What is Spain at stake if trade relations with Algeria are broken?

From the EU, the Algerian position is considered "extremely worrying" and a call is made to "reconsider its decision" to break the friendship treaty.

The Government of Spain is preparing for a possible legal battle with Algeria in the event that the African country fails to fulfill its commercial commitments with Spain, especially the export of gas.

Relations between the two countries have become extremely tense since the Spanish government changed its position on Western Sahara and admitted that the Moroccan proposal to convert the territory into one of its provinces was the "most serious, credible and realistic" way to solve an entrenched conflict.

Thus, after the President of the Spanish Government, Pedro Sánchez, reaffirmed his turn on this issue, and the European Commission approved the Iberian exception to limit the price of gas in Spain and Portugal, this Wednesday Algeria considered the Treaty of Friendship, Good Neighborhood and Cooperation with Spain, signed in 2002, and shortly after it announced that it would freeze banking activity for commercial operations to and from Spain.

The Spanish Government is studying the practical implications that these movements will have, but the Minister of Ecological Transition, Teresa Ribera, has already announced that if the contractual commitments are not fulfilled, the problem could be complex to resolve, reaching "arbitrations" or " courts".

For this reason, the Spanish Executive is studying a possible complaint against Algeria before the EU, since this unilateral freezing of trade between the two countries could violate the Euro-Mediterranean Agreement signed in 2005, which establishes a preferential regime of association between Algeria and the community bloc.

The Spanish Secretary of State for Trade reports that Algeria bought products worth 1,242 million euros from Spain between January and August 2021, while it sold goods worth 2,556 million euros to the European country, mostly hydrocarbons.
The gas at the heart of the problem

Of particular concern is the supply of natural gas, since Algeria has been the main exporter of gas to the Iberian country for the last fifty years. This trend was only broken in January of this year, when that first position was occupied by the US after Algiers decided to close one of the two gas pipelines that supplied the Iberian Peninsula, the one that ran through Morocco. Thus, exports of Algerian gas to Spain went from 40% to 25% in recent months.

Furthermore, gas prices in international markets are also a serious concern. Fired since last year, and even more since the Ukrainian conflict began, they have a disproportionate weight in the electricity bill in Spain, since all electricity, even that generated with much cheaper technologies, is paid at the price that marks in the market.

That is why the news this Wednesday that the European Commission approved the 'Iberian exception' proposed by Spain and Portugal, which from now on will allow them to limit the price of gas in the electricity price formation mechanism, had been received with relief. However, it may have been a spur for Algeria to hasten its economic decisions with respect to Spain.
The companies transmit that there is "no difficulty"

The Minister of Foreign Affairs, José Manuel Albares, has stated that the energy companies that have commercial relations with Algeria have told him that "there is no difficulty" in maintaining the flow of gas between the two countries.

"We will give a serene and constructive response, but also firm in defending the interests of Spain and Spanish companies", warned Albares, who recalled that on April 24 the Algerian president, Abdelmadjid Tebboune, maintained that the supply of gas to Spain was guaranteed.

Prices' check

For her part, the Spanish Finance Minister, María Jesús Montero, has reiterated that energy supply or other contracts do not run "any risk", although she has also emphasized that non-compliance with the commitments could lead to affected companies to wage a legal battle in defense of their interests.

However, there are still more fringes to polish in this conflict. In the midst of an energy crisis fueled by the Ukrainian conflict, Algeria offered to maintain gas prices to all countries, with the exception of Spain.

The warning comes at a time when the Algerian public company Sonatrach and the Spanish giant Naturgy are negotiating the revision of the prices of their supply contracts for the next three years.

From the Spanish sector it is reiterated that this is an ordinary review, but the negotiations could be influenced by the bilateral relations between the two countries.
The EU supports Spain

The EU has already asked Algeria to reconsider its decision to freeze relations with Spain. The European Commission considers "extremely worrying" the suspension of the Treaty of Friendship, Good Neighborhood and Cooperation between the two countries.

"We appeal to Algeria to reverse this decision," said the chief spokesman for the Community Executive, Eric Mamer, at the institution's daily press conference on Thursday.

Also the spokeswoman for Foreign and Security Policy of the EU, Nabila Massrali, has urged Algeria to "reconsider its decision". "The suspension of the friendship treaty with Spain, signed in 2002, is extremely worrying and we call on Algeria to reconsider its decision," Massrali requested.
Algeria considers "unjustifiable" the new Spanish position on Western Sahara

The measures taken by Algeria respond to the change in position of the Spanish Government – ​​"unjustifiable", according to Algiers – on Western Sahara, a former Spanish colony that the UN considers a territory yet to be decolonized and over which Morocco has claimed its sovereignty since Spain withdrew from the area in 1975.

In principle, the solution established for the conflict within the framework of the UN, and which until recently was also defended by the Spanish authorities, passed through a referendum on self-determination of the Saharawi people, an option that Algeria also supported.

"The Spanish authorities have launched a campaign to justify the position they have adopted on Western Sahara, a violation of their legal, moral and political obligations as the administrative power of the territory that weigh on the Kingdom of Spain," declared the Presidency of the Republic of Algeria, referring to the change of position of Spain, which on March 18 gave its support to the Rabat proposal to convert the Sahara into Moroccan autonomy.

The Algerian president had already declared in an interview on public television on March 25 that "what Spain has done is unacceptable, ethically and historically" and reminded the Spanish government that "its responsibility remains in Western Sahara in the face of legality international", since Spain continues to be considered as the administering power.
Multilateral geopolitical conflict

Behind the open conflict now between Spain and Algeria there is a geopolitical dispute in which there is a multiplicity of actors.

In the center is the sovereignty of Western Sahara at stake, with Morocco claiming it for itself, with the Polisario Front representing the Saharawi people and calling for a self-determination referendum, and with Algeria and the vast majority of the international community defending the latter option.

Things began to change in this entrenched conflict for almost 50 years when President Trump, just before leaving the US Presidency on December 10, 2020, recognized Moroccan sovereignty over the former Spanish colony in exchange for the full reestablishment of diplomatic relations between Rabat and Israel, a priority partner of the US government. The deal included US arms sales to Morocco worth $1 billion.

Another turning point was experienced in April and May of last year, when Spain gave a humanitarian welcome to the leader of the Polisario Front to provide him with medical care and Morocco responded by opening its border with the Spanish enclave of Ceuta, causing an unprecedented migration crisis.

Furthermore, although it might seem that in a European Union-Morocco negotiation, the latter is the weak party, this is not really the case. The community bloc depends on its neighbor to the south to control both the migratory flow to Europe and arms trafficking and, lastly, and perhaps most importantly, the terrorist movements in North Africa.

Now other economic and commercial issues are added, since with the beginning of the Ukrainian conflict, the US is becoming one of the most important exporters of gas and hydrocarbons to Europe, in the midst of a global energy crisis, which makes it more difficult to escape their pressures.

So, although the reasons that led to the historic change of position of the Sánchez government on Western Sahara, which has caused this crisis with Algeria, are not known for sure, all these issues could have influenced the decision-making decisions.