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Algerian Calm in Arab Tumult Threatened as Oil Largesse Dwindles

January 09, 2013

Algeria's President Abdelaziz Bouteflika

Algeria's President Abdelaziz Bouteflika, who came to office in 1999, is now the country’s longest-serving president, following the 13-year stints by his two predecessors. Photographer: Denis Allard/AFP/Getty Images

Ait Allaoua, a 22-year-old Algerian medical student, rattles off why he’s angry with his country: rigged elections, sclerotic politicians, corruption, high unemployment, and a quagmire of bureaucracy.

Yet there’s a reason why Algeria hasn’t been engulfed by the uprisings that started in neighboring Tunisia more than two years ago and spread across the Arab world, he said.

“There is oil here, and every time the people aren’t happy the government gives them money,” Allaoua said in an interview in the capital, Algiers.

The risk for the country of 37 million people is that its ability to buy off discontent is waning. The ruling National Liberation Front is faced with diminishing oil exports, inflation, and presidential elections in 2014 where for the first time its candidate won’t carry the aura of having fought for independence against the French.

While Algeria exported $73 billion of petroleum products in 2011, according to the country’s central bank, figures from the Organization of the Petroleum Exporting Countries show oil production declined for a fourth straight year.

“Pacification through finance can’t go on forever,” said Azzedine Layachi, a professor of international and Middle East affairs at St. John’s University in New York and Rome. “Everything is in shutdown mode until 2014 and that’s when we’ll see what direction Algeria takes.”

War Weary

Memories of conflict in the 1990s between Islamic militants and the army deter Algerians from following the rebellions in countries like Libya, another oil producer, where leader Muammar Qaddafi was deposed and killed in a bloody civil war in 2011. In the Syrian uprising, at least 60,000 people have been killed in the fighting, the United Nations said last week.

“What you see in Syria now, they had every day here, it’s just that it was hidden from the world,” said Benjamin Stora, an Algerian-born historian. “This is an exhausted country that went through 10 years of civil war and 100,000 deaths.”

Angry youths rioted across Algeria in early 2011. The government responded first with riot police, then with higher wages and subsidies that have kept the country largely quiet ever since and left President Abdelaziz Bouteflika’s National Liberation Front firmly in power.

Buying Favor

The government raised the minimum wage by 20 percent to 180 euros ($236) a month. To relieve a housing shortage, the government plans to spend 40 billion euros on 2.4 million new homes by 2017. It will also build 2,500 kilometers (1,550 miles) of new roads and upgrade 8,000 kilometers over next three years.

About 12 percent of the state budget goes toward subsidies for basic foodstuff. Gasoline costs between 13 and 23 euro cents a liter, about a 10th of its price in most European countries.

“Paying people off isn’t much of a policy, and it only works until people realize that it hasn’t made them better off,” said Kader Abderrahim, a researcher at the Paris-based Institute of International and Strategic Studies.

The International Monetary Fund said on Nov. 12 that higher spending is causing fiscal “vulnerability” and rising prices. The official inflation rate is 7.3 percent. The real rate exceeds 10 percent, Layachi at St. John’s University said. Official joblessness also runs at around 10 percent.

Bouteflika, who came to office in 1999, is now the country’s longest-serving president, following the 13-year stints by his two predecessors.

New Leaders

“We need to have clearer elections, we need to allow the emergence of a new generation of leaders,” said Allaoua, the student, as he waited in the crowd along the Algiers waterfront to greet French President Francois Hollande on Dec. 19. “If Algeria was better managed, we wouldn’t be talking about unemployment. There is the money here.”

Bouteflika, 75, isn’t expected to run in 2014 because of poor health, Layachi said, making him the last Algerian president to have fought in the War of Independence.

France, which annexed Algeria in 1830, largely crushed the 1954-1958 revolt, though civilian massacres and the use of torture undercut support for the war at home, leading President Charles de Gaulle to open negotiations with the rebels and grant the country independence in 1962.

The National Liberation Front took 17 percent of the vote in the May 2012 parliamentary elections, though won more than 40 percent of seats as smaller parties were disqualified because they didn’t reach the 5 percent threshold.

“These fraudulent elections will just be an inside game of the ruling parties,” said Abderrazak Mokri, vice-president of Movement for Society and Peace, an opposition Islamic party.

Mixed Freedom

Freedom House, which monitors democracy, lists Algeria in its bottom group as “Not Free,” unlike Morocco and Tunisia, which are “partly free.” The government limits which parties can run in elections and the president has more power than parliament, it said in its 2012 annual report.

While Algeria allowed some press freedom and lifted a 19- year state of emergency in February 2011, Mokri said the policy is: “We can say what we want; they can do what they want.”

Mokri says the crunch will come after 2018 when declining oil production and rising domestic demand will deprive the government of export revenue. Oil product sales boosted Algeria’s foreign currency reserves to $180 billion in 2011, according to the central bank.

Yet crude production declined to 1.16 million barrels a day in 2011 from 1.37 million in 2007, OPEC figures show. And there’s little else to rely on. Non-energy exports were just $1 billion, and without oil the trade deficit would have been $43.7 billion in 2011, the central bank numbers show.

Social Pressure

“Buying social peace is not durable because it would just take a decline in oil prices,” said Nourredine Benissad, president of the Algerian League for the Defense of Human Rights in Algiers. “We wouldn’t be able to contain social pressure.”

The World Bank places Algeria 152nd out of 185 countries in ease of doing business in 2012, a drop from 136th place in 2011. Tunisia, where street vendor Mohamed Bouazizi set himself on fire in December 2010 and triggered the wave of unrest, ranked 50th. Transparency International puts Algeria at 105 out of 174 in its latest corruption index. While that’s better than Libya or Egypt, it’s behind Morocco and Tunisia.

For Allaoua in the crowd in Algiers, it just reflects the hurdles facing his countrymen.

“It takes a full day to register the birth of your child, if you bother,” the medical student said. “Imagine what it’s like to start up a business.”

To contact the reporter on this story: Gregory Viscusi in Algiers, through the Paris bureau at gviscusi@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

Algeria's President Abdelaziz Bouteflika, who came to office in 1999, is now the country’s longest-serving president, following the 13-year stints by his two predecessors. Photographer: Denis Allard/AFP/Getty Images Angry youths rioted across Algeria in early 2011. The government responded first with riot police, then with higher wages and subsidies that have kept the country largely quiet ever since and left President Abdelaziz Bouteflika’s National Liberation Front firmly in power. Photographer: Fayez Nureldine/AFP/Getty Images While Algeria exported $73 billion of petroleum products in 2011, according to the country’s central bank, figures from the Organization of the Petroleum Exporting Countries show oil production declined for a fourth straight year. Source: Anadarko/Via Bloomberg

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