Cooperation between the United States of America and Algeria

Few years ago, in a trip in the United States from Washington to Chicago, South Carolina, Virginia and New York, I met important political, financial and economic personalities that I shall always remember, in particular a discussion with a senior official of the Department of the Treasury in Washington. I told him “there must be cooperation between the United States of America and Algeria and a strengthening of this cooperation in the economic and security fields and beside that I am wary of some of the French positions.
His answer was the following and served me later on as a lesson; I quote as of my memory: [ . . . ]

Advertisements

“Lesson in geo-strategy in the United States of America”

Few years ago, in a trip in the United States from Washington to Chicago, South Carolina, Virginia and New York, I met important political, financial and economic personalities that I shall always remember, in particular a discussion with a senior official of the Department of the Treasury in Washington. I told him “there must be cooperation between the United States of America and Algeria and a strengthening of this cooperation in the economic and security fields and beside that I am wary of some of the French positions.

His answer was the following and served me later on as a lesson; I quote as of my memory:

“Mr Mebtoul, you are a serious intellectual, so let us avoid any emotions…  There are no differences of policy between the United States and Europe including France but only tactical divergences. North Africa and particularly the Maghreb region formerly French colonies, the USA work closely with the French economic and security services because of their knowledge of this region and the US do take any of their comments into consideration. . .”

“As for your country, Algeria, we consider cooperation with it as strategic and this is in all areas.”

In conclusion, may be a few small changes, but in the light of experiences, ikl is unlikely, foreign policy in its broad directions and constants of the States United of America and the France change for electoral reasons.

In conclusion, perhaps a few small changes, but in the light of experience, it is unlikely that foreign policies of the United States of America and France would change for electoral reasons.

That was then and in the light of the recent statements of some US officials, in the face of the new global geostrategic changes, the prospects for both safe and economic cooperation between the new administration of the United States of America and Algeria should be based on shared prosperity.

We must never forget that the power of a Nation and its diplomatic efficiency are based on its economy and that the United States has a global strategy; American officials I contacted speak about the necessary stabilization of North Africa and give priority to the integration of the Maghreb. The Deputy Under-Secretary of State for Egypt and the Maghreb, John Desrocher welcomed Algeria’s efforts on February 3rd, 2017 in the stabilization of the region and “its quality contribution” towards the resolution of the Libyan crisis and stabilization of the region, pointing out that the American economic operators could contribute to this effort as long as Algeria carries on “improving its business climate and diversify its economy”.

Cooperation.  In the security and economic fields only ? 

Due to the weakness of Trade in 2015, for several factors, including the economic downturn in China, a severe recession in Brazil, a drop in oil and other commodity prices and the volatility of exchange rates, according to the IMF and the WTO official statistics, world trade in volume growth remained slow in 2015, at 2.7%, and was roughly equal to that of the world GDP, which amounted to 2.4%.  Despite positive growth in the volume of trade, the value in current Dollars of exports of goods has decreased by 14% in 2015, falling to $16,000 billion, due to the decline of 15% of the export price.

At current prices, the gross domestic product (GDP) of the USA for a population of 324 million people, in the 4th quarter of 2016, reached $18,861 billion with a soft growth in 2016 according to the Department of Commerce as of end January 2017 of 1.6%. For 2015, the GDP of China was $11,385 with relatively lowest growth in 15 years (6.5% in 2016), Japan $4,116, Germany $3,371, the UK $2,849, France $2,488, India $2,183, Italy $1,819, $1,800 Brazil, Canada $1,573, South Korea $1,393 and Spain $1,235 billion. The European Union including Britain, with a GDP of $18,081 billion for a population of 510 million, remains the world first economic power; its rate of growth in 2016 has been higher than that of the USA.  Thus the USA and Europe for less than a billion people represent more than 40% of global GDP estimated at $75,700 billion in 2016.  Yet to have an objective assessment, the GDP per capita should be considered.

Meanwhile, the United States economy remains a key driver of growth for the global economy. Fluctuations in its GDP, the level of its international trade and monetary policies are followed closely by world Governments and international financial markets. Major trading partners of the United States are China, Canada and Mexico, the two partners in NAFTA, Japan, Germany and the United Kingdom; Germany and China ranking second and third, respectively. The United States remains the first trading nation (in value), their imports and their exports.

Commercial opportunities between the U.S. and Algeria outside hydrocarbons, Algeria being after all interested in the transfer of technical know-how and managerial expertise with the presence of important American companies, so as to promote cooperation especially in the field of new technologies, industry, services, agriculture and the building and infrastructure sector not to mention training. In 2013 a contract between the Algerian SONELGAZ group and the US General Electric (GE) was signed for a partnership in an industrial complex of manufacture of gas turbines in Algeria for an investment of $200 million. A company was agreed, as owned 51% by SONELGAZ and 49% by GE, will produce between six to ten turbines for gas by year 2017 — a capacity of 2,000 MW, part of which could be exported. In addition, GE won a supply contract of turbines for gas and steam with a capacity of 8,400 MW for an amount of $2.2 billion, intended to equip six power stations that Algeria plans to build by 2017.

In 2015/2016, directly and indirectly the Algerian economy was dependent on hydrocarbons to 97% of receipts in foreign currency and exports of nonhydrocarbon at 6% being made up of more than 60% of derivatives of hydrocarbons. The nominal GDP of Algeria, deflated by the Dollar that averaged of DZD109/110 per Dollar is projected to be $166 billion in 2016 against $172.3 billion in 2015, according to forecasts by the IMF for a population exceeding 40 million inhabitants.  On the trade balance as a customer in 2015, the United States represented $1,977 billion, a drop 59.04% from 2014 and as provider $2,710 billion, down from 5.48% in 2014. While exports to the USA in 2012 (source Algerian Customs), were estimated in 2012 at $10,778 billion and imports of $1,651 billion.

The United States, future energy competitor to Algeria?

Energy security is the paramount economic strategy of the USA which imported between 2011/2012 nearly 20% of its energy needs primarily from Mexico and Venezuela, the Gulf countries and few countries of Africa including Nigeria and Algeria.

What was the impact of the recent rebound of US production of oil and gases, led by technology advances that allowed extracting these non-conventional resources, and reduce their imports of oil and gas and recently in 2016 to become exporter to Europe?

The developments of unconventional resources in the U.S., such as shale oil and gas, have a major impact on prices. In view of these forecasts, the country should reach the Holy Grail of energy independence by 2020. Self-sufficiency in energy announced by the first world power will no doubt have geopolitical consequences. In the first place, the U.S. policy in the Near and Middle East will probably undergo few strategic modifications insofar as changes in the factor “energy dependence” or more precisely, “securing access and energy supply” will become less sensitive.

This will lead to a redefinition of the American national objectives, where the United States, which was in the recent past, the largest importer of oil in the world, did not hesitate to trigger or promote wars and conflicts in Africa, in the Near and the Middle East or Latin America, in order to secure their energy supply. Now soon be self-sufficient, their intervention in these areas will be based on new considerations, including that linked to the growing influence of China. This new situation can only lead to geostrategic upheaval in both political and economic arenas especially of the Algerian economy.

The development of unconventional gas in North America has closed this market to Algerian exports and weighed on prices in the spot markets, which raises the question of the profitability of exports of LNG. The ‘profitable price’ of an MBTU, the unit of measurement of the gas industry, would be for SONATRACH from $9 to $10 for the pipeline and $13 to $14 for LNG. Could Algeria that has averages LNG units size with relatively high costs compared to its competitors, requiring significant transport costs, compete to its supply to Asia, with Russia, Iran and even Qatar?

Security co operation

Moreover, the data sheet as of end of January 2017 of the Department of State of the new American administration notes that Algeria is a “strong partner including its intense work in the field of counter-terrorism and its efforts for the stabilization of the region of the Maghreb and the Sahel… These analyses come together with classified documents of the CIA and FBI and a document composed of 6 chapters of the security of the U.S. Congress research service dealing essentially with the question of Government and politics in Algeria, developed between 2013/2014 whereby the USA recognize that Algeria’s military power and dominant economy in the Maghreb region represented a key partner to the United States in its efforts to combat international terrorism

This cooperation in the area of security has taken such intensity that the leaders of the two countries have decided to structure them in a formalised framework and give a regular character in the bilateral consultations, for a better organization and visibility of the relationship between the two countries. It is for this purpose that the strategic dialogue Algeria-USA was established and the first meeting of which was held in October 2012 in Washington, after the 5th session of the 2 countries joint military dialogue. The United States considers this strategic dialogue as “the Foundation” on which the United States and Algeria aim to strengthen their future relations in political, economic, cultural, scientific and security areas. This rapprochement between the 2 countries therefore translates the convergence of views on issues of regional and international interest.

But let us not forget that the United States has a global strategy that does not fundamentally differ from that of Europe (existing tactical differences) with as a base its economic interests and its insistence for the integration of the Maghreb, under segment of the Africa continent, whose economic control through rivalries including China will be a major challenge of the 21st century.

Diversify the economy so as to establish the effectiveness of Algeria’s diplomacy

Protectionism and the advent of populist regimes are likely to accelerate this trend with a slow growth of the world economy with a negative impact on the price of oil, accentuated by the new US policy of subsidizing non-conventional energy, distorting all forecasts of OPEC countries strategy which incidentally doesn’t represent in 2016 more than about 33% of the world marketed production.

 We must not overlook the fact that the hydrocarbons based rentier economy would not be a guarantee of development if it is wasted and that the power of a Nation and diplomatic effectiveness were based on its economy. Recent events, in Libya, in Mali, in the Sahel, in Syria, the important discoveries of oil and especially gas in Eastern Mediterranean and Israel security to which the USA place strategic importance, foreshadow important geostrategic compositions at the level of the region. The USA intend to play a major role in this reconfiguration and Algeria, subject to improved governance and greater realism in new international relations, is a key player for the stabilization of the region

Adaptation strategies are required both in the economic, the political as well as in security policies, taking into account the new fourth global economic revolution which looks inevitable, at horizon 2020/2030, away from the outdated patterns of the mechanical age and the building and infrastructure development models of the 1970s / 1980s.  That might involve some sort of a cultural revolution in the Algerian leadership and would certainly raise the urgency of the transition from a rentier economy to an economy away from hydrocarbons, that would be dependent on good governance, as based on enterprise and knowledge and to glimpse at the start of the energy transition (new model of consumption) taking into account the strong domestic consumption, where widespread and poorly targeted subsidies risk to bring a premature exhaustion of the rentier cushion by year 2025/2030 with a population exceeding 50 million inhabitants.

 

Conferences and debates of Professor Abderrahmane MEBTOUL, who is guest of MaghrebEmergent‘s RadioM in Algiers on Wednesday 08/02/2017 – 9:30am – 11:30am  where he will be discussing before a panel of journalists ‘the socio-economic situation and prospects of the Algerian economy and economics of the future legislative election set for May 04, 2017’.  He will also be discussing “Algeria facing the fourth economic revolution and the energy transition” and questions of national and international news.

– All are cordially invited .

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s