Algeria and Italy: Cementing gas deals keeping the door to Russia ajar
Picture of Algerian soldiers guarding a gas facility. Source of the picture: Atalayar.com
29 August 2022
Following a year of frequent state visits to Algeria in which Italy's heads of state were seen to prioritise negotiations over their domestic political commitments, a gas deal tripling Algeria's supply to Italy and cementing support for enhanced infrastructure is now in place. MENA Analyst Kais Makhlouf has a briefing.
By Kais Makhlouf, MENA analyst
Algeria and Italy are going through a gas-fed honeymoon. Over the past year, Algeria has hosted a slew of state visits by high-ranking Italian officials, including President Sergio Mattarella and Prime Minister Mario Draghi. The Draghi Government’s commitment to the partnership was such that the Italian PM visited Algeria in July, even while embroiled in a domestic political crisis that ultimately led to the breakdown of Italy’s ruling coalition.
On July 18 2022, a host of agreements were announced between both countries, covering everything from counter-extremism efforts to large infrastructure projects. Crucially, Algeria committed to increasing its gas deliveries to Italy, delivering upwards of 9 billion cubic metres (bcm) in 2023, up from 3 bcm in 2021. Italy also promised support for the trans-Saharan gasoduct, a long-standing project to carry gas from Nigeria to Algeria’s coasts, which would significantly boost Algeria’s standing.
Algeria has seized the occasion to cement its role as a major energy provider to Italy. President Mattarella, on his visit to Algiers in November 2021, was accompanied by Foreign Minister Luigi di Maio, and more importantly, by ENI CEO Descalzi. Italian energy giant ENI has been operating in Algeria since 1981, and generations of employees of Algeria’s all-important equivalent, Sonatrach, have trained in ENI facilities in Italy. Energy already accounts for almost all Algerian exports to Italy, with bilateral trade valued at 5.8 billion €.
Naturally, very little of this is coincidental. Italy and Algeria stand to gain much from such a deal. With Algerian energy exports standing at over 90% of exports income, Algeria is happy to replenish its coffers through the export of gas at current rates, and will seek to diversify its portfolio away from Spanish traders, due to recent diplomatic troubles. The Algerian leadership will likewise be relieved to learn it has regained some budgetary margin of manoeuvre, with energy accounting for 40% of state budget, spent largely on managing popular discontent.
Meanwhile, Italy secures an alternative energy supply to Russian gas, in accordance with EU policy, while keeping doors open with Moscow. Indeed, Algiers is a long-standing ally of Russia, and Italy, like most major European nations, has been reluctant to cut all Russian ties. One could assume that in the mind of Italian decision-makers, Algerian gas is not only geographically convenient, but also allows for a line of communication with Moscow to remain open. While Algerian gas would not be able to compensate for the stoppage of Russian exports, it would satisfy the needs of large segments of southern Europe, with Italy hoping to leverage its role in the nascent race for energy primacy in the Mediterranean (read our piece on Egyptian gas).
Finally, new infrastructure and energy contracts could help Italy compensate for its loss of influence in north African affairs following the economic “takeover” by Turkish interests in Libya. A loss of influence Italian business circles still regret.
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