Why Change at the Top Might Not Be Enough in Algeria: QuickTake

ALGEIRS (Capital Markets in Africa) – Bowing to almost two months of mass protests, Algeria’s ailing, octogenarian President Abdelaziz Bouteflika resigned. The announcement may not be enough to quell the unrest that’s being watched closely in Europe and elsewhere and that’s invoked comparisons to the Arab Spring of 2011. Algeria is not only one of Africa’s largest energy producers but has been a bulwark against Islamist militancy and undocumented migration from other parts of the continent.

What else do the protesters want?
They’ve called for the departure of not just the president but also of possible successors who have helped prop up his 20-year rule. Prime Minister Ahmed Ouyahia resigned on March 12, for instance, but was replaced by another member of the old guard, Interior Minister Noureddine Bedoui (who is leading a transitional government). Oil and finance ministers were then replaced in a cabinet reshuffle that kept the powerful army chief of staff, Ahmed Gaid Salah, as deputy defense minister. “The regime is attempting to placate protesters,” says Riccardo Fabiani, an analyst with research consultants Energy Aspects Ltd. “They will need to see concrete reforms.”

Why did Bouteflika fall from favor?
He’s the only ruler a significant portion of the country’s young population has ever known. But for many Algerians, the 82-year-old president — addled by a stroke in 2013 and rarely seen in public — is a front for shadowy coalition of military, intelligence and business leaders who effectively run the country. The group dominates the National Liberation Front, known by its French acronym FLN, which has ruled Algeria since the country won independence from France in 1962.

Who can replace Bouteflika?
It’s not yet clear who might emerge to lead Algeria until an election is scheduled. With Bouteflika’s resignation, the military, political and business leaders running the country need to agree on a consensus candidate soon, even though they haven’t managed to do so during recent relative peaceful years. Algerians who remember the decade-long civil war that ravaged their country after the military overrode an Islamist electoral victory in 1991 respect Bouteflika’s role in ending the conflict and credit him with restoring calm. But the younger generation is rejecting another Bouteflika-like figure as their next president.

Has an opposition candidate emerged?
The opposition is weak and fragmented and hasn’t yet been able to unify around a presidential candidate.

What prompted the protests?
They erupted in the capital Algiers after Bouteflika announced he would run for a fifth term. Demonstrators say they are fed up with corruption and high unemployment. The protests have grown to include strikes by workers, teachers and students, as well as the closure of some shops and suspension of train services. (So far, demonstrators and the police have gone to great lengths to keep the gatherings peaceful.) In 2014, Bouteflika used a mix of water cannons, food subsidies and wage increases to contain smaller protests against his re-election. That increased state spending by 16 percent, which was a manageable challenge when oil traded over $100 a barrel.

Can’t the government do that again?
Handouts would be more difficult this time around because Algeria’s economy is still struggling to cope after four years of lower crude prices. Inflation is rising, and the country’s foreign reserves are projected to plummet to $67 billion this year from $177 billion in 2014, according to the International Monetary Fund. Algeria’s budget deficit peaked at 16 percent of GDP in 2015 but has since narrowed.

What does unrest mean for oil and gas?
Except for a few protests at energy facilities, demonstrations have largely been held far from oil and gas facilities, which are located in remote areas. The state-owned oil company Sonatrach said production hasn’t been affected. Investors are still concerned that strikes may spread to Algeria’s energy industry. There’s also the risk that changes to oil and gas officials could affect deals with international companies. Sonatrach has been at the heart of multiple corruption probes and has had six chief executives since 2010. Algeria just named its sixth energy minister over the same period, replacing Mustapha Guitouni with Mohamed Arkab, the former chief executive of the state power and gas utility Sonelgaz.

How important is Algeria to world energy supply?
Algeria is a member of OPEC but one of its smaller producers, pumping about a million barrels of crude a day. Still, it supplies more than 10 percent of Europe’s natural gas (making it the third-largest supplier after Russia and Norway), which it exports by ship and pipelines under the Mediterranean to Italy and Spain. The country has ambitious plans to develop its onshore and offshore gas fields, start a trading business, revamp and build refineries and boost output of petrochemicals. The expansion hinges on stable political leadership and new laws that would attract foreign investors.

Source: Bloomberg Business News