Algeria -
On hearing a German official, Algeria expressed its official position "rejecting" the decision of the energy ministers of the European Union to ceiling gas prices in global markets, warning that the "unilateral" step would be a new bomb that would further ignite the oil markets, which are inflamed by the repercussions of the war in Ukraine.
On December 20, the Algerian Minister of Energy and Mines, Mohamed Arkab, announced that his country did not support the European Community's decision to cap natural gas prices in the energy market.
In a joint press conference with the Parliamentary Secretary of State and Minister Delegate at the German Ministry of Economy and Climate Protection, Franziska Brantner, Minister Arkab presented a number of motives behind Algeria's reservations about the European partner's step, stressing that Algeria does not support the idea of price ceilings, whatever the circumstances.
He pointed out that price ceilings directly affect upstream investments, and called for keeping markets free to continue upstream investments and achievements.
In his statement, he stressed that open, transparent and unrestricted gas markets are more than a necessity, adding that this depends on developing investments on transparent legal frameworks supported by clear financial and environmental energy policies in gas-consuming and transit countries.
Arkab's statement also carried encrypted messages to the European side - according to experts who spoke to Al Jazeera Net - when he returned to agreements with European partners to supply them with energy, especially natural gas, and stressed that Algeria remains a reliable and safe resource and that it is in full agreement with its European partners regarding long-term prices.
The Algerian minister pointed out that large investments in the field of natural gas in the medium and long term require a clear vision. On the other hand, he did not hide Algeria's fears that the oil and gas industry would be affected by the legislative changes introduced by the European Union. He singled out climate neutrality by 2050 and methane-related regulations. So too are the unilateral EU measures such as price ceilings, which destabilize the market.”
The Algerian position came in response to the decision taken by the energy ministers of the European Union, on the 18th of last December, to set a ceiling for gas prices in the event that its prices exceeded the threshold of 180 euros per megawatt hour, and the ministers justified the step by "confronting the rise in prices at the market level." The implementation of the decision will start from February 15 next.
On the other hand, the last statement of the Algerian Council of Ministers a few days ago ignored the European Union’s move to ceiling gas prices, when President Abdelmadjid Tebboune called on his Minister of Energy to start working to increase gas production in order to maintain the national consumption rate on the one hand, and to strengthen exports on the other hand in implementation of commitments. Algeria with its foreign partners.
Algerian fears
Why did Algeria reject the European decision?
And any possible repercussions on the country's oil economy?
And what winning pressure cards does the Algerian government have to “encircle” the old continent’s move after it raised its gas exports to it in 2022?
Questions posed by Al Jazeera Net to Algerian experts unanimously agreed that the European decision "will not be enforceable" for several compelling considerations, most notably:
The Europeans needed additional and permanent gas supplies.
The nature of the terms of the long and medium-term contracts signed with Algeria, which stipulate the adjustment of gas prices according to what is offered in the international markets.
Algeria's geographical proximity to Europe.
What is likely is the second hypothesis in the experts’ analyzes of Al-Jazeera Net, the announcement by the state oil company Sonatrach in Algeria, in early October, of advanced negotiations with 5 partners to review the prices of Algerian natural gas, which the Algerian oil giant considered “very advanced negotiations”, among them Spain and Italy.
Dr. Alaoua Khallout, professor of economics at the University of Batna, in eastern Algeria, considered in an interview with Al-Jazeera Net that setting a ceiling for gas prices is a violation of the market law, at a time when all Europeans are calling for a free market.
However, experts considered that the statement of the Minister of Energy and Mines also translates Algeria's fears of the impact on its investment plans to double its production of exported gas and to increase its share in the European market that is looking for outlets to replace Russian gas, at a time when Algeria provides 30% of Europe's needs of this basic commodity. .
On December 13, the Algerian president revealed his country's plans for the year 2023 to produce 100 billion cubic meters of gas, intended only for export, at a time when the country consumes half of its gas production of 102 billion cubic meters.
Limited effects
In an interview with Al-Jazeera Net, Dr. Alaoua Khallout, a professor of economics at Batna University in eastern Algeria, considered that setting a ceiling for gas prices is a violation of the market law, at a time when all Europeans are calling for a free market.
As for the possible effects of the European decision on Algeria's gas exports and on the country's economy in general (which is 96% dependent on oil revenues), he considered that Algeria is not concerned with the European decision, and that the potential effects will be on the global market, and pointed out that the European Union is facing The dilemma of not being able to implement this decision.
With regard to Algeria, Dr. Khallout explained that the country has contracts concluded with the European Union countries, at a time when Algeria and Italy agreed to deal according to current market prices, and he believes that the impact will be limited on the Algerian economy, given that the global market still needs to pump more gas. .
Scenarios of Algerian influence
As for the motives of Algeria's rejection of the European decision, even if it carries Algerian fears that the step of capping prices would include its gas exports to the old continent, Dr. Alama Khulout confirmed that this is due to the fact that the European decision does not adhere to the market rules related to supply and demand, just as the Europeans, with their decision, obstruct the fuel market. This leads to lower prices and raises Algeria's concerns, given that oil is the main source of its income.
Meanwhile, Professor Jaloul Salameh, who is interested in Algerian and international energy affairs, identified the potential impact of the European decision on the Algerian economy in two scenarios.
In an interview with Al-Jazeera Net, he said that the first scenario, which he considered "the worst", when he referred to the possibility of "Algeria stopping selling gas to any country or party", and he expected, in return, that Algeria would deal with the European Union in the event of this scenario "as countries and not as a unit."
As for the second scenario that the expert puts forward, it is that Algeria resorts to establishing a gas bloc along the lines of OPEC with countries that have a vision similar to the Algerian vision, which is "applying to the market."
political decision
As for the expert in energy affairs and deputy in the Algerian parliament, Abdelkader Breish, he classified the decision of the Europeans to ceiling gas prices in the category of "political decision", explaining in a statement to Al-Jazeera Net that it affects the fundamentals of the oil market, which are determined in light of supply and demand and the understandings made by the OPEC and OPEC Plus groups. And he stressed in the context that the European decision would be harmful to the producing countries in the first place.
He revealed that Algeria defends its point of view and the interests of oil and gas producers, which is a European and Western decision imposed on Russia.
And he considered that the position expressed by the Algerian Minister of Energy "is the fear that politics and political tensions that exist in light of these transformations will interfere and become a precedent, so that politics is used to strike the interests of oil-producing countries, and this violates the principles on which the international energy market is based, namely The market, which is organized according to the mechanism of periodic meetings of OPEC and OPEC Plus, which has proven to be effective in ensuring the stability of markets and the interests of both parties, producers and consumers.
pressure papers
With regard to the cards that Algeria possesses to prevent any repercussions on its economy from the European decision, Breish talked about a number of pressure cards that Algeria possesses, represented by its geographical proximity to Europe, and the fact that it contributes to ensuring European energy security through its share in the European market, but it can double in the years. The next, at a time when the Algerian and European sides confirm that Algeria is a reliable partner for securing energy for the northern bank of the Mediterranean, and such cards Algeria is pressing on its European partners.
He stressed that the issue of price ceilings does not serve Algeria in the matter of its investments in the energy sector to increase its production and export capabilities towards Europe.
The energy expert also pointed out that Algeria is an active member of OPEC, the OPEC Plus group, and the Organization of Gas Exporting Countries, considering that "all these cards are owned by Algeria to pressure so that the European measures taken against Russia do not affect the interference in the fundamentals of the market."
While the economist, Dr. Allawah Khallout, says that Algeria has a strong card, which is the European search for a reliable financier on a regular basis with gas in light of the turmoil that the international market knows, and this is what always puts Algeria in a strong negotiating position with Europe, especially since the Algerian gas that reaches Italy extends to countries other European.
Algeria occupies the tenth position in the world among the largest producers of natural gas and secures 11% of Europe’s gas needs. About 4.5 trillion cubic meters (25.3% of Africa's total reserves), and it ranks third in oil reserves in the African continent, which amounts to 12 billion barrels (9.6% of Africa's reserves), according to the latest report of the US Energy Information Administration issued earlier this month.
For his part, Professor Jaloul Salameh added other dimensions to the reasons for the Algerian rejection of the decision to roof the gas by the European Union, which he described as "contradictory to international treaties," and considered that it translates that Algeria has become firm in taking the decision, and that "silence on the decision means acceptance of it."
And he explained this in an interview with Al-Jazeera Net, that the roofing of oil prices, which is the backbone of the Algerian economy, is an undermining of the Algerian state as a whole, considering that any tolerance with any party means handing over part of the reins of the elements of the national economy to this party.