ALGIERS- The diplomatic crisis between Algiers and Madrid has had a strong impact on the Spanish economy. The reversal of the Spanish government, led by Pedro Sanchez, on the question of Western Sahara, announcing, last March, its support for the Moroccan autonomy plan for this occupied territory, has aroused the anger of Algeria, which has taken several measures, first of all, by recalling its ambassador in Madrid.
Then, on June 8, Algiers decided to suspend the Treaty of Friendship, Cooperation and Good Neighborliness concluded with Madrid in 2022. This decision was immediately followed by a series of measures that would block the exchange of non-energy-related goods and services, including the freezing of bank domiciliation operations for foreign trade operations of products and services to and from Spain.
More than four months after these last two retaliatory measures, the consequences are increasingly visible on the Spanish side, given the losses recorded by Spanish companies trading with Algeria. According to the most up-to-date trade figures released by the ministry for Spanish industry, which run up until July, the damage can already be measured. Between June and July, “Le Monde” news website revealed, the halt in transactions between the two countries resulted in a loss of 235 million euros for the Spanish economy as exports to Algeria amounted to €66 million in June and barely €28 million in July, a total of €94 million over the two months, compared to €329 million in June and July 2021, according to statistics from the Spanish Ministry of Tourism, Industry and Trade.
In the province of Castellón, on the east coast of Spain, a business leader from the National Association of Frits, Glazes and Ceramic Pigments (ANFFECC), anonymously, expressed his disappointment about the effects of Algeria’s suspension of the treaty of friendship, good neighborliness and cooperation, which was announced on June 8, 2022. The treaty had bound the two countries for 20 years. “Immediately, customs stopped distributing our products to our customers. And the transit ships no longer wanted to load up goods in Spanish ports, since they were no longer guaranteed to be able to unload in Algeria.”
Algiers has also decided to freeze “bank debits for foreign trade operations of products and services to and from Spain,” the entrepreneur continued. “Invoicing through another headquarters in another country is also impossible, because any Spanish certificate of origin is automatically blocked. In our case, this means a 20% loss in sales.” According to the ANFFECC, the breakdown of trade relations has already cost the sector more than €50 million. Until the suspension of the treaty, Algeria was the second largest consumer of those goods behind Italy.
The website further noted that the most affected sectors are those of food industry, livestock meat, ceramics, paper, and spare parts, as well as water desalination plants.
The Spanish association of beef producers, Provacuno, also complained about the situation. “Before 2020, Algeria was our first destination for export outside the European Union [EU], with almost 20,000 tonnes sold per year. With the pandemic, the country restricted imports, and in 2021 we could only sell during Ramadan. The diplomatic crisis has prevented traffic from recovering,” said its director, Javier Lopez.
As with ceramics, the sector fears losing its share of the market, which could then be difficult to recover once the crisis is over.
In total, Spanish exports have fallen by 71% since Algeria’s decision, last June, to suspend the Treaty of Friendship and freeze foreign trade with Spain. From January to July 2022, Spain exported to Algeria for 940.2 million euros, down 15.3% compared to the same period last year.
On the other hand, according to the same data, Spain continued to import from Algeria, mainly; hydrocarbons, in particular natural gas. The two countries are linked by gas delivery contracts via gas pipeline (Medgaz).
Last July, Spain imported Algerian gas worth 514.6 million euros, up 41.9% compared to July 2021. During the month of June, Spain imported 663.1 million euros, an increase of 49.1%. In two months, Spanish imports from Algeria increased by 45.8%.
From January to July 2022, Spain imported Algerian gas for a value of 4666.8 million euros (4.66 billion euros), an increase of 108.6%.
Earlier this month, the national hydrocarbon company Sonatrach and the Spanish energy group Naturgy signed, in Algiers, an agreement on the sale and purchase contracts of natural gas linking the two companies through the Medgaz pipeline.
“Sonatrach and its partner Naturgy have agreed to revise the prices of existing long-term gas supply contracts in the light of market developments, thus ensuring the balance of their contracts on a win-win basis”, according to the explanations presented during the signing ceremony of this agreement.
The agreement was signed by the CEOs of Sontrach, Toufik Hakkar, and of Naturgy, Francisco Reynes Massanet, in the presence of the executives of the two companies.