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Tebboune aims to extend Algeria's market access for Chinese and Russian investments, aligning with their broader African influence quest.
This article was translated from Arabic to English.
Algerian President Abdelmadjid Tebboune’s administration is advancing its agenda to enhance the country’s strategic alliances with both Russia and China across military, economic and political domains.
In July 2023, Tebboune’s official aircraft touched down in the heart of Beijing, China’s capital, with the goal of cultivating a comprehensive five-year strategic cooperation plan. This framework, originally established a year ago, aims to fortify the economic and investment ties between the two nations until 2026. The significance of this visit is underscored by its historical context, as it marks the first visit by an Algerian president to China in over 15 years, thereby bestowing it with profound importance.
About a month prior, Tebboune embarked on another consequential journey, this time to Moscow, Russia’s capital. This visit significantly contributed to mitigating the diplomatic and political isolation faced by Russian President Vladimir Putin’s regime.
During this visit, Tebboune broached subjects of great concern to the United States, including the imperative to lessen the dominance of the dollar and the euro in the global economy, and advocated for the adoption of national currencies in trade transactions. Tebboune also articulated his aspirations to establish branches of Russian financial institutions within Algeria and to augment Russian investments in the Algerian energy and food sectors. These endeavors presented a direct challenge to the Western paradigm that seeks to economically constrain Russia.
Consequently, Tebboune’s visit to Moscow culminated in the signing of a “deep partnership” declaration between the two nations, akin to the five-year strategic cooperation plan established with China. Additionally, Tebboune successfully secured Moscow’s support for Algeria’s inclusion in the “BRICS” consortium, which is envisioned to enhance Algeria’s economic interactions with Russia, China and other BRICS members.
This initiative stands as a counterpoint to the Western sway over the global financial framework. The Moscow visit also resulted in eight treaties spanning diverse spheres, encompassing the legal system, agriculture, communications, culture and even space exploration.
Tebboune’s economic and political calculations
Algeria has consistently maintained distinct strategic relations with both China and the former Soviet Union since gaining independence. However, recent years, particularly following Tebboune’s rise to power in 2019, have witnessed a notable upswing in Algeria’s political and economic ties with these two nations. This shift highlights a significant recalibration in Algerian foreign policy.
In fact, the Algerian president’s visits to Moscow and Beijing in the past couple of years merely scratch the surface of Algeria’s burgeoning engagements with China and Russia, a trend that has rapidly expanded between 2019 and 2023.
Of paramount importance is the parallel nature of these transformations with the Algerian regime’s growing dissatisfaction with the results of the “Association Agreement with the European Union,” which has been in effect since 2005 but has failed to yield any significant strategic or economic benefits for Algeria. Under Tebboune’s leadership, Algeria’s appeals for a reconsideration of this agreement have fallen on deaf ears among European leaders.
Consequently, Tebboune’s recent initiatives can be viewed as efforts to cultivate alternate avenues for economic collaboration, aiming to reduce Algeria’s reliance on its historically constrained strategic interactions with European nations.
Simultaneously, Tebboune is aware of the EU’s dependence on a relationship with his administration, given Algeria’s pivotal role as a key supplier of natural gas, which is particularly pertinent considering European countries’ need to compensate for dwindling Russian gas imports. These circumstances motivate Tebboune to venture further into nurturing his rapport with Russia and China, deviating from conventional Western interests while displaying resilience against Western pressures, and without severing Algeria’s strategic ties with European countries outright.
Moreover, the burgeoning Algerian relationships with China and Russia bolster the Tebboune regime’s arsenal of leverage and negotiation clout in its interactions with Europe which can potentially lead to greater gains in foreign relations with European countries down the line.
This new Algerian approach aligns with the economic policy championed by Tebboune since assuming power. His strategy focuses on rejuvenating and enticing private sector investments, while also cultivating non-oil exports, all aimed at diminishing the nation’s disproportionate reliance on gas production revenues. This drive led Algeria to enact a fresh investment law in July 2022, designed to furnish ample assurances, incentives and conveniences to attract foreign capital and invigorate private sector initiatives.
Thus, Tebboune is working to extend his country’s market access to embrace Chinese and Russian investments, a push that coincides with China and Russia’s quest for broader influence spheres within Africa.
This clarifies Tebboune’s determination to convene with 200 Russian investors in Moscow during his recent visit, as part of the “Algerian-Russian Businessmen Forum,” alongside his official discussions with Russian government officials. In the framework of this forum, Tebboune unveiled the details of Algeria’s comprehensive economic revitalization program, detailing the amendments pertinent to the Algerian investment landscape, all geared toward instilling investor confidence and attraction.
Moreover, Tebboune presented an exhaustive overview of the investment prospects inherent in each economic sector within Algeria, and systematically analyzed the benefits and potentialities underpinning investment in these sectors.
History of Algerian-Russian ties
Algeria boasts a rich history of positive relations with Russia, spanning back to the era of the Soviet Union. During the period of French colonization in Algeria, the Soviet Union extended both humanitarian and military support to the Algerian Liberation Front through various intermediary channels.
Following Algeria’s attainment of independence in 1962, the Soviet Union became the first state to recognize the newly formed Algerian government and establish direct diplomatic ties. This pivotal step facilitated support from likeminded governments and other socially-oriented entities.
Despite its emergence as a prominent player among non-aligned nations, Algeria managed to sustain highly amicable relations with the Soviet Union throughout the Cold War, concurrently expressing its disapproval and vehement stance towards France across multiple phases. It was evident that this foreign policy approach stemmed from the enduring scars inflicted during the colonial era, which persist as indelible imprints in the collective memory of Algeria.
After the collapse of the Soviet Union, Russian President Vladimir Putin showed particular interest in fostering ties with Algeria, culminating in a personal visit in 2006 and the subsequent waiver of Algeria’s outstanding debts to Russia. In a contrast, under the leadership of President Abdel-Aziz Bouteflika, Algeria purchased an array of light and heavy Russian weaponry, including air defense systems, fighter jets, tanks and naval vessels.
Algeria has since become the world’s third-largest buyer of Russian armaments, trailing only behind India and China. It is worth noting that Algeria was the first African nation to enter into a strategic partnership of this kind with Russia, a model that Russia has tried to replicate with other African counterparts.
Nevertheless, during the Bouteflika era, a delicate equilibrium was maintained in nurturing relations with both the East and the West, while honoring the stipulations outlined in the Association Agreement with the EU, which facilitated an open avenue for commerce between Algeria and EU member states.
Over time, the Algerian-European partnership gradually engendered a reliance on imported European goods, an arrangement that proved advantageous for European industries, accruing customs exemptions amounting to nearly $30 billion. This scenario hindered Algeria’s capacity to develop local industries, promote non-oil exports, or harness the full potential of the European partnership in terms of attracting foreign direct investment.
It is against this backdrop that the substantial transformation led by Tebboune following his rise to power in 2019 becomes clear, as Algeria strengthened ties with Russia while upholding its vital role as a gas supplier to the European market.
Following the imposition of Western sanctions on Russia, Russian entrepreneurs were actively seeking stable and emerging markets to channel their investments, diverting focus away from the markets within the EU and the U.S. This presented an opportunity for Algeria, which was looking for foreign direct investments that have been lacking from EU member states in prior stages.
At the same time, the Algerian regime needed to develop its military equipment due to escalating tensions along its southern border with Mali. This drove the regime to enhance import agreements for Russian weaponry, now constituting 80 per cent of the Algerian army’s arms acquisitions. The increasing presence of the Russian “Wagner” group in Mali further influenced Algeria’s pursuit of heightened security and military collaboration with Russia. This collaboration aimed to mitigate the repercussions of events unfolding in Mali along Algeria’s southern border.
However, as Putin openly stated during the July 2023 Russian-African summit, Russia is actively seeking secure trade routes connecting with African nations, with the goal of bolstering its exports independently from the trade corridors influenced by European Union member states.
This drive has drawn Putin’s attention toward Algeria, a key gateway to the northern expanse of the African continent that can serve as a pivotal link between Russian ports along the Black Sea and nations across central, eastern and southern Africa. This rationale underpins the discussions between Tebboune and Putin in Moscow, particularly centered on potential Russian investments in Algerian infrastructure projects.
Algeria’s bet on Chinese investments
Much like its historical ties with Russia, Algeria boasts a significant history of amicable relations with China which serve as a basis upon which Tebboune today relies to cultivate a strategic partnership with the administration of Chinese President Xi Jinping, fostering a climate of trust between the two sides.
The People’s Republic of China played a pivotal role in supporting Algeria’s quest for independence from France in 1962. Additionally, Algeria stood alongside 22 other nations in 1971, championing a proposal to reinstate China’s representation and permanent seat within the UN Security Council. Consequently, Algeria played a crucial role in reestablishing the United Nations’ recognition of China’s communist regime, following its loss of standing subsequent to the Communist victory in the Chinese Civil War of 1949.
After 2019, Tebboune has demonstrated a commitment to enhancing Algeria’s ties with China in a bid to diversify Algerian’s sources of financial backing. As a result, China has become Algeria’s foremost commercial lender and financier, accounting for approximately 17 per cent of the nation’s financial support. Notably, in December 2022, Algeria inked an agreement outlining the implementation plan for the Chinese “Belt and Road” initiative, which aims to attract substantial Chinese investments into Algeria’s infrastructure sector after the two parties signed a “comprehensive strategic cooperation” agreement that same year.
Consequently, Chinese investments have proliferated across various sectors in Algeria, spanning transportation, shipping, energy, construction, and phosphate extraction as part of China’s investment expansion strategy in Africa.
Tebboune’s recent visit to Beijing resulted in attracting $36 billion in new investments. Consequently, his strategy of fostering Chinese investments has proven successful, positioning Algeria as a key investment hub in Africa by 2023. The country now ranks among the top four destinations for Chinese investments on the continent, alongside South Africa, Nigeria and the Democratic Republic of the Congo. Algeria currently hosts over 700 operational Chinese enterprises and institutions, spanning diverse economic sectors.
In any event, a significant portion of Chinese investments in Algeria has been concentrated on the energy sector, primarily due to Algeria’s status as an oil and gas exporter. This stands in contrast to China’s previous dependence on energy imports to fuel its industrial sectors. China’s objective in this endeavor is to bolster its energy security, especially in light of recent disruptions in global oil and gas supply chains.
Concurrently, Algeria aims to leverage partnerships with Chinese enterprises to develop its oil refining capabilities and diversify its production beyond crude petroleum exports.
Through this approach, President Tebboune is steering Algeria away from over-reliance on economic ties with the European Union, a pattern that existed in the past. In tandem, he is fostering growth in Algerian productive sectors, thereby generating employment opportunities, facilitating economic advancement and reducing the economy’s reliance on income from oil and gas exports.
However, it is essential for Algeria to maintain equilibrium in its foreign relations by nurturing strategic collaborations with European Union nations, which remain a crucial and expansive market for Algerian gas. While expanding its international relationships, Algeria must avoid undue reliance on newfound partnerships with China and Russia, thereby safeguarding its long-standing ties with traditional economic allies.