By Edward Robinson, Culmer Raphael

Algeria is in a tight spot. Last year, a $5bn trade surplus turned into a $14bn deficit. Hydrocarbon revenues account for around 95 per cent of exports and the government needs an oil price of well over $100 to balance its current budget. Domestic consumption continues to rise, eating up around half of total production, and some economists have questioned whether domestic capital markets will be able to fund a budget deficit of the scale and duration predicted. The country faces a triple challenge: it needs to boost energy efficiency, speed-up infrastructure investment and diversify its economy.

That’s the bad news. The good news is that the government appears to be heeding Churchill’s advice never to let a good crisis go to waste. It is being candid with the public about the scale of the challenge and is coming forward with a range of measures, the sum of which could lead to a genuine improvement in the business climate, as even the IMF noted in a recent trip to Africa’s largest country (and Europe’s second-largest supplier of natural gas). Read more

By Edward Robinson, Culmer Raphael

Last December, Sonatrach, the state owned Algerian oil and gas monopoly, announced that it would be investing around $100bn in energy infrastructure over the next five years and that Algeria would invest $70bn in shale gas exploration over the next 20 years. This is on top of a recent raft of fiscal incentives aimed at attracting more foreign investment into shale prospecting.

The US Energy Information Administration estimates that Algeria possesses the third largest shale gas reserves in the world (after China and Argentina), so the investment announcement is a significant development for the EU’s third largest supplier of natural gas and is obviously of interest to the European Commission as it prepares to present its energy security strategy in the coming weeks. Read more

Even inside the labyrinthine central circle of Algeria’s governing regime, the magnitude of last month’s failure to auction off shares in the country’s energy reserves has not been lost.

While the officials that head the Agence Nationale pour la Valorisation des Ressources en Hydrocarbures (Alnaft) frantically try to determine why just four of the 31 oil and natural gas concessions the country offered to international energy companies this year were taken, former state energy executives are openly expressing their dismay. Read more

Following a decade in which Chinese largesse has helped to transform Africa’s prospects – and challenged the supremacy that western companies once enjoyed over the continent’s natural resources – Beijing has sent word to Washington that the world’s two biggest economies might combine their efforts to generate some much-needed electricity in one of the poorest.

The Democratic Republic of Congo, an expanse the size of western Europe that perennially ranks among the worst countries in which to do business, has known little but conflict and penury for decades. World Bank-backed plans to build a third dam at Inga are part of a broader vision for a dam complex capable of generating 40,000MW – twice the size of the Three Gorges dam in China. Read more

By Dalibor Rohac and Nouh El-Harmouzi

Campaigners for Abdelaziz Bouteflika, the 76-year old Algerian president who is seeking re-election for a fourth consecutive term, promise “broad democracy” if their candidate wins. After decades of oppression and authoritarianism, Algerians have little reason to believe them. Read more

Young Arabs are increasingly turning their backs on cushy public sector jobs in favour of working for private companies and starting their own businesses, a survey in 16 countries has found.

There has also been an erosion in optimism that the “Arab spring” uprisings in recent years against authoritarian governments across the region will translate into better lives for ordinary people, the survey found. Read more

By Edward Robinson, Culmer Raphael

Events in Algeria could be about to complicate the European Union’s response to Russia’s intervention in Ukraine.

As part of a second possible package of sanctions, the European Commission is drawing up options for “reducing energy dependence on Russia”, to be debated by EU heads of government at the June summit. The obvious options include substituting some Russian gas imports with supplies from Europe’s second and third largest gas suppliers: Norway and Algeria. The CEO of ENI crystallised it last week when he said that he expected a ‘gigantic’ effort to diversify gas imports in the absence of any agreement with Russia over Crimea. Read more

Algeria, with its population of 37m, its energy wealth and growing demand for modern infrastructure and consumer products, could have been a spectacular venue for foreign investment and a great economic player in the southern Mediterranean, writes Borzou Daragahi.

But because of its past and its location, Algeria is one of the toughest places to do business. Its tangled postcolonial history has enthroned a secretive leadership atop a Byzantine bureaucracy resistant to change. Read more

The choice of target in the recent bloody hostage standoff in Algeria was not by chance. By attacking the gas sector, jihadist terrorists went for maximum impact. Energy accounts for 98 per cent of Algeria’s exports and 70 per cent of tax revenue, with the In Amenas plant accounting for 12 per cent of the country’s gas output.

It is unlikely to prompt any large-scale pull-out by foreign companies, but the events cap a longer term deterioration in the operating environment of Africa’s biggest natural gas producer, where new investment has all but dried up, with steadily decreasing numbers of successful oil round awards. Read more

By Philippe de Pontet and Riccardo Fabiani of Eurasia Group

The investor and geopolitical impacts of the French-led intervention against Islamist militants in Mali will reverberate far beyond the country’s porous borders. Indeed they already have, as the grisly kidnapping of dozens of expatriates in BP’s southern Algerian gas field has shown.

Mali will continue to be the epicenter of combat, casualties, and French preoccupation, but the real risks to multinationals and foreign citizens will play out elsewhere in a vast region that spans North Africa, West Africa and the largely ungoverned Sahel which lies at crossroads of the two. Read more

The conflict in Mali has intensified following the onset of a major French military intervention and promises by Islamists to retaliate against western targets across the region. What might be the economic spillover effects of the conflict?

Mali may not play an integral role in the world economy, but many of its neighboring countries do as suppliers of key petrochemicals and minerals – so the potential for disruption from the conflict is more significant than it might at first seem. Read more

By Naguib Sawiris

Most governments in North Africa acknowledge the role of foreign direct investment in relieving poverty and encouraging economic growth – and in helping countries to respond to the challenges raised by the recent political upheavals in the region.

This is why the behaviour of the Algerian government, in threatening to rip up legal commercial agreements and investment treaties and in targeting one of the country’s largest foreign investors with a campaign of harassment and interference, is so damaging. Its actions could have a devastating impact on the business climate in Algeria and cast a shadow over the investment prospects for the whole region. Read more

Algeria’s powerful armed forces, which already run Africa’s biggest defence budget, have requested a 14 per cent spending increase for next year, as the country prepares for security threats on its southern border.

The Algerian defence ministry, still mostly run by the ageing generals who fought for the country’s liberation from France 50 years ago, has requested a $10.3bn budget for 2012, according to the South African news outlet, DefenceWeb. So what’s on the shopping list – and from whom? Read more

“Don’t forget, revolutions are expensive”, says Dimitris Tsitsiragos. He should know: his responsibilities as a vice president at the International Finance Corporation include north Africa and the Middle East, not least the countries hit by the Arab Spring.

The IFC, the World Bank’s private sector arm, has, in the last five years, boosted its annual commitments to the region by nearly 50 per cent to over $2bn. But, Tsitsiragos says it’s not enough: without more private sector involvement, the region cannot generate the investments required to produce faster economic growth and more jobsRead more

The north African nation of Algeria has hired an American company, Itron, to upgrade the metering system for its electricity power network.

US firms play a relatively major role in Algeria’s economy, but mostly in developing the oil and gas industry, rather than utilities. Read more

Algeria is Africa’s third biggest economy – yet the Bourse D’Alger is among the smallest stock exchanges in the world, with only a handful of listed companies.

Now, for the first time, the country plans to allow foreign investors to buy stocks on the exchange, though only in partnership with domestic investors. Will they bite? Read more

By Tom Gara and Josh Noble

Erecting magnificent mosques has long been a favoured way for leaders in the Islamic world to establish or enhance their political legitimacy. That tradition continued this week as Algerian authorities signed a deal with a Chinese state contractor to erect one of the biggest and most expensive mosques ever built, the billion-euro Grand Mosque of Algiers.

China State Construction Engineering (CSCE) picked up the contract in a signing ceremony in the Algerian capital. Algeria’s religious affairs minister, Bouabdallah Ghlamallah, said president Abdelaziz Bouteflika, in power since 1999, wanted to “leave his mark” by building the vast new house of worship. Read more

By Stephen Snyder of Ergo

US Secretary of State Hillary Clinton visited Algiers on Saturday and gave Algerian President Abdelaziz Bouteflika a free pass on two major issues of contention between the two countries: his government’s upcoming rigged elections and his support for Bashar al-Assad in the worsening crisis in Syria.

In the midst of a regional tour to promote democracy-building and rally international support for intervention in Syria, Clinton’s sudden silence on these issues in Algeria spoke volumes. At the root of this silence is Algeria’s position as a cornerstone in the global oil and gas market. Read more