. However, the claim does not make much business or political sense in the long run. It’s possible that Algeria could ultimately lose the long and arduous arbitration currently underway in European courts. But more to the point, if it reached a negotiated, fair settlement, the outcome would clearly be in the best interest of all parties. Gas Natural Fenosa and the Spanish government have made many attempts to settle the dispute amicably, but have been met with unwillingness to negotiate from their Algerian counterparts. Sonatrach has strong ties with its European energy clients. It also conducts significant business in the U.S. and can ill afford to alienate some of these reliable and growing customers. These connections are important to all sides and maintaining them requires good faith and good will. At the same time, however, both energy and money are fungible. Those customers can go elsewhere if they believe Algeria has become inflexible or unreasonable. To that end, Algeria’s rough handling of anti-government protests and its sometimes testy business dealings with foreigners threaten to mar its reputation internationally. Learning how to negotiate and compromise would not only bring Algeria more hydrocarbon revenues (even more than the $2 billion it seeks), but could also make the difference between stability and chaos. The choice rests squarely with the governing elites. If they fail to rise to the occasion quickly, these controversies may soon be left to their replacements to solve. The views and opinions contained in this article are those of the author alone and do not necessarily represent the views of the European Geopolitical Forum. Eugen Iladi is a freelance journalist, based in Washington DC, covering mostly international politics, business, energy and conflict topics. He has contributed commentary and analysis to publications including Gulf News, Al Arab, the Iraq Business News, Business New Europe, Prime Tass and many more.
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