Mired in crisis with Algeria, Spain’s exports to Algeria sharply down resulting in colossal losses for European country

BY: Hana Saada

ALGIERS- The diplomatic crisis unleashed between Spain and Algeria, last June, has not only had consequences in the energy sector but has also had an impact on others spheres.

The diplomatic crisis between Algeria and Spain has been going on for a year. It was provoked by the Spanish government, led by Pedro Sanchez, which announced on March 18, 2022 an unlooked-for reversal in its position on the question of Western Sahara, supporting Morocco’s plan for this occupied territory.

In response, Algeria took several measures against Spain, recalling its ambassador in Madrid on March 19 last year. This decision was followed, on June 8, by the suspension of the Treaty of Friendship, Cooperation and Good Neighborhood between Algeria and Spain signed in 2002.

Then, on June 9, 2022, Algeria also decided to freeze bank domiciliations for foreign trade operations of products and services, from and to Spain.

This last measure has had a strong impact on Spanish companies that depend on the Algerian market. Spanish companies trading with Algeria have suffered losses amounting to millions of euros due to this crisis.

Last March, during his visit to Algeria, High Representative of the European Union for Foreign Affairs and Security Policy, Vice-President of the European Commission, Josep Borrell tackled the “obstacles” introduced since June 2022 by the Algeria to commercial exchanges with Spain, which “must find a solution”.

Spanish exports “have fallen sharply and in a general way”

Before the crisis caused by the Spanish reversal on the question of Western Sahara, Algerian-Spanish relations had experienced their “golden age” since 2013, noted this Tuesday, April 4, 2023 the Spanish media ABC, which added that the restrictions on the banking operations for foreign trade between Algeria and Spain, imposed by the Algerian government last June, had the direct consequence of a drop in exports.

“In 2022, following the restrictive measures put in place by Algeria, our exports fell sharply and in a generalized manner in all sectors. The rate of decline accelerated from June to reach 93% in December. That month, 10.8 million euros were exported, compared to a monthly average of 169 million euros in the period “January-May 2022,”” Spain’s Secretary of State for Commerce told ABC. He also pointsed out that imports “have increased under the effect of energy prices. Over the whole year, they increased by 59%.”

According to data from the Spanish public body ICEX Spain, taken over by ABC, a total of 129,475 Spanish companies have ceased to maintain commercial relations with Algeria. “In 2022, there were 189,573 exporters, in 2021, their number amounted to 222,603 companies working in the African country. Last year, 8,934 regular Spanish exporters also ceased operations in Algeria. “The result is a sharp increase in the bilateral trade deficit, which reaches 6,575 million euros,” noted the Spanish Secretary of State for Trade.

The loss of market share in Algeria benefits other countries

The ICEX directory of Spanish companies established in Algeria gives an idea of the sectors related to commercial operations between countries. Indeed, Spanish companies are active, particularly in integrated energy engineering services, aeronautical services, tourism-related services, installation, maintenance and distribution of oil and gas, and steel products.

There are also companies active in building construction and public works services, financial services, telecommunications, legal advice, machinery and equipment for the oil industry, hydraulic infrastructure, trains, ceramics, perfumery, soft drinks and real estate development.

But, as Haizam Amirah Fernández, senior researcher for the Mediterranean and the Arab world at the Royal Elcano Institute, pointed out, quoted by ABC, “the remoteness of Algeria does not only have repercussions in economic and commercial terms: There is also talk of the loss of market share in Algeria, from which other countries benefit”. Indeed, “As for Algerian imports of various products, Italy is positioning itself to occupy the space where Spain is not currently present”, he explained.