Plummeting energy prices and its impact on Algerian stability and security

Since oil revenues represent the backbone of the political and socio-economic systems of oil-producing and exporting countries in the Middle Eastern and North African region, a persistently low level of energy prices, combined with bad economic trends, can have severe impacts on these countries. It is not by chance that Algeria’s most violent historical period occurred just after the oil shock of 1986, when the country was strained by economic downturns and tensions escalated between Islamist militant groups and the Algerian army.

Since the late 1990s, however, Algeria returned as one of the main actors in the international trade of oil and gas (it is Europe’s third largest gas supplier after Russia and Norway). The massive reserves contained in its territory, which amount to more than 12 bn barrels of oil and around 160 tn cubic feet of natural gas, combined with low operating costs, should make Algeria a successful case. In the past 20 years, oil and gas rents have allowed the President Abdelaziz Bouteflika to sustain public budgets, finance government spending and maintain the pivotal elements of a rentier state, such as, for instance, the system of subsidies on housing, food, education and gas. In return for social services and redistributive policies, the President was able to mitigate political opposition and social unrest, thus assuring the stability of the regime. In fact, when the so called Arab Spring flared up across neighboring countries, Algeria escaped the turmoil almost totally unscathed.

This scenario of apparent domestic stability and international activism was completely reshaped by the collapse in oil prices, which shed the light on the limits of Algerian economic and social development: firstly, the high level of dependence from oil revenues,[1] in the absence of economic diversification, made the country extremely vulnerable to the fall in oil and gas prices, which dragged the price of a boe (barrel of equivalent) from the $144 peak of June 2014 down to the $27 of January 2016. The sudden fall of prices imposes on Algeria to implement austerity measures such as freezing employment in the public sector, postponing non-urgent large projects and increasing the taxation pool, in order to reduce government spending. In this context the government announced a 9 percent cut in next year’s budget, which will mainly affect fundamental social services such as housing, healthcare and education. In turn, deteriorating public services are likely to provoke new waves of protests from the population after the turmoil which broke out throughout 2014: in October hundreds of officers marched through the streets of Khencheka and Oran, demanding better wages and working conditions, along with public housing for their family. Similarly, in December 2014, hundreds of protesters in Touggourt, a Saharan city 600 km southeast of Algiers, demonstrated against the delay in government social handouts.[2]

Secondly, the fall of energy prices severely hit the bottom line of the main oil companies, leading to a numerous rounds of layoffs, something that could eventually turn unemployment (which is already expected to reach 11.9% in 2016) into a highly destabilizing factor. In addition, the big state company Sonatrach seems unable to break free from a series of corruption scandals, a condition that undermined any attempt to improve energy efficiency.

Thirdly, the rapid increase in local consumption of oil and gas (75% over the last decade) is not matched by an equivalent increase in production. Conversely, production is falling due to uncompetitive tax rates and such reduction risks to undermine the process of industrial and human development which is necessary for the future stability of the regime.

In conclusion, disaffection towards the regime of Bouteflika, triggered by declining oil revenues, is mounting and this poses serious risks for the stability of the whole region. As The Financial Times oil analyst Nick Butler has argued: “The danger is that economic problems, combined with uncertainty over the succession to Mr. Bouteflika, opens the door to radicalization and the spread of violence and terrorism from failed states in the region such as Libya.”[3]

The first time Algeria has been targeted by jihadist terrorist violence against oil and gas plants inside its national borders was between January 16 and January 19, 2013, when the In Amenas hostages crisis occurred. At that time, the perpetrators have been recognized to belong to Al-Qaida in the Islamic Maghreb (AQIM), the most important franchise branch of the Al-Qaida’s network.



Figure 1: Statoil and BP main gas plants in Algeria[4]


Technically speaking, the terrorist attack was unprecedented and strategically perfect. On January 16, 2013, joint venture personnel and two airline pilots took their seats on a bus outside the living quarters of the In Amenas gas facility in Eastern Algeria. After a while they have witnessed the most heavy terrorist attack against the oil and gas facilities in the country. Mokhtar Belmokhtar, one of the most prominent leaders of AQIM in Algeria, was the mastermind behind the attack. There were around 800 people at the site at the moment of the attack. Many of them have been taken hostage in a siege that lasted four days. 40 people lost their lives in the attack and 32 terrorists have been appointed responsible for what occurred.

In Amenas is one of the Algeria’s largest gas developments, which has started producing in 2006. It is operated as a joint venture between the Algerian national oil company Sonatrach, Statoil and BP. The latter has built its Algerian facilities since the mid-1950s and signed the contract for the In Amenas in 1998 (originally signed by Amoco).[5] Statoil, a Norway based oil and gas company founded in 1972 which has exerted a leading role for several years, entered in the project and bought the 50 per cent of BP’s interest in 2003 (see Figure 1). Shocked by what has been defined “the most serious international crisis the company has ever faced,”[6] Statoil commissioned an investigation report to determine the most relevant factors that have leaded to the crisis. This document probably is the most exhaustive written work on the In Amenas attack. It is of fundamental importance also for the purpose of this article because Statoil started from it to improve its capabilities to securitize its facilities in geopolitical risky scenarios.

That of In Amenas is a particularly complex geopolitical location because of several factors basically linked to the Algerian religious and political violence, from 2001 onwards. The perpetrators of the In Amenas plot were inspired by Belmokhtar, one of the AQIM leaders.

Al-Qaida in the Islamic Maghreb was officially founded in 2007, and it has not been a proper case of radicalization towards extremism. It is better referring to what has occurred to AQIM as an institutionalization process, because the group’s personnel and commander in chief belonged to the previous jihadist apparatus of the Salafist Group for Preaching and Combat (GSPC), operative in Algeria since 1998. The GSPC, inspired by its leader Abdelmalek Droukdel, shifted to Al-Qaida in order to improve its being linked to the international jihadist enterprise. In the evolutionary trajectory of AQIM, it is of fundamental importance assessing the group’s structure in two different historical waves:

  1. First-hour AQIM (2007-2008): characterized by the first connection with the Global Jihad ideology and operationally based on martyrdom operations;
  2. Second-hour AQIM (2008-present): characterized by a shift in its strategic approach that led the group to follow more regional and global objectives.

According to Jean-Luc Marret, scholar at the Center for Transatlantic Relations at the John Hopkins University (Washington, D.C.), the second wave of AQIM has coincided with a change in its geophysical operational area. From the Northern area of Algiers and the coastline, AQIM moved to Southern deserted safe havens. This shift is very common in terrorist groups organizational structure, especially when they have to face national security operations against them.[7] This has been the case of Algerian jihadist movements, especially after 2008 when the national intelligence and security task forces began to extend actions to defeat jihadist extremism. Indeed, the increasing usage of martyrdom operations and the hardness of terrorist attacks by jihadist-linked Algerian groups was intolerable to a political system, just escaped from the apocalypse of the revolutionary violence. The peculiar physical condition of Southern Algeria area allowed AQIM to perfectly create connections with local populations and local crime agents. In other words, the geographical scenario of the Sub-Saharan and Sahelian strip, due to its deserted areas, is prone to violent extremism.

Since it is not possible to completely prevent such an attack as that of In Amenas, the fact that it has occurred in this complex area confirms the high-level of alert that the Algerian government should maintain in preventing terrorism. This has become particularly evident after the sudden end of the Qaddafi regime in Libya and the subsequent radicalization of Daesh in its territories. This represents a direct threat also for the Algerian capabilities to defeat internal terrorist threats. Indeed, In Amenas is located next to the Algerian-Libyan border strip and more than 1300 km far from Algiers. Thus, it is an isolated place, where the probability that a terrorist attack will occur is really high. This is reasonably why the Statoil‘s report on In Amenas attack contains such a lapidary conclusion. Quoting it textually:

[…] Prevention of and protection against terrorism are the responsibilities of states. Statoil and the In Amenas joint venture trusted that the military would deter or detect and respond to any terrorist threat, and thus prevent it from getting close to In Amenas. For this particular attack, this could have happened at the border, in the outer military zone or in the security zone provided by gendarmes. Given this reliance on, and trust in, the military, and the influence this had on the design of the inner layer of security, it was only the Algerian military that could have prevented the attack on January 16, 2013. The economic importance of the petroleum sector and a belief that the Algerian authorities would make every effort to protect critical oil and gas facilities further deepened this trust. Even during the violence of the 1990s, the Algerian authorities managed to safeguard the oil and gas installations in south of the country, although there had been attacks on oil and gas workers and pipelines. There were strong economic incentives for the Algerian military to continue to protect this critical national infrastructure. […][8]

The In Amenas attack shed the light to the necessity of improving the effectiveness of the Algerian tools to combat violent jihadist extremism. Due to the importance of Algerian oil and gas production, the terrorist attack caused a concerted reaction inside the International Community who confirmed its willingness to support Algeria in defeating terrorism. U.S. President Barack Obama was in the front-line: “My administration would work with other countries to combat the scourge of terrorism in the region, which has claimed too many innocent lives. This attack is another reminder of the threat posed by al Qaeda and other violent extremist groups in North Africa.”[9] The international concern arisen from Western states was justified by the heaviness of the risk that had occurred at In Amenas. Indeed, AQIM had planned to blow up the entire plant site and, to this purpose, the site area had been completely filled by mines. Geopolitically speaking, attacking In Amenas was of particular importance for AQIM in 2013, due to the related situation of jihadist movements in Mali. At the time, the French-led operation Serval – under the UN umbrella – was operating in Mali in order to restore the stability in the country, shocked by jihadist extremism. Since the French colonial attitude in North African affairs is among the main factors that had fueled the homegrown radicalization of jihadist extremism during the centuries, the Malian anti-French cause was particularly endorsed by AQIM in Algeria.

Despite its progressive and massive evolutionary trajectory, Daesh has not been able to penetrate Algerian borders as effectively as in other geopolitical scenarios. Algeria has been a powerful stronghold of Al-Qaida and for this reason Daesh has not been able to penetrate jihadist movements inside the country. There have not been any formal pledging allegiance to Al-Baghadi by traditional jihadist movements. On the contrary, in other context as Philippines and Malaysia this shift has happened sharply. Probably the catalyst factor that shaped this adhesion is related to a different conception of Jihad proposed by the two geopolitical areas. Both of them – Philippines and Algeria – have been the two most important stronghold of Al-Qaida, and share the characteristic of being local movements linked with global jihad. The substantial difference between them is that while violent Islamic extremism in Algeria is ideological and historically linked to a generally perceived disaffection towards Western colonial values, in the Philippines and Malaysia jihadism is more related to a commodity choice rather than to a vocational engagement in ideological violence. Underlying these differences is not a mere circular speculation. It allows us to understand why Daesh penetrated in some environments and why in other did not.

The only traceable Daesh-linked cell in Algeria appeared to the chronicles early in February 2016, when authorities arrested 40 people at Algiers airport, who were attempting to fly to Turkey with fake passports. Their arrests came after the “discovery of alleged Daesh sleeper cells in the country that were recruiting young people for Jihad.”[10] Already in mid-January Algeria had banned all foreigners from entering the country borders, especially those between Algeria and Libya, in the Southern province of Illizi. This concern shed the light to the growing level of alert in Algeria to avoid the risk of repeating events as In Amenas.

Despite this efforts, Algerian security forces are still not able to prevent terrorist plots in those areas where Western strategic interests are more concentrated. Indeed, on Friday 18, 2016, jihadist militants attacked the other important gas plants of In Sabah (Krechba), that is basically a joint venture like In Amenas, ruled by Sonatrach, BP and Statoil. In the attack, militants used rocket-propelled grenades, without causing any damage at the gas infrastructure. Despite the ineffectiveness of this action, the joint venture lobbied Algerian government to deepen its securitize efforts, menacing it to withdraw the plants’ personnel from In Amenas and In Sabah.[11]

This last terrorist attack to oil and gas facilities imposes three operational conclusions. First, the geographical position of Algerian oil and gas plants are at the same time hotbed for terrorist groups. Second, efforts of Algerian security forces are necessary but not sufficient to prevent violent extremism. Third, the hatred of Western intromission in Algerian internal affairs sponsored by jihadist extremist groups in the country could lead to a progressive withdrawal of Western personnel from extractive sites. This determines a plummet of oil prices and a severe economic loss for Algeria. This could lead to the impossibility for Algerian government to carry out its rentier state‘s obligations towards citizens and, as a direct consequence, this could finally provoke a progressive willingness to topple down Bouteflika establishment, passing through radicalization of a new unsatisfied Algerian lost generation.

Federico Solfrini

Master’s degree in Economics and Institutions in Islamic Countries (LUISS “Guido Carli”)

Leonardo Giansanti

Master’s degree in Economics and Institutions in Islamic Countries (LUISS “Guido Carli”)

References and notes

[1] Hydrocarbons such as oil and natural gas, accounted for 60 percent of Algeria’s national budget and made up 97 percent of its national exports in 2014 according to IMF.

[2] Ould Khettab, Djamila. “Oil price slump threatens to erode Algeria’s status quo.” Al Jazeera, 2 February 2015.

[3] Butler, Nick. “Algeria- Falling oil prices add to the risk of instability.” Financial Times, 26 October 2015.

[4] Stateoil Investigative Commission. “The In Amenas Attack.” Statoil: 2.

[5] Ibidem.

[6] Ibidem: 3.

[7] Marret, Jean-Luc. “Al-Qaeda in Islamic Maghreb: A “Glocal” Organization.” Studies in Conflict and Terrorism 31(6), 2008: 541-552.

[8] Ibidem: 4.

[9] Smith-Spark, Laura and Joe Sterling. “Bloody Algeria hostage crisis ends after ‘final’ Assault.” CNN, 23 January 2013.

[10] “Scores of Islamic State suspects arrested in Algeria.” Adnkronos, 3 February 2016.

[11] “Militants fire rockets at Algerian BP/Statoil gas plant, no casualties.” CNBC, 18 March 2016.

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