Wednesday , May 25 2022
Home / Naked Capitalism / Algeria Threatens to Cut Off Gas Exports to Spain Amid Rising Geopolitical Tensions

Algeria Threatens to Cut Off Gas Exports to Spain Amid Rising Geopolitical Tensions

Summary:
As Europe’s energy crisis deepens in the East, relations are souring between the EU’s fourth largest economy, Spain, and its largest natural gas supplier, Algeria. Once again, the US is stirring the pot. Until mid-March this year, Spain appeared to hold an enviable position in Europe’s natural gas markets. While it produced virtually no gas of its own, it was also almost completely free of dependence on Russian-supplied gas, thanks largely to its long-standing commercial ties with Africa’s largest exporter of natural gas, Algeria. In 2021 Algeria provided 43% of all the gas consumed in Spain. But those ties could be on the verge of breaking, leaving Spain in a much less enviable position. On Wednesday (Apr 27), Algiers threatened to cut off the gas supply to Spain if the Sánchez

Topics:
Nick Corbishley considers the following as important:

This could be interesting, too:

Yves Smith writes Michael Hudson Talks with Katie Halper and Aaron Maté About the Broader Ramifications of the US/NATO Conflict with Russia

Nick Corbishley writes Could Spain’s Latest Spying Scandal, “Catalangate”, Topple the Pedro Sánchez Government?

Yves Smith writes Leaked Draft Opinion Shows Supreme Court Set to Strike Down Roe v. Wade

Yves Smith writes Out of Africa: Rich Continent, Poor People

  1. As Europe’s energy crisis deepens in the East, relations are souring between the EU’s fourth largest economy, Spain, and its largest natural gas supplier, Algeria. Once again, the US is stirring the pot.

Until mid-March this year, Spain appeared to hold an enviable position in Europe’s natural gas markets. While it produced virtually no gas of its own, it was also almost completely free of dependence on Russian-supplied gas, thanks largely to its long-standing commercial ties with Africa’s largest exporter of natural gas, Algeria. In 2021 Algeria provided 43% of all the gas consumed in Spain. But those ties could be on the verge of breaking, leaving Spain in a much less enviable position.

On Wednesday (Apr 27), Algiers threatened to cut off the gas supply to Spain if the Sánchez government diverted any of the energy it received from Algeria to any third countries (without naming any names).

“Any transport of Algerian natural gas delivered to Spain whose destination is contrary to that provided for in the contracts will be considered a breach of contractual commitments, and consequently, could lead to a breach of the contract that binds Sonatrach (NC: Algeria’s state-owned natural gas company) with its Spanish customers,” the Algerian government said in a statement.

Though Algeria did not name any names, it didn’t need to. Spain has been talking for months about reversing the flow of the now dormant Maghreb-España (MGE) pipeline in order to shift gas to Morocco, which has struggled to secure new supplies since Algeria closed the MGE in November 2021.

This Algiers did for a number of reasons, including as retaliation for a cyber-espionage campaign by Rabat against high-ranking Algerian officials, including the president, the minister of foreign affairs, and a former military chief of staff. A staunch defender of Western Sahara’s claims for independence and home to close to 200,000 Western Sahrawi refugees, Algiers is also livid about Morocco’s aggressive (and so far largely successful) efforts to garner international support for its territorial claims over Western Sahara.

For both Spain and Morocco the pipeline was an important source of natural gas that has now gone. Spain is still receiving gas from Algeria through the Medgaz pipeline that links the two countries by sea as well as from LNG shipments. Morocco is having to depend on domestic production, which is not nearly enough to meet domestic demand.

The new plan, hatched between Madrid, Rabat and quite possibly Washington (more on that later) would work as follows: Morocco would purchase liquified natural gas on the international market, most likely the US, which will be regassified in Spain and then piped to Morocco. The US has already replaced Algeria as Spain’s largest supplier of gas in recent months.

“Not a Single Molecule” 

But Algeria is not happy with the idea, as Geoff D Porter, the president of North Africa Risk Consulting (acronym: Narco) notes in a report on the dispute:

Were Madrid to reverse the GME pipeline and use it to supply gas to Morocco, Rabat would have slipped Algeria’s stranglehold. But not only would Rabat have devised a way to
circumvent Algeria and secure a natural gas supply, Madrid would have been complicit in allowing it to do so.

“Not a single molecule of Algeria gas sent to Spain should arrive in Morocco”: That is the condition Algiers has placed on the operation, to which Spain’s Third Vice-President and Minister for the Ecological Transition Teresa Ribera replied: Spain’s “commitment with Algeria is that not a single molecule of the gas that reaches Morocco can be attributed to gas coming from Algeria.”

Algeria’s response was to up the ante a little more by demanding that the Spanish and Moroccan governments publicly certify the origin of each batch of gas sent to Morocco through the GME pipeline, reports El Confidencial. It seems Algiers literally wants to make sure that not a single molecule of Algerian gas reaches Morocco. But that is easier said that done since the gas that arrives in Spain, whether by pipeline from Algeria or by LNG tanker from one of Spain’s 20 or so suppliers of liquified natural gas, gets mixed together in the network.

“Very Dangerous” Geopolitics

Time for a little historical context.

Western Sahara has been occupied by Morocco, just north along the coast, since 1975, the year Spain abandoned its former colony. One of the reasons why Morocco covets the territory so much is that it is home to some very valuable minerals including much of the phosphate rock on planet Earth, which, together with nitrogen, is one of the two most necessary components of synthetic fertilizer, as the 2016 Atlantic article, “The  Desert Rock that Feeds the World“, explains:

Unlike nitrogen, which makes up 78 percent of the atmosphere, phosphate is a finite resource. And there’s no way to manufacture it…

If you include this disputed region, Morocco holds more than 72 percent of all phosphate-rock reserves in the world, according to the most recent United States Geological Survey study. The next closest country, China, has just shy of 6 percent. The rest is spread out in smaller pockets around the globe. Morocco aggressively and sometimes violently argues that the notion of Western Sahara statehood is illegitimate, and that the region’s rich supply of phosphate is theirs. As a result, Western Sahara has been the stage for a growing human-rights conflict as well as significant regional geopolitical tensions.

“I’ve been to 70 countries, including Iraq under Saddam and Indonesia under Suharto,” says Stephen Zunes, an international-studies professor at the University of San Francisco.* “[Western Sahara] is the worst police state that I’ve ever seen.”

Between 1991, when the UN Security Council decided to establish a Mission for the Referendum in Western Sahara, and just over a month ago, Spain, like roughly 80 other countries as well as the African Union, supported the idea of holding a referendum to resolve the territorial integrity of Western Sahara, which has been occupied by Morocco since Spain abandoned the colony in 1975.

But all that changed on March 20, when the King of Morocco Mohammed VI read out a letter from Spanish Prime Minister Pedro Sánchez on live TV praising Rabat’s plan for sovereignty over Western Sahara as offering “the most serious, realistic and credible” way of resolving the conflict.

Before sending the letter, which completely reversed 47 years of official Spanish policy, Sánchez did not consult the Spanish parliament on the issue. In fact, he didn’t even bother to inform some of his ministerial colleagues what he was about to do, and they, like the rest of Spaniards, found out about it from Mohammed VI. Since then Sánchez has faced virtually unanimous opposition to his unilateral decision to back Moroccan sovereignty over Western Sahara, including from among his own coalition partners.

Predictably, the U.S., under the Trump administration, was the first major Western government to break with protocol and recognize Moroccan sovereignty over Western Sahara. To seal the deal, all Morocco had to do was recognize the state of Israel, becoming the second Arab country in North Africa — after Egypt — to do so.

Since coming into power Biden has, again predictably, not changed that policy in any kind of meaningful way. As Zunes told Democracy Now in February, 2021, this could have devastating repercussions not only for the welfare of Sahrawi people but also for international law as a whole.

“It’ll be very dangerous if Biden does not reverse Trump’s unprecedented recognition of Morocco’s takeover of Western Sahara. The United Nations Charter is very clear that the expansion of territory by military force is illegitimate. Trump already set the dangerous precedent of recognizing Israel’s annexation of the Golan Heights of Syria.

“However, taking  over an entire country takes it to a new level, especially as Western Sahara is recognized by the African Union as a full member state. Over 80 countries have recognized the independent Sahrawi Arab Democratic Republic. So essentially what Trump was doing was to endorse the takeover of one recognized African country by another. And failure to reverse this would signal that the Biden Administration shares the Trump administration’s contempt for fundamental international law.”

Fourteen months on, that is clearly the case. As I reported in my previous article on this topic (“Spanish Government Reaps Whirlwind After Antagonizing Its Biggest Natural Gas Supplier”) US Secretary of State Anthony Blinken recently visited Morocco where he said Washington continues to “view Morocco’s Autonomy Plan as serious, credible, and realistic, and one potential approach to meet the aspirations of the people of Western Sahara.”

The Biden administration has plenty of economic reasons for not changing course. If Spain does begin processing LNG on behalf of Morocco and then piping it to the north African kingdom, Morocco could become yet another important client for US liquified natural gas. Morocco has also launched a tender to install a floating LNG import terminal in the country. Moreover, if Spain is cut off from Algerian gas, it will become more dependent on US LNG, which already accounted for 34% of total Spanish imports of natural gas.

Morocco is also a major client state of the US arms industry, leading the MENA region in terms of the percentage of arms acquired from the US, as Morocco World News reported in 2020.

The US supplies 91% of Morocco’s arms. The remainder comes from France (9%) and the UK (0.3%).

In 2019, Morocco significantly increased its arms purchases. The development aligns with its five-year plan, established in 2017, to attain “regional military supremacy.” The country aims to modernize its army, airforce, and navy.

Morocco’s arms purchases from the US this year include 25 F-16 aircraft and associated equipment worth $3.8 billion, along with upgrades to Morocco’s existing fleet of F-16 fighter jets for $985 million. The US State Department also approved the sale of 36 AH-64E Apache attack helicopters and related equipment to Morocco for an estimated $4.25 billion…

Although Morocco is beefing up its arsenal and expanding its military budget, a separate SIPRI report ranked Morocco 31st in the world in terms of arms imports. The country accounted for only 0.8% of global arms purchases in 2019. However, Morocco is one of the top three arms importers in Africa, after Egypt and Algeria..

Algerian Bluff?

Washington also seems to have managed to convince France, Germany and now Spain to also back Morocco’s territorial claims, regardless of the harm it may cause to Europe’s economic, energy or geostrategic interests. According to Arab Weekly, some states have even arranged with Morocco to establish their own consulates in the disputed territory. This is all happening at the same time that the US and its NATO allies are constantly invoking the language of international law with regard to Russia’s invasion of the Ukraine.

Of course, it is perfectly possible that Algeria’s threats are simply a big bluff aimed at pressuring Spain to reverse its policy on Western Sahara. As the Arab Weekly pointed out on Thursday, Algeria has previously said it would stick to its contractual agreements with Spain, regardless of the row over the Western Sahara:

Talking on national television, Saturday, Algerian President Abdelmadjid Tebboune had described Spain’s endorsement of Morocco’s autonomy plan for the Western Sahara as “morally and historically unacceptable”. But he added, “We assure the Spanish friends, the Spanish people that Algeria will never abandon its commitment to supply Spain with gas under any circumstances.”

There is also the fact that Algerian reserves have stagnated in recent years and are in dire need of outside investment to open up marginal fields. It also has limited LNG capacity. As such, it may struggle to find buyers quickly enough to replace Spain. Algeria did recently sign an agreement with Rome to provide Italy with an additional 9 billion cubic meters annually, but that is not supposed to come into effect until 2023-2024.

If Algiers doesn’t find new buyers quickly enough, it could end up losing out financially. But that may be a risk worth taking given it is currently selling gas to Spain and Italy at well below current spot prices, says Porter:

Algeria’s export contracts are almost all long-term contracts, and it has missed out on the spot market windfall of the last 12 months. Furthermore, production constraints mean that it has not been able to capitalize on the spike in natural gas prices resulting from Russia’s Ukrainian invasion.

Suspending gas shipments to Spain would do double duty. First, it would free up Algerian gas volumes that it could sell on the spot market for higher prices than it was getting from Madrid. Second, it would make Madrid feel the pain for having switched its position on Western Sahara in favor of the Moroccan approach. Spain would be compelled to compensate for lost Algerian volumes by buying more US LNG, which is presently the most expensive gas on the market.

That would be great news for US energy producers but not so much for Spanish consumers or businesses, or for that matter US energy consumers since the more the US exports its natural gas, the higher prices rise domestically. There are also serious doubts, as reader Rev Kev notes and as I reported in a previous article, as to whether US energy producers will be able to continue supplying Washington’s geopolitical partners with LNG and keep meeting the needs of the domestic market. Whatever happens, one thing is sure: Spain will be buying its gas at more expensive prices going forward

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.