Gas bonanza may help Algeria gain time to delay catastrophe, but for how long?

Algeria has announced painful reforms including subsidies cuts on which the social peace hinges to try to save its crumbling finances, but all the reforms have vanished as the oil and gas bonanza offer the regime space to gain time and delay reforms as the country heads straight to economic collapse.

Before the Russia-Ukraine war flared up, the public finances of the Algerian regime were on the verge of collapse prompting it to cut vital imports- including medicines, foodstuff and cars- and promised to reduce subsidies on basic goods, in crisis management measures that were meant to mitigate the impact of financial collapse. But Putin saved Algeria by his war on Ukraine which sent gas and oil prices skyrocketing giving Algiers some room to further delay reforms.

“Oil-extracted revenues have long been the regime’s preferred method for purchasing social peace and citizens’ political allegiance,” Dalia Ghanem wrote in a recent OP-ED on Middle East Eye.

“The regime uses hydrocarbon money to distort the political process, supporting pro-regime incumbents during elections and enabling them to improve economic opportunities for the regime’s clients and allies,” she said.

The other pillars on which the Algerian authoritarian regime rests are the army and repression as well as the co-option of political opponents and the fragmentation of the civil society in addition to maintaining corrupt circles to buy allegiance, Ghanem wrote in a recent book.

In 2011, amid the Arab Spring protests that engulfed Tunisia, Algerian youth took to the street against the backdrop of higher foodstuff prices. The protests were quelled by a mix of police repression and generous direct handouts. Back then, the state has amassed enormous wealth standing as the 13th country in the world in terms of foreign exchange reserves.

Likewise, Algeria is taking advantage of its newly found oil and gas rent to distribute direct stipends to 1.5 unemployed people.

But the expensive oil and gas bracket will close soon as the world heads to clean energy. Oil and gas exporters have this decade to make this profit and prepare for a diversified economy to survive the energy transition. Algeria seems more bogged down in short-term policies to buy social peace at the expense of preparing the economy to the challenges of the post-fossil fuel era.