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Algiers Port, General View of Algiers on 24 November 2017 Algerian voters are choosing new local leaders in an election marked by the frustration of growing poverty caused by low oil prices. Billal Bensalem / NurPhoto
Report 192 / Middle East & North Africa

Breaking Algeria’s Economic Paralysis

Political paralysis in oil-dependent Algeria has blocked much-needed economic reform. To avoid a new era of instability, the government should increase transparency and accountability within state institutions and the private sector, as well as improve opportunities for the country’s burgeoning youth.

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What’s new? Since the 2014 oil price drop, Algeria’s economic model, which emerged from the civil war in the 1990s, appears increasingly unsustainable. Despite repeated reform promises, the political system remains paralysed, led by an aging and ailing president who seems primed to embark on another five-year term following elections in 2019.

Why does it matter? An adaptation of Algeria’s economic policy is long overdue. Yet uncertainty surrounding an eventual presidential succession and a state-dependent entrepreneurial class seeking to protect the status quo are hindering progress on imperative reforms needed to navigate the challenges of the decade ahead.

What should be done? Cautious initial steps could include improving transparency of public finances, launching a broader discussion on the challenges Algeria faces and how best to address them, and placing young Algerians – the bulk of the population, whose future is at stake – at the centre of discussions on reform.

Executive Summary

Algeria’s longstanding need to diversify its economy away from hydrocarbons has gained fresh urgency since oil prices started falling dramatically in 2014. New financial realities have rendered the preceding decade’s high spending unsustainable, rapidly emptying state coffers and increasing the deficit. But despite successive governments’ vows to implement reforms and rebalance state finances, political paralysis has militated against decisive policy. Recent history – memory of the economic recession of the 1980s and the ensuing political instability which led to civil war in the 1990s – hinders government efforts to seek a political consensus on reforms and implement them. Yet a failure to reform could precipitate a new period of instability. To resolve this conundrum, the government should pursue greater transparency and better communication about the economic challenges the country faces, greater inclusivity vis-à-vis socio-economic stakeholders, and a sharper focus on the youth demographic in particular.

Two chief obstacles stand in the way. Politically influential vested interests seek to protect the status quo, which benefits a state-dependent business class. And political factors dampen enthusiasm for a more aggressive approach: memory of the political turmoil and bloodshed that followed austerity measures and political reforms in the 1980s and 1990s lingers. Acknowledgement that generous state spending helped pacify the country in the aftermath of the “black decade” of the 1990s, when as many 200,000 Algerians died in fighting between the state and Islamist groups, has made the government understandably cautious to reverse it. And the question of presidential succession and what legacy Abdelaziz Bouteflika, president since 1999 and the architect of national reconciliation, will leave behind looms large. Bouteflika appears intent on running for a fifth five-year term in elections next April, despite his poor health and public calls for him to pass the torch to a new generation, a factor that contributes to a general sense of paralysis.

Despite an increase in revenues in 2018 due to a recovery in oil prices, a potential economic crisis could come as soon as 2019.

Despite an increase in revenues in 2018 due to a recovery in oil prices (which might not last), a potential economic crisis could come as soon as 2019. It could thus overlap with tensions surrounding the presidential election (which Bouteflika is expected to win easily should, as expected, he run again), and, beyond that, a looming leadership transition. To stave off a crisis, the government has carried out successive rounds of spending cuts, which will take time to deliver results, and implemented an expansionary monetary policy, which fuels inflation and merely serves to buy the government time without addressing underlying problems. Although officials have outlined a broader agenda of industrial diversification and subsidy reform, among other measures, both local and foreign experts say an overarching strategy for reform is still missing. Entrenched political and business interests have too many incentives against change and are squandering the opportunity to get ahead of the curve of a potential fiscal crisis that, if handled too late, will demand more painful and destabilising policies.

The political uncertainty surrounding economic policymaking was evident under Prime Minister Abdelmajid Tebboune in 2017, who was ousted after attempting aggressive changes to economic policy. His replacement, Ahmed Ouyahia, is a three-time former prime minister and a pillar of the establishment; what he lacks in novelty he makes up in experience and ability to navigate the government’s murky internal divides. Ultimately, however, any government is limited by the growing paralysis – whether on economic policy or elsewhere – of Algeria’s strongly presidential system, a reflection of Bouteflika’s health and the uncertainties around how his eventual successor will reshape the relationship between political power, the public sector and the private sector.

In time, Algeria will have to make more than marginal technical adjustments to its economic policy. It should seek to renegotiate an implicit social contract between the state and its citizens long constrained by the advantages (and disadvantages) of its oil-based “rentier” economy, namely that the state should provide and the people should abide. Cracks in that arrangement have become more apparent, manifesting themselves chiefly in frequent socio-economic protests across the country. However, since the late 1980s, contestation that expressed the desire for change – mass protests, calls for political reform and various other forms of activism that sometimes resulted in concessions from the state – often generated profound instability and conflict. Nearly twenty years after the end of the civil war of the 1990s, it is time to begin moving away from a model that, for all the stability and peace it brought, increasingly appears unsustainable.

In order to begin this process, the government should take modest steps to establish a roadmap for economic reform:

  • Be more forthcoming and transparent to the public on the state of public finances and how it intends to address it. The government should avoid introducing new policies without consulting with and preparing state institutions. It should also seek to address mounting public concern with corruption, for example by appointing a commission to review how to best curtail it through administrative and legislative reforms. This would be a more effective way to curtail corruption in the long term than through trials that the public perceives as politicised and doing little to deter future corruption;
     
  • Include a wider range of business and civil society actors in its consultations on economic policy, beyond the business associations and trade unions that are currently its chief interlocutors;
     
  • Put particular emphasis on youth, from jobseekers to entrepreneurs, in shaping a reform agenda. This could take place, to begin with, through surveying the needs of younger Algerians and creating consultation mechanisms to integrate their views into the development of the reform agenda.

Algiers/Brussels, 19 November 2018

Video: Breaking Algeria's Economic Paralysis

CRISISGROUP

I. Introduction

Algeria faces two challenging transitions. The first, compelled by the drop in oil prices since their peak in the early 2010s, is a move away from an economic model based predominantly on oil and gas revenue and heavy government spending. The second is an uncertain presidential succession, as President Abdelaziz Bouteflika, 81 and severely weakened by a 2013 stroke, approaches the end of his fourth five-year term in 2019. These two transitions are related: the Bouteflika era coincided, until 2014, with a period of steadily increasing oil prices that boosted the economy as the country recovered from the civil war of the 1990s. Yet it also gave rise to an entrepreneurial class that stimulated growth but whose growing political clout and deepening corruption present obstacles to reform. Negotiating these twin transitions simultaneously will be crucial to sustaining Algeria’s relative stability in a turbulent region.

This report outlines why the current economic model is unsustainable, something authorities openly recognise but have difficulty addressing. This challenge is common in “rentier” states – countries overly reliant on oil income for their annual budget – facing the imperative of change: cutting state spending is unpopular with a public accustomed to subsidised fuel and other basic goods. In Algeria, the task is complicated by the tacit link between economic prosperity and the national reconciliation process undertaken since Bouteflika became president in 1999. The economic dimension of the post-civil war years, including a period of high oil prices that enabled both social spending and the development of a new business elite, helped avoid a reprise of violence. The lingering trauma of the civil war – which began as a popular movement for political and economic reforms and ended in widespread bloodshed – hinders reform, as does the ability of influential interest groups that have prospered in the Bouteflika era to block policy changes that could adversely affect them.

The 2011 Arab uprisings and their aftermath underlined the fragility of existing economic and political models across the region.

The 2011 Arab uprisings and their aftermath underlined the fragility of existing economic and political models across the region. Algeria sees itself as different from those countries in that it experienced and eventually overcame its own major political and social upheavals in the 1980s and 1990s. Largely as a result of this history and associated trauma, it saw no significant unrest in 2011, and the ruling establishment, while oft-criticised, retains historic legitimacy stemming from the war of national liberation with France as well as popular support, in part due to the absence of clear alternatives. Yet it shares many fundamentals with its neighbours, including a young population, a laggard economy resisting reform and an uncertain leadership transition on the horizon. Its sense of immunity from regional trends should not be cause for complacency.

This report is based on research conducted in Algeria in 2017 and 2018, including interviews with government officials, politicians, entrepreneurs, civil society actors, academics and journalists. It addresses how best to balance the prevailing desire to avoid a socio-economic shock at a time of political transition against the imperative to adapt to a rapidly changing economic environment and keep pace with Algerians’ expectations as the country faces the next decade.

II. An Unsustainable Economic Model

A. A Dangerous Dependency on Shrinking Hydrocarbon Reserves

Algeria is over-dependent on hydrocarbons revenues. Oil and gas accounted for 97 per cent of total exports, two thirds of state revenues and one third of gross domestic product in 2014.[fn]Crisis Group interview, Amor Khelif, research director, Centre de Recherche en Economie Appliquée pour le Développement, Algiers, September 2017. See also Yanis Ainas, Nacer Ouarem and Said Souam, “Hydrocarbons: An asset or an impediment to Algerian development?”, Revue Tiers Monde, no. 210 (February 2012), pp. 69-88.Hide Footnote In better times, this resource wealth enabled the state to spend lavishly to buy elite loyalty and social peace. Oil revenues have for the most part insulated the government from popular demands for greater participation and transparency. When financial incentives such as generous subsidies and free housing proved insufficient in stifling popular dissent, these revenues helped the security apparatus acquire the coercive means to repress it.[fn]See Merouan Mekouar, Protest and Mass Mobilization: Authoritarian Collapse and Political Change in North Africa (New York, 2016), pp. 15-16.Hide Footnote

But a rentier economy has downsides. It has rendered the state complacent, protected a private sector in which state contracts are awarded based on personal connections rather than merit or efficiency, and propped up internationally uncompetitive industries. It also has fostered a sense of entitlement among the public. Together, these outcomes have left the country vulnerable to volatility in global commodity prices, which risks transforming a prolonged economic downturn since 2014 into a crisis of political legitimacy. Inefficiencies in the energy sector further hamper a sluggish economy. As a result, Algeria has become the only OPEC member to pump below its permitted quota as its production has declined, despite efforts to attract new investments.[fn]Since production peaked in 2005 – at 1.7 million barrels per day for oil and 8.8 billion cubic feet per day for natural gas – both have been in decline. See “Algeria is reforming its laws to attract foreign investment in hydrocarbons”, U.S. Energy Information Administration, 4 August 2015. Misleading public statements and a climate of opacity surrounding gas production statistics are further deterring investment. An analyst said: “Looking for gas production statistics feels like looking for a state secret”. Crisis Group interview, Geoff Porter, CEO, North Africa Risk Consulting, May 2017.Hide Footnote

Algeria’s proven energy reserves are also dwindling. Current estimates of extraction timetables – twenty years for oil, fifty for gas – mean that within one or two generations, barring significant new discoveries or major technological advances, there could be nothing left.[fn]Crisis Group interview, Algeria expert at an international financial institution, Washington, February 2017.Hide Footnote Meanwhile, decreasing international investment in the hydrocarbon sector and aging fields are taking a toll. Compared to 2007, when Algeria exported 85 billion cubic metres (bcm) of natural gas, the export target for 2018 is only 50 bcm. As domestic consumption rises (due to population growth and changes in consumption patterns), an increasing proportion of production stays at home, suppressing exports and therefore access to foreign currency to import goods.

Algeria is redoubling efforts to raise production, including through controversial techniques such as fracking.[fn]New shale gas initiatives risk provoking new rounds of unrest in the south, where its production has triggered protests in the past. See Crisis Group Middle East and North Africa Report N°171, Algeria’s South: Trouble’s Bellwether, 21 November 2016.Hide Footnote While official ambivalence about greater foreign participation in the oil and gas sector has repeatedly stymied legal reforms, the state might have to resort to more radical moves, such as making Algeria a more attractive investment destination for multinational corporations that can boost output of existing wells and develop new resources such as shale gas.[fn]An oil industry analyst said: “Previously the energy ministry and [national oil company] Sonatrach spoke about sector reform because it was the right thing to do. Now there is a sense of urgency that wasn’t there in the past”. Crisis Group interview, Geoff Porter, CEO, North Africa Risk Consulting, October 2017. For background on oil sector reform, also see Viktor Katona, “Why Algeria’s Oil Sector Isn’t Booming”, OilPrice.com, 6 September 2018.Hide Footnote The government’s plan to boost output by 14 per cent by 2019 and invest billions in exploration is unrealistic, in part because protracted corruption scandals have paralysed Sonatrach, the state-owned oil company; these were widely seen as a tug-of-war between officials and the intelligence services.[fn]In 2009 and 2010, the Département du Renseignement et de la Sécurité (DRS), the country’s intelligence service, accused top officials at the state-run oil company Sonatrach, as well as then Energy Minister Chekib Khelil, of graft. Many perceived the charges as an attack on the president, as Khelil is one of Bouteflika’s closest allies. See “Algerian leader spars with security chiefs”, United Press International, 3 February 2010; Mélanie Matarese, “L’entourage de Bouteflika éclaboussé par les affaires”, Le Figaro, 1 April 2013. Khelil, who denies the accusations, fled to the U.S. in 2013, returning to Algeria in April 2016 after Bouteflika dismantled the DRS. See Farid Alilat, “Algérie : Chakib Khelil, les secrets d’un retour”, Jeune Afrique, 14 June 2016. On the dismantling of the DRS, see Crisis Group Middle East and North Africa Report N°164, Algeria and Its Neighbours, 12 October 2015.  Hide Footnote With four energy ministers and six heads of Sonatrach since 2010, erratic leadership has affected the oil sector’s stability. As an industry analyst put it:

It was a one-two punch. The 2010 scandal that disrupted Sonatrach and the energy ministry put everyone in a holding pattern. That holding pattern continued through the oil price collapse in 2014, and the collapse meant that even if oil companies were more comfortable with the above-ground risks in Algeria, such as leadership changes and the regulatory environment, they didn’t have the financial leeway to return to Algeria and start investing.[fn]Crisis Group interview, Geoff Porter, CEO, North Africa Risk Consulting, May 2017.Hide Footnote

B. The 2014 Oil Shock

In mid-2014, oil prices began a precipitous drop, plummeting from the $80-110 per barrel range in 2011-2013 to $40-60 per barrel throughout most of 2015-2017. Since then, Algeria has drawn down its $200 billion foreign-exchange reserves to shore up its economy, fuelling fresh scrutiny of its economic model’s structural weaknesses. The oil price drop took a heavy toll on state coffers: in 2007, Algeria’s revenues were $74 billion; in 2017, they totalled $24 billion.[fn]Crisis Group interview, Amor Khelif, research director, Centre de Recherche en Economie Appliquée pour le Développement, Algiers, September 2017.Hide Footnote Meanwhile, its fuel import bill tripled between 2016 and 2017 to a record $2.5 billion.[fn]“Algeria in talks with oil firms to set up trading venture”, Reuters, 24 July 2018.Hide Footnote

Even though oil prices stabilised in the $40-60 range in 2017 before rising again in 2018, this does not necessarily signal a long-lasting recovery. In any event, higher oil prices would only allow authorities to buy time to address underlying problems.[fn]An Algerian economist and retired policymaker said: “Even though it brought us a lot of money, the oil price rise in 2008 was a catastrophe; it was like opium or cocaine. The two times we felt this drug, in the beginning of the 1980s and in 2007-2008, the state started spending with reckless abandon and launching grand projects that are not profitable”. Crisis Group interview, Algiers, October 2017.Hide Footnote The state can no longer afford to postpone dealing with what economists call the “Dutch disease”: an overvalued domestic currency (due to a central bank policy of maintaining an artificially strong Algerian dinar) that makes exports more expensive and uncompetitive. This leads in turn to a decline in non-oil industrial productivity, fuelling unemployment and leaving the economy highly exposed to unpredictable fluctuations in global commodity prices (for example, of oil, minerals and cereals).

Successive Algerian governments have acknowledged this. Abdelmalek Sellal, prime minister from 2012 to 2017, called in 2016 for a “new economic model” that would reduce the state’s role while enhancing that of the private sector and limiting dependency on hydrocarbon revenues.[fn]See “Sellal présente les grandes lignes du nouveau modèle de croissance économique”, Radio Algérie, 5 June 2016.Hide Footnote His successors have repeated the same message.[fn]See “Ahmed Ouyahia: “L’Economie de marché est une fatalité irréversible”, Algérie1.com, 23 December 2017.Hide Footnote All have faced resistance from entrenched economic interests and institutional inertia, which forced them to backpedal on reform.

That said, Algeria still has considerable autonomy to devise a new approach, primarily due to its low foreign debt, which is less than 2 per cent of GDP. Its partners – particularly European countries that want strong states in the southern Mediterranean to cooperate on regional security and stemming migrant and refugee flows – are willing to provide support. Experts expect foreign currency reserves, though depleting, to fund government spending for roughly another two years. As an expert at an international financial institution put it:

The oil shock made the urgency of needed changes more apparent. The difficult question Algerian authorities face is pace: if they go too slow, adjustment could become disorderly. And if they go too fast, there will be social resistance. They have the means to walk this fine line; the question is where to find [that line].[fn]Crisis Group interview, Algeria expert at an international financial institution, Washington, February 2017.Hide Footnote

C. What Reform Agenda?

When oil prices collapsed in June 2014, Algeria had a comfortable cushion in the form of significant savings. It had $178 billion in foreign reserves and $37 billion in its sovereign wealth fund (Fonds de régulation des recettes, FRR, which is financed by surplus hydrocarbon revenues). Yet, at the beginning of 2018 only $97.3 billion of reserves remained, while the government had exhausted the FRR in 2017 to finance successive budget deficits.[fn]The government created the FRR in 2000 to invest surplus revenue and put it toward financing foreign debt. Experts have criticised its opaque management. See M. Hachemaoui, “la Corruption politique en Algérie : l’envers de l’autoritarisme”, Esprit, No. 6 (June 2011), pp. 111-135. For central bank reserve statistics, see Situation de la Banque d’Algérie, Banque d’Algérie, June 2018. There are fewer publicly available statistics regarding the FRR, but the fund is widely believed to have been exhausted in early 2017. See “Le Fonds de régulation des recettes épuisé depuis février”, Le Matin d’Algérie, 8 September 2017.Hide Footnote Authorities, optimistic that oil prices would rebound, calculated the state budget for 2017 on the basis of an oil price recovery to $70 barrel by 2020 – a level reached by the first quarter of 2018, but which may not be sustained.[fn]Crisis Group interview, Algerian finance ministry official, Algiers, December 2016.Hide Footnote

Cautiously and inconsistently, the government has acknowledged the crisis.

Cautiously and inconsistently, the government has acknowledged the crisis.[fn]As early as May 2015, Prime Minister Abdelmalek Sellal said “Algeria is not immune to a major economic crisis”. Quoted in “Crise économique : les aveux de Sellal”, Le Quotidien d’Oran, 26 May 2015. In September 2017, Prime Minister Ahmed Ouyahia told parliament: “Since 2014, Algeria has been hit with a long-lasting financial crisis, as there are no indications in the short or medium term of a significant recovery of oil prices”. Quoted in “Ouyahia dépeint un tableau sombre de la situation financière de l’Algérie”, Tout Sur l’Algerie, 7 September 2017. On 14 June 2017, Bouteflika released a communiqué stating “the crisis of oil prices is here for the long term”. https://www.tsa-algerie.com/document-le-communique-des-conseils-des-ministres/.Hide Footnote It introduced tentative austerity measures in the 2016 budget, trimming state spending by 9 per cent. At the start of 2016, it raised the prices of subsidised gasoline. Facing no significant opposition, it became more aggressive, adopting a budget in 2017 that reduced government spending by 14 per cent. It took other measures as well, introducing import restrictions and allowing a controlled depreciation of the Algerian dinar. The 2018 budget, adopted in December 2017, includes further cuts. These have been accompanied by a resort to “quantitative easing” – the increase of money supply by the central bank through issuing government bonds – to stimulate the economy.

These measures carried great risks. While some have praised them, the question remains whether they amount to an overall strategy for economic reform rather than a superficial response to an urgent crisis. Economic experts and financial institutions criticised quantitative easing in particular. An economist said the measure was “adding fuel to the fire” of inflation and would raise living costs, discourage foreign direct investment and possibly depress industrialisation efforts.[fn]He also said: “If businesses and jobs creation had some momentum, making more dinars available at a lower price might help spur growth. But Algeria doesn’t have a stable environment with that momentum. So unconventional financing will cause short-term damage and hamper long-term growth”. Crisis Group interview, Algerian economist, September 2017. The International Monetary Fund (IMF) has made similar criticisms of the government’s resort to quantitative easing rather than foreign borrowing.Hide Footnote A European diplomat summarised the criticism: “The purpose of quantitative easing is to buy time, not to implement change. It is just propping up liquidity at the risk of creating inflation”.[fn]The IMF has repeatedly raised this criticism since 2015, most recently in its 2017 Article IV Consultation, June 2017. It has warned that the government has implemented cuts with insufficient public buy-in and that this could slow the economy unnecessarily. It also said that the government should consider foreign borrowing as an alternative to quantitative easing, which has an inflationary impact. Crisis Group interview, Algiers, February 2018.Hide Footnote

Some officials say the government is intent on rationalising public spending by overhauling inefficient and wasteful subsidy programs, raising taxes on the rich, reducing and formalising the informal sector by making banking more flexible, and encouraging the growth of the industrial sector (which currently accounts for less than 5 per cent of GDP).[fn]Crisis Group interview, government economic adviser, Algiers, September 2017.Hide Footnote Experts and officials alike believe that diversifying the economy away from its overreliance on hydrocarbons for revenue, preferably through the increase of other exports, is essential, as is reducing the import bill.[fn]Crisis Group interviews, Algerian diversification experts, Algerian economic policymakers, Algiers, September 2017. Most experts say the government should pursue export-led growth rather than the import-blocking or import-substitution policies it has often adopted, which can cause shortages of both basic goods and industrial materials. See also Alan Gelb, “Economic Diversification in Resource Rich Countries”, part of seminar on “Natural Resources, Finance, and Development: Confronting Old and New Challenges”, by Central Bank of Algeria and IMF Institute in Algiers, 4-5 November 2010.Hide Footnote Officials have discussed plans to implement such major reforms for years, but without any concrete change.

D. The Trauma of the Past

One reason for this inaction is that the transition from[fn]state socialism to a more market-oriented economy from the late 1980s to early 1990s is intertwined in Algerians’ minds with the violence of the black decade that followed. When oil prices crashed in October 1985, revenues from gas and oil exports fell by more than 40 per cent. A crisis followed on multiple fronts: authorities shelved investment plans and cut back large-scale social programs. Unemployment rose and productivity plummeted as factories closed. And the government, believing that prices would soon rise again, dipped into its foreign reserves and borrowed externally to finance budget deficits.[fn]“When the debt crisis came in 1993 and we had $7 billion in revenues and owed $8 billion, we went to the IMF like the Eid sheep to the slaughterhouse”. Crisis Group interview, Algerian economist and retired policy adviser, Algiers, October 2017. The policies implemented at the time resulted in the closing of a thousand public enterprises and the firing of 400,000 salaried workers, facts authorities admitted only in 2017. See “Ouyahia défend ‘la légitimité de l’espoir et de l’espérance en l’avenir de l’Algérie’”, TSA, 27 September 2017. For background see G. Delhaye and L. Lepape, “Les transformations économiques en Algérie : privatisation ou prédation de l’Etat ?”, Journal des Anthropologues, no. 96-97 (2004), pp. 3-4.Hide Footnote Between 1985 and 1988, the debt-to-service ratio more than doubled, from 35 to 80 per cent.[fn]M. Majumdar, Transition and Development in Algeria: Economic, Social, and Cultural Challenges (Bristol, 2005), p. 49. The debt-to-service ratio is the ratio of debt service payments to a country’s export earnings.Hide Footnote

The social and economic crisis that followed the 1985 oil price collapse set the stage for the riots of October 1988, when thousands took to the streets to protest rising prices, unemployment and austerity measures. Starting in Algiers and spreading to other parts of the country, they were Algeria’s most serious riots since independence in 1962. The deployment of the army to put an end to the unrest resulted in clashes that killed 500 (mostly when the army fired upon protesters) and wounded over 1,000.These events precipitated the fall of the single-party system and, in 1991, the country’s first free elections, followed by a military coup that ushered in civil war during the so-called black decade. As a board member of the Forum des Chefs d’Entreprise (FCE), a business lobby, said, looking back on those times: “We can’t go back to the 1990s, when the country was ravaged by terrorism and people joined the rebels because they had no prospects and no visibility”.[fn]Crisis Group interview, senior FCE board member, Algiers, September 2017.Hide Footnote

The memory of economic collapse that preceded and exacerbated political violence haunts even the most pro-reform policymakers. Algeria’s last experiment in economic liberalisation and political democratisation ended with a decade of internecine slaughter. Today, authorities never publicly refer to the links between that economic crisis and the social unrest and political crisis that followed. But they clearly have its spectre in mind – especially the loss of sovereignty in managing reforms – as they try to avoid the mistakes made in that period.[fn]Crisis Group interview, senior economic policymaker, Algiers, September 2017. “We need to be careful with debt, because the 1986 crisis meant we had to divide by 10 our currency, close schools and hospitals. If you’re not solid monetarily, financially, you can really fall …. This explains the president’s extremely strong position against public debt. But we’re going to have to really accelerate the process of investing in productivity in this country, in agriculture, services, etc”.Hide Footnote

In the Bouteflika era from 1999 onward, Algeria has been able to avoid repeating such a scenario. Bouteflika’s first three terms represented fifteen years of recovery from civil strife, the restoration of security and stability, and mounting prosperity. Through his call for a “civil concord” Bouteflika offered Algerians a new social contract when he was first elected in 1999: forget the “black decade” and questions of accountability; instead, focus on economic development. Taking advantage of nearly two decades of buoyant oil prices,[fn]In the early 2000s, soaring oil prices and a recalibration of international alliances ushered in by the U.S. “global war on terror” helped restore economic prosperity, as Algeria shed its pariah status from the 1990s and restored trade ties and security partnerships with the U.S. and other Western countries. Buoyed by oil revenues, Bouteflika launched overlapping stimulus initiatives that pumped cash into the economy: a round of privatisations beginning in 1999 and an economic recovery plan (2001-2004) followed by a complementary growth support program worth $55 billion (2005-2009). The policies of building a new economic framework and implementing a post-conflict national reconciliation process were strongly intertwined. See T. Dahou, “Les marges transnationales et locales de l’état Algérien”, Politique Africaine : l’Algérie aux marges de l’Etat, no. 137 (2015), p. 11.Hide Footnote he gradually and partially shifted power away from the country’s entrenched establishment – the army, the Département du Renseignement et de la Sécurité (DRS, the intelligence service), and the Front National de Libération (FLN, the historic single party until 1989) – popularly referred to as le pouvoir. In its place, he restored the primacy of the presidency that had been eroded in the turmoil of the 1980s and 1990s, building a regime in which business elites gradually gained the kind of influence previously reserved for senior military officers and other officials.[fn]See A. Boubekeur, “Rolling either way? Algerian entrepreneurs as both agents of change and means of preservation of the system”, The Journal of North African Studies, vol. 18, no. 3 (2013), pp. 469-481.Hide Footnote

The Arab uprisings of 2011 provided the first real test of this new system. The government relied heavily on public spending to quell domestic discontent. This entailed lavish subsidies, infrastructure investments and an ambitious free housing program, embracing handout politics that offered economic security to many Algerians in exchange for continued social peace. In 2011, the government added thousands of new jobs, particularly in the security sector, and oversaw a 330 per cent increase over the previous year in interest-free cash loans distributed to young entrepreneurs through the Agence nationale de soutien à l’emploi des jeunes (ANSEJ). In such a context, popular concerns relayed by the media about corruption and wasteful spending did not gain traction, and Algeria weathered the region’s turmoil largely unscathed.[fn]Prime Minister Ahmed Ouyahia, answering a question in parliament on how oil money earned since 2000 had vanished, said: “The Algerian people know where the $1,000 billion were spent”. Quoted in “Ouyahia défend : ‘la légitimité de l’espoir et de l’espérance en l’avenir de l’Algérie’”, TSA, 27 September 2017.Hide Footnote

During his fourth term, from 2014 onwards, Bouteflika consolidated his new power configuration (particularly with the dismantling of the DRS). But this period was also marked by growing political uncertainty (especially over the president’s health and ability to govern) and renewed economic anxiety.[fn]See R. Tlemçani, “The purge of powerful Algerian generals: Civil-military reform or presidential power grab?”, Al Jazeera Centre for Studies, 12 February 2017.Hide Footnote

III. The Politics of Economic Policymaking

A. The Fashioning of Economic Policy

Algeria has a presidential system in which the head of state has the final say on economic policy. Since 2014, an economic policy advisory board works to produce compromises among three institutions collectively known as the Tripartite: the Union Générale des Travailleurs Algériens (UGTA, a trade union federation), the Forum des Chefs d’Entreprise (FCE, an entrepreneurs’ lobby) and the cabinet.[fn]The Pacte social et économique de croissance (Social and Economic Growth Pact) of February 2014 formalised this cooperation and elevated its role in policymaking.Hide Footnote In theory, this arrangement is inclusive and stabilising, bringing together ministers, an association of business leaders that has rapidly gained in clout since 2014, and the country’s most powerful and historically significant trade union federation. In practice, the Tripartite is top-down and imposes loyalty to the government as a precondition for participation in economic debate. The exclusion of important actors, such as autonomous unions and dissident entrepreneurs, limits the reach and scope of the policy debate.

The UGTA and FCE are both politically centrist: the FCE’s advocacy for business is tempered by an acknowledgement of the country’s socialist roots; the UGTA’s defence of labour is softened by its desire to support the emergence of a strong private sector and an affirmation of the typically pro-business sentiment that excessive bureaucracy is harmful to job creation and the business environment. Both perceive the Tripartite as a constructive form of social dialogue, and share the view that private enterprise is key to economic development. A UGTA leader said: “We may not have the high degree of social dialogue that the Scandinavians have but we’re doing our best to avoid violence. Both sides must listen and put forth proposals. We need to listen to one another”.[fn]Crisis Group interview, Algiers, September 2017.Hide Footnote Likewise, an FCE board member noted:

We don’t say anything against public enterprises, like Air Algérie which has 10,000 employees instead of 3,500 …. There is a need to strengthen the private sector, to make it stronger and more dynamic, so that the public sector can disappear eventually, except for certain core areas like gas, oil and utilities.[fn]Crisis Group interview, Algiers, December 2017.Hide Footnote

In an environment in which decision-making remains highly opaque, the leaders of both the UGTA and FCE – respectively Abdelmajid Sidi Said and Ali Haddad – enjoy a high degree of influence and prestige given their proximity to Said Bouteflika, the president’s brother and a senior adviser. 

While the Tripartite appears to unite and stabilise the discordant leftist and liberal policy perspectives the two bodies represent, policymaking suffers from fits and starts and often is paralysed. There is weak coordination within, and among, institutions and policy can change arbitrarily.[fn]Some have noted the inconsistency of economic policy, as well as the government’s lackadaisical approach to attracting foreign investment. A European diplomat said: “No one seems to want to take the really hard decisions, and there have even been reversals on announced reforms. The most important thing for investors is predictability in decision-making. The Algerian government seems to think that other governments can steer foreign direct investment to come here, not that it is their job to create an attractive business environment. The ministry of foreign affairs threatens us that if they don’t get their way on economic issues, they will make conversations on other issues that we care about, such as migration, more difficult”. Crisis Group interview, Algiers, February 2018.Hide Footnote In Bouteflika’s fourth term, the government has rotated officials with unusual frequency, particularly in key ministries such as energy and industry. This has created confusion about the country’s priorities, which are set by the prime minister but can subsequently be reversed by presidential decree.[fn]When Sellal vowed to fast-track economic diversification in January 2015, there was no clear sector selection but rather a scattering of emphasis on diversification across economic activities. Countries that have successfully diversified tended to identify four or five key strategic sectors as priorities. Crisis Group interview, Algerian diversification expert, May 2017. Sellal appointed a six-member economic taskforce whose work was secretive and reportedly ultimately censored. Crisis Group interview, Algerian industrialist, Algiers, May 2017.Hide Footnote The opacity of the policymaking process and low levels of intra-governmental communications and cooperation reinforce this ambiguity: rather than working in coordination, ministries are mostly unaware of one another’s projects and approaches. An industrial policy specialist who worked with the government noted:

The policy environment is not conducive to diversification. Agencies that should be working together are not. I enquired about industrial policy design at each of the relevant ministries: the finance ministry told me they don’t deal with industrial policy; the industry ministry said to ask at the trade ministry; the trade ministry said they only deal with trade statistics, not design, and to go see the finance ministry.[fn]Crisis Group interview, Algerian diversification expert, May 2017.Hide Footnote

Sudden, unexpected turnover in senior leadership has added to the confusion and highlighted the role of influential entrepreneurs in politics. Bouteflika appointed Abdelmajid Tebboune, housing minister in the previous cabinet and a member of the FLN said to be close to him, to replace Sellal as prime minister in May 2017. As interim trade minister from January to May 2017, Tebboune made a name for himself as an establishment figure willing to challenge import barons – businesspeople with privileged political connections whose success depends on securing import licenses (and sometimes monopolies) in lucrative markets.[fn]An Algerian economist and retired policymaker said: “Import barons belong to important military factions. There are about eleven generals who control the most important import markets. These are people even Tebboune wouldn’t touch. Tebboune moves a lot, but what he does is shadowboxing”. Crisis Group interview, Algiers, May 2017.Hide Footnote To reduce a burgeoning trade deficit due to lower oil prices, he quickly moved to suspend a wide range of imports, sending prices up and freezing industrial investment. His open targeting of importers as a privileged and overprotected interest group raised hopes that his economic reforms would extend to addressing corruption.[fn]Crisis Group interviews, Algerian economists, Algiers, May 2017. In a speech before parliament on 20 June 2017, Tebboune said: “We will be careful to separate money from political power, and to ensure that each stays in its lane”. Quoted in Brahim Takheroubt, “L’impitoyable univers”, L’expression, 23 July 2017.Hide Footnote Tebboune tackled politically delicate issues ranging from import licenses to public land reform with a zeal that threatened the established order, in particular stepping on the toes of FCE leader Ali Haddad.[fn]See “Tebboune-Haddad, chronique d’une guerre intestine”, TSA, 31 July 2017.Hide Footnote

The Tebboune-Haddad standoff became a fixation for Algerian media: for example, photos showing Said Bouteflika warmly embracing Haddad and appearing to snub Tebboune at the 30 July funeral of former Prime Minister Redha Malek were widely shared and interpreted as foreshadowing the prime minister’s downfall.[fn]Crisis Group interviews, Algerian journalists, Algiers, August 2017.Hide Footnote When Bouteflika dismissed Tebboune on 15 August, the message he appeared to send was that the entrenched interests of business elites are untouchable, regardless of the urgency of economic reform.[fn]Crisis Group interviews, Algerian journalists, business leaders, experts, Algiers, September 2017.Hide Footnote

Even as it gained breathing space, the state has used veiled threats to defend its economic policy, including the suggestion that the violence of the 1990s might return.

Tebboune was succeeded by Ahmed Ouyahia, a seasoned apparatchik who previously served as prime minister on three occasions (1995-1998, 2003-2006 and 2008-2012) and was director of the presidential cabinet immediately prior to his appointment. A consummate insider, he is widely considered a compromise between competing interest groups and sometimes mentioned as a potential future president who many within the ruling elite could live with, despite his prickly public persona.[fn]Crisis Group interviews, Algerian journalists and political analysts, February 2018.Hide Footnote

Within weeks of his appointment, Ouyahia moved to implement quantitative easing, thus enabling the government to finance the budget and buy time, in part gambling that oil prices might soon recover. For the moment, the gamble appears to have paid off. The government has been able to avoid deeper cuts, while the rise in oil prices that began in early 2018 has relieved pressure on the budget.

B. Warding Off Unrest

Even as it gained breathing space, the state has used veiled threats to defend its economic policy, including the suggestion that the violence of the 1990s might return. In September 2017, defending his decision to implement quantitative easing, Ouyahia told parliament that without it the government would lack funds to pay civil servants’ salaries within two months, implying imminent unrest. In October 2017, the state television station ENTV broadcast, for the first time on Algerian television, explicit and deeply upsetting images of the slaughter of the 1990s. This was widely interpreted as a warning to the public to keep quiet and be grateful for the country’s stability.[fn]“Les images choquantes de la télévision gouvernementale fédèrent les Algériens”, Algérie Focus, 1 October 2017. https://www.algerie-focus.com/2017/10/decennie-noire-images-choquantes-de-television-gouvernementale-federent-algeriens. “They want us to shut up. They want us to stop asking how $1,000 billion [a reference to oil and gas earnings spent since 1999, a figure frequently touted by officials] went down the drain”, an Algerian wrote on Facebook, calling the state’s use of these images a form of “psychological terrorism”.Hide Footnote The intention appears to be, as it was in 2011, to warn the population against rocking the boat by protesting or otherwise challenging the state’s decisions.

Since the end of 2016, with the announcement of the trimmed-down 2017 budget, popular dissent against austerity has surfaced in multiple ways. Protests have mostly been spontaneous, lacking larger organisational frameworks and failing to mobilise large numbers, with a few exceptions.[fn]The number of Algerian protesta – micro-protests that make distributional claims on the state and are disconnected from political parties, unions or other associations – reportedly rose from 10,000 in 2012 to 14,000 in 2015. See R. Parks, “Voter Participation and Loud Claim Making in Algeria”, Middle East Report (Winter 2016), pp. 23-27.Hide Footnote After the approval of the 2017 budget, a five-day “stay at home” protest planned for 2-7 January, combined with calls for a general strike by a shopkeepers’ union in opposition to import restrictions, tax hikes and penalties, turned violent.

From 2 to 4 January, protesters clashed with security forces across multiple towns in the province of Bejaia in the eastern Kabylia region, as well as in Bouira and Ain Benian, both just outside Algiers. Young men attacked symbols of the state such as the Office of National Education, looted goods from technology stores and blocked roads. Security forces used teargas to disperse them and dozens of protesters were reported wounded, as well as 39 police officers in the Bejaia area alone.[fn]See “DGSN: 39 policiers ont été blessés lors des émeutes de Bejaia”, Algérie 1, 8 January 2017.Hide Footnote Security services diffused or disrupted several other marches.[fn]Within weeks of the Bejaia protest, three more protests took place. The Intersyndicale, a network of autonomous unions, held peaceful assemblies in front of the provincial government offices in Blida, Oran, Batna and Ouargla on 28 January 2017 to demand repeal of the new retirement law. Students at the Fine Arts school in Algiers went on strike, with seven undertaking a hunger strike on 6 February – for the first time in the school’s history – to protest mismanagement and underfunding. Numerous police units were deployed to the Algiers city centre on 15 February to prevent two protests planned by pharmacy and dental surgery students seeking better training and employment. The protests came after Sellal received their representatives on 5 February. “Contrary to what was announced, our grievances were not taken into consideration”, one of the students said. Quoted in “Sit-in des étudiants en pharmacie et chirurgie dentaire à Alger : La manifestation empechée”, Le Courrier d’Algérie, 15 February 2017.Hide Footnote Similar protests took place in 2018, with the notable case of a six-month doctors’ strike that ended with government concessions after they brought the public health sector to a near-standstill.[fn]See Zahra Chenaoui, “En Algérie, les médecins résidents suspendent leur grève des gardes”, Le Monde, 28 May 2018.Hide Footnote

During Bouteflika’s tenure, Algeria has invested much in reforming and professionalising its security services, rebuilding confidence both at home and abroad, in the realisation that forms of violence and surveillance seen as legitimate or necessary in fighting an insurgency are no longer so.[fn]Crisis Group interview, security services source, Algiers, February 2017. Despite the financial crisis, Algeria spent $10 billion on defence (24.4 percent of the state budget) in 2017 for the third year in a row, making it Africa’s largest military spender. See “Future of the Algerian defence industry to 2022 – market attractiveness, competitive landscape and forecasts”, BusinessWire, 22 October 2017. See also L. Martinez and R. Boserup, Algeria Modern: From Opacity to Complexity (London, 2016).Hide Footnote Pre-emptive arrests and targeting protest leaders with harassment and persecution are more effective in stamping out public dissent than other less discriminating methods, which encouraged escalation in the 1990s in Algeria and during the more recent Arab Spring uprisings elsewhere. But the state has not yet tested this change in policing tactics on a large scale, and accumulating resentment could erupt unpredictably. Authorities are exercising particular caution in handling protests in the south, a site of rising contestation.[fn]See Crisis Group, Algeria’s South: Trouble’s Bellwether, op. cit. In November 2016, protests against spikes in electricity bills following subsidy cuts mobilised thousands in southern cities such as Biskra and Ouargla, prompting the government to reduce their bills. See “Energie/Allègement des factures d’électricité pour les wilayas du Sud”, Algérie Focus, 14 November 2016.Hide Footnote

IV. The Private Sector’s Rising Influence

A. A Newly Relevant Political Class

The Forum des Chefs d’Entreprise’s (FCE) power has waxed since 2014 and it appears poised to gain even more political influence. Private sector growth is a welcome development that stands to bring jobs and a more diversified and competitive economy, but vigilance and oversight will be necessary to harness, coordinate and guide its growth. Critics see in the post-2014 rise of the FCE – which lacks the historical legitimacy of the military or FLN – the advance of a politically influential oligarchy more likely to shape state policy in line with its own interests than to develop the economy.[fn]Crisis Group interviews, Algerian economists and industrialists, Algiers, May 2017. An Algerian economist and retired policymaker said: “What we need is a productive economy. The only thing the FCE is good at is defrauding the state”. Crisis Group interview, Algiers, September 2017.Hide Footnote Although the FCE describes itself as a force lobbying for economic reform, its growing political influence has garnered more attention than its declared reform objectives.[fn]See “Algeria’s corporate barons cast themselves as saviours of the economy”, Heba Saleh, Financial Times, 12 July 2018; Leïla Beratto, “Algérie : Ali Haddad, un proche de Bouteflika, à la tête du patronat”, Radio France International, 2 January 2015.Hide Footnote

Since 2014, when Haddad financed Bouteflika’s campaign for a fourth term and then became FCE head, this business lobby’s influence has steadily risen.[fn]Haddad, a businessman from the Kabylia region, is CEO of the Entreprise des travaux routiers, hydrauliques et bâtiments (ETRHB) construction group which benefits from lucrative state contracts. He also owns two private newspapers, Le Temps d’Algérie and Waqt Eldjazair, and two television stations, Dzair News and Dzair TV.Hide Footnote It reached new heights in the public eye in December 2016, when – against protocol and after being denied permission to do so – Haddad insisted on speaking before Foreign Minister Ramtane Lamamra at the Algeria-Africa Business Forum, prompting a walkout by Sellal.[fn]This affair caused much consternation among public officials incensed by the high profile Haddad has sought. Crisis Group interviews, Forum organiser, Algiers, September 2017. In a separate incident related to tensions between Haddad and officials, Algeria’s ambassador to France, Amar Bendjama, abruptly announced his resignation on 5 December 2016, reportedly after a dispute erupted when he expedited dozens of visas for Forum invitees with views considered hostile to Algeria. “L’Algérie sans ambassadeur en France depuis plus de huit mois”, TSA, 6 August 2017.Hide Footnote For experts and society alike, Bouteflika’s decision to sack Tebboune in August 2017 – soon after the latter directly targeted Haddad’s construction empire – signalled that Haddad’s clout now trumped the head of government’s.[fn]Crisis Group interviews, Algiers, September 2017. On 15 July, Tebboune had Haddad expelled from a civil servants’ institution graduation ceremony; the next day, the government sent half a dozen official letters to the ETRHB, putting it on formal notice concerning delivery of various projects worth hundreds of millions of dollars. See “Haddad dit avoir ‘été victim d’une cabale’ de la part du ‘prédateur’ Tebboune, sans le nommer”, HuffPost Algérie, 21 October 2017.Hide Footnote Haddad’s influence derives principally from his real and perceived proximity to Said Bouteflika, the president’s brother; many Algerians noted that Tebboune’s sacking came just days after the two men were pictured in the media laughing together and entering a government vehicle.[fn]“Saïd Bouteflika et Haddad ont quittés ensemble El Alia : on ne touche pas à mon pote!”, Le Matin d’Algérie, 1 August 2017.Hide Footnote

The FCE’s rise echoes the growing political relevance of the entrepreneurial class generally. The May 2017 parliamentary elections marked the first time that business personalities ran directly as candidates, especially in the FLN and its partner in the pro-Bouteflika presidential coalition, the Rassemblement National Démocratique (RND).[fn]Ali Haddad’s brother, Mohand Haddad, was second on the FLN list in Tizi Ouzou; Tayeb Ezraimi, CEO of the Semoulerie Industrielle de la Mitidja group (a major food company), headed the RND list in Blida; Abderrahmane Benhamadi, chairman of the Condor Electronics and Electromenager group (an appliance retailer), headed the RND list in Bordj Bou Arreridj; and billionaire industrialist Issad Rebrab’s niece headed the Tajamoue Amal El-Djazair (TAJ) list abroad in Tunis. See “L’influence politique occulte des patrons algériens”, Orient XXI, 26 April 2017.Hide Footnote Their growing influence – in part paved by the open role several businessmen played in financing Bouteflika’s re-election campaign in 2014 – was perceived as a victory for representatives of business and, leftist critics say, a loss for representatives of the people.[fn]See Cherif Dris, “Algérie 2014 : De l’élection présidentielle à l’émergence des patrons dans le jeu politique”, L’Année du Maghreb, No. 13 (2015). Workers Party head Louisa Hanoune called for a fight against “dirty money” before the elections and linked the lack of popular interest in the polls to impunity for corruption scandals involving FLN and RND deputies. See “Appel à la sanction des députés de la majorité sortants”, Liberté, 11 April 2017.Hide Footnote This trend in recent years has made some Algerian commentators argue that, in future presidential elections, financial backing from the business community may become as important as the political backing of traditional power centres such as the military.[fn]For example, Nordine Grim argues: “The presidential election will be very costly for the candidate co-opted by the government’s hard inner core and it will be all-important to know whether he can guarantee the financial support of a handful of oligarchs who would help him win the poll through the millions they would make available to him”. “Politique et argent : Qui aura les faveurs des hommes d’affaires”, Algérie Eco, 15 August 2017.Hide Footnote

B. Whose Private Sector?

FCE leaders see themselves as the custodians of a transition from centralised statist socialism to a market economy that started in the late 1980s and was disrupted by the black decade. As a FCE board member put it:

There needs to be a peaceful transition from one system to the other without too great a social shock. We’re coming out of a very difficult period and we can’t go back to that. It took so little time to discredit Algeria and so long to rebuild trust for Algerians and foreigners. In 1992, we left a socialist economy. We didn’t really kick off the process of developing private enterprise until 2000, which makes us only seventeen years old. Two thirds of jobs and three quarters of value added derive from the private sector. Taxes on businesses should replace export earnings in the state budget.[fn]Crisis Group interview, FCE board member, Algiers, September 2017.Hide Footnote

The FCE considers knowledge and technology transfers from foreign investment key to building a strong private sector, and does not deem the requirement that at least 51 per cent of capital investments in any local business be locally owned as a deterrent, even though foreign investors often cite it as one.[fn]Businesses can circumvent this requirement; for instance, the 51 per cent can be divided among several Algerian partners to render the foreign shareholder dominant, or these entrepreneurs can conclude shareholder agreements in which the foreign partner has a majority of votes. Yet Algeria’s foreign partners complain that this requirement (believed to be imposed by Bouteflika himself) impedes foreign direct investment. Crisis Group interviews, EU and U.S. diplomats, Brussels and Algiers, November 2017. Many foreign investors nevertheless perceive Algeria’s large middle-class domestic market as an attractive enough asset to forego the controlling stake. Crisis Group interviews, Algerian economists and industrialists, Algiers, May 2017.Hide Footnote It lobbies for rationalising both social spending, which it deems highly inefficient, with a particular focus on subsidy reform for energy and housing. It also supports integrating the informal sector into the formal economy as a high priority: huge quantities of cash circulate in a massive informal economy, which is more flexible than the rigid, overly bureaucratic banking and finance sector, and has proven remarkably resistant to efforts to regulate it. The informal circulation of money not only denies tax revenues to the government, it also renders impossible the kind of detailed economic analysis necessary for planning.[fn]Crisis Group interviews, Algerian economists and policymakers, Algiers, September 2017.Hide Footnote

The need for foreign investment and partnerships to support private enterprise has endowed the FCE with a diplomatic relevance it has enthusiastically embraced. FCE delegations project an Algeria transformed since socialist rule, with new and dynamic private enterprises and strong untapped potential. It has identified Western countries and Japan as desirable investment partners, on account of the knowledge and technology transfer prospects they offer, and sub-Saharan Africa as an export market with strong potential. The FCE seeks to translate Algeria’s robust political and diplomatic relations with African countries into economic relationships.[fn]Crisis Group interview, FCE board member, Algiers, September 2017. Morocco, a diplomatic and economic rival to Algeria in West Africa, is doing the precise opposite far more efficiently, parlaying budding economic relationships with African partners into diplomatic ties it can then translate into political gains in the African Union. In terms of regional exports, Algeria brings a certain savoir-faire and competitiveness to the table in sectors such as pharmaceuticals and infrastructure. Since 2015, it has overseen a number of projects, including the electrification of the Chadian capital N’djamena. Crisis Group interview, FCE board member, Algiers, September 2017. The FCE-hosted Algeria-Africa Business Forum, launched in December 2016, attracted 300 business leaders from across the continent to a two-day event in Algiers aimed at bolstering relationships and producing trade deals. The Forum led to the signature of around 100 Memoranda of Understanding between Algerian and sub-Saharan African business leaders, which were welcomed by Algerian operators looking to be more active on the continent. Crisis Group interview, FCE member, Algiers, September 2017.Hide Footnote

Critics charge that the FCE embodies a backward rather than forward-looking aspect of Algerian private enterprise. An Algerian economic analyst said:

The FCE represents liberal interests, including those of import barons. Import barons don’t want diversification and domestic production; they want imports because these allow them to manipulate the hard currency market. Their business model depends on their ability to arbitrage [the buying and selling of assets to take advantage of differing prices for the same asset] the state by selling goods at inflated prices. They’re not real capitalist investors. They don’t produce anything. It was this group of economic actors that brought about the sacking of Tebboune.[fn]Crisis Group interview, Amor Khelif, research director, Centre de Recherche en Economie Appliquée pour le Développement, Algiers, September 2017.Hide Footnote

Government officials and FCE members seem aware that import barons must pivot toward more productive sectors. “Elites want to make a lot of money”, a government adviser said. “But we have no more foreign currency. Import barons need to be pushed into productive activity. Circumstances oblige us to get out of this Dutch disease”.[fn]Crisis Group interview, government economic adviser, Algiers, September 2017.Hide Footnote

The FCE has paid a cost for its increased political visibility: its critics now often paint it as a parasite granted special favours and playing a pernicious political role.[fn]Crisis Group interviews, Algerian economic analysts, Algiers, May-September 2017. “The FCE is a lobby. The principal contradiction of the FCE is that it seeks to extract fiscal and financial advantages from the state even as it lobbies for liberalising the economy”. Crisis Group interview, Algerian retired economic policymaker, Algiers, October 2017.Hide Footnote This is in part a caricature that does not reflect the diversity of its members, but is also the predictable result of its politicisation, which rewards business leaders for supporting the government and punishes others for challenging it. Independent-minded entrepreneurs are often actively obstructed, as the public tussle between the government and billionaire industrialist Issad Rebrab, whose Cevital group produces the majority of the country’s non-hydrocarbons exports, has shown.[fn]Issad Rebrab is the most striking example of the state obstructing entrepreneurs it views as too independent. He has consistently supported opponents of Bouteflika since 2004, when he fell out with the FCE over its decision to support Bouteflika’s second term. Rebrab’s business group immediately began to encounter problems with port authorisations and customs approvals. See Wikileaks, “Form over function: surviving as a newspaper in Algeria today”, 5 May 2008. Rebrab, whose Cevital Group is the largest private company in Algeria and who is Africa’s ninth richest man with an estimated net worth of $4.3 billion, has since faced significant state obstruction, including a refusal by the port of Bejaia to release Cevital industrial equipment for several months, sparking strikes and protests by workers, and a court cancellation of his purchase of El Khabar, a newspaper. Rebrab is rumoured to be considering a presidential run in 2019. See Skander Salhi, “Election présidentielle de 2019 : la candidature de Rebrab, le scénario qui fait peur à Alger”, Maghreb Intelligence (www.maghreb-intelligence.com), 10 May 2018.Hide Footnote

V. Overcoming the Paralysis

Algeria stands at a delicate juncture. Bouteflika’s administration, having leveraged Algerians’ past traumas into its own overextension, is unable or unwilling to confront succession. For several years, prominent Algerians have repeatedly and publicly questioned whether Bouteflika is governing the country in reality, and have become increasingly bold in demanding that he not run for a fifth term.[fn]See, for instance, “Algérie : trois personnalités politiques appellent à empêcher Bouteflika de briguer un cinquième mandat”, Jeune Afrique, 9 October 2017.Hide Footnote Important elements of the opposition have tried, in vain, to call for a negotiated transition that would also address pressing economic issues.[fn]An Algerian opposition leader said: “Between falling oil prices and growing domestic energy consumption, it will be increasingly difficult to export oil after 2025. In the face of this economic situation, there is no political opening. The problem is not one of policy but of governance: we have a government that is inefficient, opaque and almost impossible to hold accountable. We need a government of national unity, one that can make Algerians feel it is sincere about making the changes that are needed. Without engaging with social forces, the state cannot resolve the crisis”. Crisis Group interview, Algiers, February 2018.Hide Footnote Yet in the face of such calls, the presidency and the political coalition that supports it have chosen to either remain silent or double down on another extension of Bouteflika’s tenure as the glue that binds the system together. The latter build on a sense of confidence that many Algerians are grateful for the peace they have enjoyed since 1999 and are more worried about what an unknown future will bring.[fn]Crisis Group interviews, Algerian activists, academics and journalists, Western diplomats, Algiers, October 2017-February 2018.Hide Footnote

The result is an increasing paralysis, reflected not only in the political status quo dominated by the FLN and RND, but also in economic and foreign policy.[fn]Crisis Group interviews, Algerian activists, academics and journalists, Western diplomats, Algiers, October 2017-February 2018.Hide Footnote One consequence of this paralysis has been the stifling of an overdue debate about how to adjust to the decline in hydrocarbon revenues and reduce Algeria’s reliance on them. Such a debate needs to happen at two levels: between the elites – businesspeople, technocrats and politicians – that influence policy and the wider public, but also among these elites themselves.

Whether needed economic changes arrive suddenly in response to crisis or more gradually if higher oil prices can buy more time, a first step for the government is to improve its communications and outreach. This is necessary to explain the challenges ahead and the necessity of reforms – including some that may be unpopular – and what they are expected to deliver. In recent years, the government has tended to underestimate or obfuscate worrisome economic data, including the evaporation of export earnings for savings and investment.[fn]Then-Prime Minister Sellal, for instance, vowed in July 2016 that foreign exchange reserves would “under no circumstance” fall below the $100 billion threshold, yet this is precisely what happened at the end of November 2017. See “Sellal : les réserves de change ne baisseront pas en dessous de 100 milliards de dollars”, HuffPost Algérie, 14 July 2016.Hide Footnote An effort to be more transparent about the state of the treasury and how public money is spent would be important in explaining the country’s economic situation and avoiding the type of alarmist responses that can prevail when no reliable information is available.

A related issue is the need to address the distrust many Algerians harbour towards both the state and the private sector, given the public perception that a small elite has captured the state. Neither policymakers nor their partners in the private sector and labour movement should underestimate the role corruption plays in the popular imagination; the Khalifa Bank and Sonatrach scandals in particular have eroded trust among both Algerians and foreign investors.[fn]See fn. 7 above for more on the Sonatrach case. “Fresh trouble for Algerian oil and gas”, Forbes, 12 March 2013. The high-profile Khalifa bank scandal involved one of the largest private sector conglomerates, including a bank, an airline and a TV channel. In 2003, the bank declared bankruptcy, dissolving the savings of over a million customers, including state-owned companies. Proximity to the Bouteflika brothers was instrumental to Khalifa building his empire; a rupture with them is believed to have conditioned its fall. Crisis Group interviews, Algerian journalists, Algiers, September 2017. See also Renaud Lecadre , Florence Aubenas , José Garçon and Cédric Mathiot, “La face cachée de l’« empire » Khalifa”, Libération, 30 October 2002.Hide Footnote The seizure of over 700 kilos of cocaine in a shipment of frozen meat belonging to a well-connected businessman in mid-2018 provoked consternation about the alleged complicity of senior security officials in organised crime.[fn]See “Affaire des 701 kg de cocaïne : Complicités et dommages collatéraux”, El Watan, 11 July 2018. The scandal, which continues to be investigated, has led to the dismissal of a number of senior security officials and scrutiny over the businessman’s relations with a wide range of politicians, officials, and their families.Hide Footnote

Accountability for at least the most egregious of past excesses could be one option if policymakers want to address public concern about corruption, even if a politically fraught one because of the likelihood it will harm vested interests. An anti-corruption crackdown also runs the risk of becoming a politicised witch-hunt, particularly in the context of a looming leadership change. A more palatable option might be to lower the risk of repeating such occurrences, for instance by appointing a commission of experts to review existing legislation and administrative procedures and suggest reforms to improve oversight of public spending.[fn]One possible model for this is the Instance Nationale de Lutte Contre La Corruption (National Authority for the Fight Against Corruption, INLUCC) created after the 2011 uprising in neighbouring Tunisia, one of whose missions is to propose policy reforms to fight corruption. See Crisis Group Middle East and North Africa Report N°177, Blocked Transition: Corruption and Regionalism in Tunisia, 10 May 2017.Hide Footnote

Any renegotiation of the post-1990s social contract – lavish state spending, including on the cultivation of new economic elites, in exchange for political acquiescence in Bouteflika rule and impunity for the perpetrators of violence during the civil war – must be considered carefully. The generation born in the 1990s has little memory of the decade’s violence and will face rising prices of basic goods as the government phases out subsidies. Those younger than thirty – 70 per cent of the population – are now entering the workforce with bleak prospects and dramatically diminished state capacity to support them.[fn]Youth Policy Labs, Algeria factsheet, 2014. International Labour Organization, ILOSTAT database, March 2017.Hide Footnote While some resent the change in circumstances, others perceive it as an opportunity: there is a will among this group to carve out its own space and reduce dependency on the state. As Abdellah Malek, the 28-year-old head of a technology start-up hub in Algiers,[fn]Malek is unusual and quite popular because he is young, dynamic, comes from a poor background and is entirely self-made. Forbes recognised him in 2018 as one of the most influential African entrepreneurs under 30. While he may not be representative of the under-30 generation per se, he is an influencer and thought leader with popular legitimacy.Hide Footnote put it:

Most of society has been receiving things for free for twenty years. People need to work hard to navigate themselves out of dependency. If entrepreneurs are not able to do things on their own, they’ll always rely on the government for help; too much of society is already suffering from this mentality because of oil income.[fn]Crisis Group interview, Abdellah Malek, director, Sylabs, Algiers, September 2017. Malek hosted an Algiers start-up conference in 2016 that was well-attended by senior government officials and resulted in several large contracts. He said he was optimistic that dialogue between the government and young entrepreneurs would help the government better adapt its support efforts to the needs of young entrepreneurs, even if this support has focused too much on materials and cash loans and not enough on training and human resources. He also cited positive improvements in reducing bureaucracy; for example, a document it took four to six weeks to obtain in 2016 was available in 2017 in merely a week.Hide Footnote

Implementing a transition away from the current economic model will require more transparency and openness at all levels.

The question of the relationship between a handful of powerful officials and politically influential economic elites is intertwined with the wider public’s perception that corruption is widespread among a small power elite of entrepreneurs and officials. “Separating money from political power”, as former Prime Minister Tebboune promised to do and what many believe he was sacked for, is a politically charged slogan at odds with the reality that powerful businesspeople organise to defend both corporate and personal interests, and that the struggle against corruption is too often used to settle political scores. A better approach is to expand the number of stakeholders in the formulation of economic policy.

Part of the controversy about the FCE’s influence is ideological, reflecting typical right/left or liberal/statist divides that generally can be resolved through elite power rebalancing and electoral outcomes. But the FCE’s problem also largely lies in the perception that despite being the lead reformer, it embodies the interests of the establishment and a new elite rather than the economic interests of the country as a whole. As an economic policy adviser said: “The Tripartite should be widened. In terms of building a popular consensus around reforms, having representation be restricted to the UGTA and FCE has a negative impact”.[fn]Crisis Group interview, chief economic policy adviser, Algiers, October 2017.Hide Footnote Reaching out to outliers in the business world, including those seen as critics of the Bouteflika government such as Issad Rebrab, could not only infuse the debate over economic policy with different ideas but also defuse charges that it lobbies for a particular faction more than the interests of the private sector as a whole.[fn]Another example of a businessman trying to promote alternative views to the FCE is Slim Othmani, head of the NCA Rouiba beverages company and president of the economic think tank Cercle d’Action et de Réflexion autour de l’Entreprise (CARE). He has lobbied for a modernisation of thinking about the economy, using conferences and media outreach to push for less bureaucracy and more private sector autonomy, so far to little effect. Crisis Group interview, Slim Othmani, Algiers, October 2017.Hide Footnote

VI. Conclusion

Algeria has a mixed inheritance from the black decade. It has learned some lessons about how not to liberalise too quickly under sudden pressure due to mounting foreign debt, and it has a strong will to avoid repeating past mistakes. It must now balance the need for an economic adjustment against vested interests that range from privileged businesspeople to elements of society who consider rapid and substantial changes to the redistributive model as too disruptive. That model, for all its inefficiencies, has lifted many out of poverty and helped stabilise a war-torn nation.

Implementing a transition away from the current economic model will require more transparency and openness at all levels, and more accountability from both state institutions and the private sector. Ultimately, the deep reform that Algeria needs requires a strategic opening, externally but also internally, to embrace a diversity of economic, political and societal actors in building a new model that can ensure both stability and growth. The government’s current attitude, be it toward making major economic decisions or tackling broader political and societal questions, is too often aloof, arrogant and at odds with Algerians’ expectations.

Despite the political uncertainty before the 2019 presidential election and, more generally, a looming presidential transition that may or may not align with the electoral calendar, some cautious initial steps are possible. They could include improving transparency on the state of public finances and widening the discussion on the challenges Algeria faces and how best to address them to a broader range of business and civil society actors than those currently involved in the policymaking process. Young Algerians in particular – who constitute the bulk of the population and whose futures is at stake – should be at the centre of any effort to define a long-term response to the country’s economic challenges.

Like many issues crucial to Algeria, questions of economic reform have tended to be postponed, with proponents of change waiting for a more forward-leaning political leadership. This may not emerge for some time, however, and today’s decision-makers should consider that getting ahead of the curve of a future crisis would be wiser – for their own sake as well as Algeria’s – than dealing with a shock when it comes. It is not too early to start widening the framework of a debate that is as much about how the Algerian social model should evolve as it is about technical steps toward remedial reform.

Algiers/Brussels, 19 November 2018

Appendix A: Map of Algeria

University of Texas at Austin
Algerian demonstrators stage a sit-in on 5 March 2015 at Somoud Square in the Sahara desert village of In-Salah, south Algeria, against the exploration of shale gas. AFP/Farouk Batiche
Report 171 / Middle East & North Africa

Algeria’s South: Trouble’s Bellwether

As waves of protests have hit the hydrocarbon-rich Algerian south since 2013, authorities maintained a tenuous peace through handouts, repression and policing. To calm tensions, the state needs to clarify policies, communicate with local protestors and address underlying issues of governance.

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Executive Summary

Since 2013, the politically marginal but economically crucial oil-producing areas of the Algerian south have experienced successive waves of unrest over what may appear local economic, environmental and communal issues. Taken together, however, a pattern emerges: resentment is growing against central authorities in a part of the country long peripheral to its politics. Thus far, authorities have managed this burgeoning discontent with a stick-and-carrot policy that has kept a tenuous peace but not addressed underlying issues. Ahead of an uncertain presidential succession and given the painful consequences of low oil prices, Algeria should go beyond treating the symptoms to address governance shortcomings and include its peripheral populations in political decision-making. It should do so now, when the challenges are still amply manageable, rather than allow them to fester and bleed dangerously into the coming political transition.

Three separate movements in three southern cities have evolved in recent years to mobilise thousands of Algerians, both in the desert region and elsewhere in the country. The historic town of Ghardaia has seen recurrent clashes between Sunni Arabs and a Berber minority that follows Ibadism, an Islamic school of jurisprudence, in a rare instance of sectarian violence in an overwhelmingly Sunni country. In the far south, the town of In Salah has given birth to the Maghreb’s most significant ecological protest movement, with thousands mobilising against shale gas exploration the government concealed. In Ouargla, widespread unemployment has provoked unrest by local youths, who have formed a movement that demands an end to what they consider central-authority neglect.

These issues, long considered politically marginal, must be taken seriously, not only for the sake of the vast region, but also because of their growing and very real impact on the country’s political “core” in the north. Central authorities in Algiers, who tend to view local discontent with suspicion, have failed to appreciate its depth. They continue to think in terms of handouts, repression and policing, tools which have barely kept a lid on an occasionally violent cauldron. That most of the south remains calm, and the state has managed to restore order in the areas where there has been turmoil, indicates southern unrest is still manageable. Defusing the possibility of renewal and spread is an opportunity as well as a necessity: deep political engagement would pay dividends across the country.

Facing the most serious economic challenges in decades due to falling oil production and low international prices, Algeria is less and less able to substitute spending for inclusive politics and good governance. A strategy that helped secure peace in the 2000s – when it was still recovering from a conflict between the state and Islamist insurgents that claimed over 200,000 lives and pursuing national reconciliation – is no longer viable. The unrest of the last few years demonstrates that southern citizens are no longer willing to put aside their demands for improved transparency, communication and respect from their government.

The Algerian state, born of a long struggle against colonialism and an advocate for a strict doctrine of sovereignty, is certain to reject anything it perceives as meddling, which is how it often interprets outside advice. But it should listen to its citizens: much of the protesters’ outrage derives from their sense that they are neither being heard nor engaged. The government should consider several meritorious demands whose fulfilment would contribute to building greater trust. These include:

  • establishing a parliamentary enquiry, or another form of independent investigation, headed by personalities accepted by locals, to examine intercommunal relations in Ghardaia. Such an entity could look into causes of past violence, devise measures to improve community relations, assess what reparations could be made and offer recommendations to improve policing strategies and local governance;
     
  • creating more transparent procedures for public-sector hiring and improving guarantees of fairness in making such appointments. Encouraging responsible private investment and diversification from extractive industries in Saharan provinces would also relieve pressure on the state to create jobs that burden its finances; and
     
  • adopting a more transparent policy toward shale gas exploration and production, starting with clearly stating where it is pursued, and encouraging research into its potentially adverse local effects and how to mitigate them. This could take the form of dialogues with local populations as well as encouraging academia, civil society groups and private-sector partners to participate. At the national level, the authorities should encourage open discussion of fracking’s potential economic benefits and environmental pitfalls.

Southern unrest is a bellwether of a wider governance problem that jihadist groups have already sought to capitalise upon. If recognised early, it could prompt a course correction that would defuse tensions at a time of global geopolitical upheaval, regional turmoil, economic downturn and political uncertainty. The lessons learned from such an exercise would have relevance for other challenges the country faces in the years ahead.

Algiers/Brussels, 21 November 2016

I. Introduction

The Algerian south, the vast area beyond the Atlas Mountains and the High Plateaux that border the Mediterranean, comprising 85 per cent of the national territory and virtually all its oil and gas reserves but less than 9 per cent of its population, was long sheltered from the mass protests and armed insurrections that have flared up sporadically in the north since the 1980s. But spurred by the Arab uprisings and local grievances, politics in the south has grown increasingly contentious since 2013, and the region has overtaken the north as the epicentre of protest.

Three sites, each with local specificities, have demonstrated over the past few years the potential for seeding wider unrest. Since 2013, intercommunal clashes between Ibadi Mozabites and Sunni Maliki Arabs in the Mzab Valley have led to dozens of deaths, the burning and looting of thousands of businesses and homes and the destruction of cultural heritage sites, including a UNESCO-classified Ibadite shrine.[fn]The Mzab Valley Mozabites are Amazigh followers of the Ibadi school of Islamic jurisprudence, common only in Oman and Zanzibar, but with followers in Algeria, Libya and Tunisia. Malikis follow the school of Islamic jurisprudence founded by Imam Malik Ibn Anas, one of Sunni Islam’s four main schools and dominant in the Maghreb.Hide Footnote The remote Saharan town of In Salah became the site of a large mobilisation against shale gas exploitation after the government announced successful test drills nearby in December 2014. Peaceful unemployment protests in the towns of Laghouat and Ouargla were met with arrests and intimidation in 2013.

As Crisis Group has advocated regarding foreign policy, President Abdelaziz Bouteflika’s fourth-term administration needs to build a long-term strategic vision.

The state so far has managed to contain tensions through familiar carrots – including dhamanat (literally “guarantees”, in this case of various reforms), patronage and largesse – and sticks, such as intimidation and harassment of protest leaders. However effective in the short term, these measures, by failing to address the underlying political causes of unrest, risk exacerbating them in the long run. Conflict and violence are already expanding, overlapping and deepening. New forms of contestation are emerging as the state’s welfare role shrinks.[fn]Cuts to electricity subsidies, one of a host of moderate austerity measures passed in the 2016 and 2017 budgets, are already sparking new rounds of protests across southern cities such as Biskra, In Salah and Ouargla. See “Algérie: Le Sud grogne contre une facture d’électricité salée”, Jeune Afrique, 27 October 2016.Hide Footnote As Crisis Group has advocated regarding foreign policy, President Abdelaziz Bouteflika’s fourth-term administration needs to build a long-term strategic vision.[fn]Crisis Group Middle East and North Africa Report N°164, Algeria and Its Neighbours, 12 October 2015.Hide Footnote

The Algerian state often represents itself as a model of security and stability in troubled times, while critics at home and abroad say that plummeting oil prices and uncertainty about the presidential succession are pushing it toward a new crisis. Contestation in the south could herald promise or peril, depending on how it is managed. If well, it could encourage political inclusivity and transparency; if poorly, it could emerge as a major vulnerability when, as likely in only a few years’ time, oil money runs low.

II. Why the South Matters

Algeria took shape as a unified territory only in the nineteenth and twentieth centuries, after waves of conquest (by the Ottoman Empire in the sixteenth and France in the nineteenth centuries) and the settlement of territorial disputes with its neighbour Morocco (in the twentieth). Historically, control over the regions that today comprise the south focused on trade routes; authority was concentrated around the coast, stretching only weakly to the interior and barely to the Sahara.[fn]Y. Kouzmine, J. Fontaine, B.E. Yousfi and T. Otmane, “Étapes de la structuration d’un désert: l’espace saharien algérien entre convoitises économiques, projets politiques et aménagement du territoire”, Annales de géographie, no. 670, 6 (2009), pp. 659-685.Hide Footnote The French started to define the southern border in the mid-1800s, a process finished only in the early 1900s. Since independence in 1962, the state has worked unevenly to integrate the south into the national fabric.

The central authorities have long had an ambivalent relationship with the southern regions. Weak control there has posed security dilemmas, with, for example, the region famously providing sanctuary for nineteenth century anti-colonial rebel leader Emir Abdelkader in his struggle against the French. Swayed more by wishful thinking than a clear understanding of reality on the ground, the state – first French, later Algerian – has seen southern populations as more amenable to its control than those of the north; this perception was reflected in the mid-nineteenth century notion of “pénétration pacifique”, which evolved into the idea of “le sud tranquille” in the late twentieth, when the north was awash in violence.[fn]See Benjamin Claude Brower, A Desert Named Peace (New York, 2009), pp. 22, 207. See Appendix C below for a glossary of terms and phrases, including English translations, for those given only in French in the main text.Hide Footnote  But while political activism long has been more energetic in the north, the misperception of southern passivity has had real and dangerous consequences, arguably contributing to policymakers overlooking the region’s needs and grievances.

A. The Algerian Sahara

The central authorities have long had an ambivalent relationship with the southern regions.

As independent Algeria constructed a national identity based on socialist and Arab nationalist ideologies, it sought to reduce inter-regional disparities, with limited success. The south’s hydrocarbon reserves, discovered in the 1950s, shaped the region’s infrastructure, which was built around the extraction and transport of oil and gas. State policy formally emphasised regional equality, but security, particularly but not only since the civil war of the 1990s, has been trump. So too has the Arabisation policy; pursuit of the ostensible goal of national cohesion and social integration by imposing Arabic as the language of education and administration has come at the expense of speakers of French and Amazigh (Berber) dialects, inciting protest among the latter.

In the early 2000s, the contradictions between the Algerian Sahara’s resource wealth and its residents’ relative deprivation grew sharper. The Mouvement des Enfants du Sud pour la Justice (MSJ), founded in 2004, demanded greater economic opportunity and fairer wealth distribution. At a time of rising foreign investment and job growth, southerners saw few of the benefits, even as their region produced most of the nation’s wealth.

At the same time, jihadist activity expanded. Abdelmalek Droukdel, leader of the Kabylie-based jihadist Groupe pour la Prédication et le Combat (GSPC), an Algerian body founded in 1998, shifted his focus from the north, curbed his ambitions of striking Europe, which his group had failed to do, and concentrated on forming Saharan katibas (brigades). Under Mokhtar Belmokhtar and Abdelhamid Abu Zeid, these carried out attacks against Western targets in parts of the Algerian Sahara and the wider Sahel region, such as Mali and Mauritania, where security was weak.[fn]The Sahara Desert includes most of North Africa east of the Atlas Mountains and south of the fertile regions of the Mediterranean coast. In this report, “Algerian Sahara” means the part in Algeria, and Sahel refers to the semi-arid region on the Sahara’s southern edge stretching from the Atlantic Ocean to the Red Sea, including southernmost Algeria and parts of neighbour states.Hide Footnote They grew rich off smuggling as well as ransoms for Western hostages.[fn]See Jean-Pierre Filiu, “The fractured jihadi movement in the Sahara”, Current Trends in Islamist Ideology, 10 January 2014. AQIM Emir Abdelmalek Droukdel, an “Arab Afghan” and former GSPC commander, is believed to still be based in the Kabylie region. His Sahara deputy, Abdelhamid Abu Zeid, was killed in a French airstrike in northern Mali in February 2013. Mokhtar Belmokhtar, mastermind of the In Amenas attack, commands the al-Morabitoun jihadist group, which has links to al-Qaeda and the Islamic State (IS) and is responsible for attacks as far west as Ivory Coast. Despite repeated reports of his death, including in a U.S. airstrike targeting him in Libya in June 2015, he is believed to be alive.Hide Footnote

The GSPC formally affiliated with al-Qaeda in 2007, when it was renamed al-Qaeda in the Islamic Maghreb (AQIM). Jihadist interest in the Sahara, which during the 1990s was mainly a logistical and support hub, culminated in AQIM’s 2012 seizure of northern Mali, in cooperation with the trans-Sahelian jihadist groups Ansar Dine and the Movement for Monotheism and Jihad in West Africa (MUJAO). France’s Operation Serval, launched in January 2013, led to the recapture of northern Malian towns, but attacks on military and civilian targets there remain common, while implementation of the Algiers peace agreement signed between non-jihadist northern rebels and the Malian authorities in June 2015 has stalled.[fn]See Crisis Group Africa Report N°226, Mali: An Imposed Peace?, 22 May 2015; Africa Briefing N°115, Mali: Peace from Below?, 14 December 2015.Hide Footnote

B. A Resource-rich Region

Longstanding southern frustrations have grown sharper in the past decade and a half as a result of mismanagement and changes in the global economy. In the early 2000s, President Bouteflika’s administration raised expectations of rising wealth when he liberalised the oil and gas industry.[fn]Unemployed urban youth recalled their expectations that new jobs and investments would benefit them. Crisis Group interview, southern activists, Ouargla, May 2015.Hide Footnote A new Hydrocarbons Law in 2005, which aimed to attract foreign investment by loosening ownership requirements, set off a wave of exploration and production in the south.[fn]The 2005 law ended Sonatrach’s monopoly on exploration, production and transportation, forcing it to compete with international oil companies investing in the liberalised activities.Hide Footnote But Bouteflika, for reasons that remain unclear, backtracked when the 2006 Hydrocarbons Order reinstated the requirement that the state oil company, Sonatrach, have a majority stake in almost all upstream, midstream and downstream activities.

Over the next years, culminating in 2013, southern hopes soured. Even as oil prices soared, enabling Algeria to amass foreign exchange reserves of $200 billion in 2012, social investments failed to materialise, and corruption scandals multiplied. Many southerners came to perceive national authorities and multinational companies as at best reckless and at worst criminal. A southern activist said, “Bouteflika authorised them to come, all kinds of companies with all sorts of activities, and they dug in the south without protecting the environment and do nothing for the society. They don’t even create local jobs: they bring their own employees”.[fn]Crisis Group interview, southern activist, Adrar, May 2015.Hide Footnote

In 2010, after a six-month investigation by the Départment du Renseignement et de la Sécurité (DRS) – the now-defunct but then-powerful intelligence agency often at loggerheads with the presidency in the last decade – corruption charges were brought against Sonatrach CEO Mohamed Meziane, his two sons and several top managers. Corruption at the highest levels of the company, which is involved in every oil operation in the country, is alleged to have cost Algeria billions of dollars in annual revenue in the oil sector alone.[fn]Aomar Aouli, “Algeria oil corruption trial begins after 5-year delay”, Associated Press, 15 March 2015. For background on the rivalry between the DRS and President Bouteflika, see Crisis Group, Report Algeria and Its Neighbours, op. cit. ENI subsidiary Saipem is on trial over allegations it paid $200 million in bribes to Sonatrach, 2007-2010, in exchange for seven contracts worth €8 billion. In early 2016, a criminal court sentenced six, including Meziane and his two sons, to jail for corruption offences ranging from embezzling public funds to accepting bribes. “Affaire Sonatrach 1: sursis pour Mohamed Meziane, prison ferme pour son fils”, TSA, 2 February 2016.Hide Footnote

Over the past five years, oil production has declined, as bureaucratic hurdles and poor management of oil and conventional gas reserves have driven investors away. Algeria depends on hydrocarbon exports for 98 per cent of its foreign earnings (70 per cent of national revenue). Declining production for export, rising domestic demand due to population growth and the vertiginous drop in oil prices in 2015 mean that a fiscal breaking point looms on the three-year horizon: at current spending levels, the Fond de regulation des recettes, the revenue regulation sovereign wealth fund created in 2000 to manage surplus hydrocarbon revenue, is expected to run out in 2016, and foreign exchange reserves, which fell $35 billion in 2015 to $143 billion, are expected to be exhausted by 2018.[fn]British Gas and Total have each abandoned a field within the past two years, due to obstacles such as a new three-year exploration license when five to ten years is the industry standard. Response to bidding rounds since 2007 has been “dismal”. Crisis Group interview, international oil company executive, Algiers, May 2015. George Joffe, “Fracking won’t fix Algeria’s oil woes,” al-Araby al-Jadeed, 13 March 2015. “Le fonds de régulation des recettes s’épuisera dès la fin de l’été 2016, selon des experts”, Maghreb Emergent, 5 March 2016.Hide Footnote

The government has sought a solution in shale gas exploration. The U.S. Energy Information Administration (EIA) estimates that Algeria has almost 20 trillion cubic metres (707 trillion cubic feet) of technically recoverable shale gas and 5.7 billion barrels of technically recoverable shale oil, placing it third after China and Argentina in technically recoverable shale gas resources.[fn]Crisis Group interview, senior oil company analyst, Algiers, June 2015. “World Shale Resource Assessments”, EIA, 24 September 2015.Hide Footnote A long-time analyst of its hydrocarbon sector said:

Shale is Algeria’s get-out-of-jail-free card. The industry perspective right now is that Algeria is an also-ran – they’re there producing oil and gas but not in any interesting or competitive way. But if they become a shale producer then they can meet their domestic energy needs and export to Europe.[fn]Crisis Group interview, Geoff Porter, CEO, North Africa Risk Consulting, June 2016.Hide Footnote

Industry specialists also say improvements in management, anti-corruption measures and red-tape reduction could raise conventional gas and oil production enough to make up for lower oil prices, with less political impact than developing unconventional sources such as shale.[fn]Crisis Group interview, senior foreign oil company adviser, Algiers, June 2015.Hide Footnote

C. The Transformation of the South

As oil prices and production have dropped, so too has the state’s ability to buy social peace, but banking on a rentier system, even when it functions smoothly, could prove risky. Excessive reliance on rent redistribution alone can obscure reasons for discontent and demands for justice, equality and dignity.[fn]Naoual Belakhdar, “‘l’Eveil du Sud’ ou quand la contestation vient de la marge”, Politique africaine, no. 137, March 2015, pp. 27-48.Hide Footnote Generous patronage might temporarily satisfy enough people to calm an upsurge of resentment but is at best a temporary solution as the economy worsens – especially when jihadists in neighbouring states have proven adept at exploiting social crises and even more adept at exploiting the inadequate, often heavy-handed government responses to them. The south’s sense of exclusion ultimately can be solved only through better representation and integration at the national level, recognition of region-specific needs and challenges and a more equitable distribution of resources.

The south is undergoing a far-reaching transformation, propelled by almost 2 per cent annual population growth nationally, rapid urbanisation (69 per cent of the population was rural at independence; 70 per cent live in cities today) and rising expectations born of education and the internet.[fn]“National Report on Housing for the Conference on Housing”, République Algérienne démocratique et populaire, July 2014. The expansion of education and infrastructure in the 1970s, combined with sedentarisation policies and population transfers, set the stage for the glut of unemployed graduates in Ouargla and spread oil and gas expertise in In Salah.Hide Footnote The region has just 10 per cent of the total population but 36 per cent of the country’s impoverished municipalities.[fn]Luis Martinez and Rasmus Alenius Boserup (eds), Algeria Modern (London, 2016), p. 24.Hide Footnote

Further complicating social dynamics is the south’s ethnic composition, which includes significant ethno-linguistic Amazigh communities such as Tuaregs, Ouarglis and Mozabites.[fn]Numbers are unclear because the state abolished ethnic categories in the 1966 census.Hide Footnote The national ruling party, the Front National de Libération (FLN) has long pursued a policy of co-opting traditional political and religious leaderships of southern groups, such as zaouiyas (Sufi brotherhoods), Tuareg amenoukals (traditional tribal and regional chiefs) and the organised Mozabite political leadership known as the majlis al-qurthi. Local administration in the southern provinces, perceived to favour Arabs and co-opted Amazigh elites, tends to be run by northerners.[fn]Crisis Group interviews, local residents, Ghardaia, Ouargla, In Salah, May 2015, May 2016.Hide Footnote Co-opting elites creates the appearance of inclusion but tends to spread resources narrowly; many socially influential southerners, including urban youths, unionists and even traditional elites, feel outsiders run their lives according to their own priorities.

Occasional protests, strikes and violence in the north in the 1970s and 1980s demanding economic and minority rights peaked with the October 1988 riots over rising prices, unemployment and austerity. Contestation faded in the 1990s, as the security crisis overshadowed social questions.[fn]Belakhdar, “‘l’Eveil du Sud’”, op. cit.Hide Footnote It resurfaced in the south over the first decade and a half of the present century, however, when the newly formed Mouvement des Enfants du Sud pour la Justice (MSJ) demanded solutions for unemployment and regional inequality, putting southern concerns, for the first time, on the national map; the Comité National pour la Défense des Droits des Chômeurs (CNDDC) formed in Ouargla after a decade’s incubation; citizens in In Salah launched a national movement against fracking, sparking protests in Algiers, Oran, Constantine and across southern cities; and intercommunal fighting in Ghardaia led to the first-ever strike of security forces in Algiers, who marched on the president’s office.

The sustained if sporadic unrest at these sites suggests the emergence of specifically southern political dynamics. Governance shortcomings in the oil-rich zones are felt particularly forcefully. The south – far less populated, far more strategically important in terms of natural resources and far more difficult to control given its geography – has replaced northern regions like Kabylie as the epicentre of contestation. Its grievances are tightly wound social, economic, political and environmental concerns, in part specific to their communities, in part reflective of national sentiment, particularly resentment of a rentier state in crisis.

III. Southern Unrest: Three Case Studies

The coincidence of unrest at In Salah, Ouargla and Ghardaia, particularly given relative calm elsewhere, demonstrates the centrality of the Sahara to peace and security in Algeria today.[fn]Crisis Group interview, Dida Badi, research director, National Centre for Prehistoric, Anthropological and Historical Research, Algiers, May 2015. Nevertheless, while the nucleus of sustained unrest has transferred to the south, an official gendarmerie report recorded 429 “disturbances to the public order” during 2016’s second trimester (a five-a-day average), with interventions in northern urban centres such as Medea, Algiers, Boumerdes, Blida, Annaba and Skikda. “La gendarmerie s’inquiète d’une situation sociale qui reste préoccupante”, TSA, 8 August 2016.Hide Footnote While top officials tend to depict southern activists as separatists, they are fighting, in different ways, for more inclusion and voice in the state.[fn]“[Prime Minister Abdelmalek Sellal] accuses us of being separatists. We won’t negotiate with him …”. See “Ouargla: les organisateurs de la marche du 14 mars refusent de rencontrer l’envoyé spécial de Sellal”, Algerie-focus.com, 11 March 2013.Hide Footnote Fuelling the protest movements in Ouargla and In Salah are demands for greater benefits from the extraction of natural resources – what an analyst calls “resource regionalism” – as well as environmental concerns.[fn]“If resource nationalism was about states insisting on greater benefits from the extraction of the natural resources by foreign firms, then resource regionalism is about local communities demanding greater benefit from those same industries but at the expense of the central state”. Geoff Porter, “The new resource regionalism in North Africa and the Sahara”, Dossiers du CERI, Centre de recherches internationales, July 2013.Hide Footnote Exclusionary politics and weak governance in a resource-rich zone helped enflame tensions in Ghardaia, where they manifested as intercommunal conflict.

The coincidence of unrest at In Salah, Ouargla and Ghardaia, particularly given relative calm elsewhere, demonstrates the centrality of the Sahara to peace and security in Algeria today.

The crisis in Ghardaia is distinct in that it weaves the issue of ethnic and religious minorities together with political and economic concerns felt elsewhere in the south.[fn]The “Berber spring” was a period of activism in the Kabylie region and Algiers in 1980 that was violently put down by the military.Hide Footnote The Mozabites of the Mzab Valley, Amazigh followers of the Ibadi school, say they face structural discrimination in Arabisation policies as well as attacks on their homes, religious symbols and businesses by Arab Maliki groups.[fn]Algeria’s Mozabites are the founders of a 1,000-year-old pentapolis (a five-city aggregation that includes Ghardaia, Beni Isguen, El-Ateuf, Melika and Bounoura, and subsumes as well the more recently established Berriane and Guerrara) 600km south of Algiers. On allegations of discrimination against Mozabites, see below.Hide Footnote Their historical demographic predominance in the Mzab Valley has been undermined by a rapid population shift since the 1980s, in part due to state settlement of Arab tribes and designation of Ghardaia as the provincial capital in 1985. This, they say, multiplied official administrative posts that were filled primarily by Arabs and deepened class tensions, pitting relatively wealthy urban Mozabites against poor Bedouin Arabs who used the Arab national parties and their influence for social mobility.[fn]Crisis Group interviews, Mozabite residents, Ghardaia, May 2015. Nacer Djabi, “Solving the tensions in Algeria’s Ghardaia region”, Arab Reform Initiative, July 2015.Hide Footnote More recently, takfiri preachers in the region have accentuated the stigmatisation of Mozabites as “Shia apostates”, justifying violent attacks on them.[fn]Takfir is the act of a Muslim declaring another Muslim to be a kaffir (unbeliever). Takfiris are radical Islamists (including most contemporary Sunni jihadist groups) who practice takfir, often to sanction lethal violence against other Muslims that otherwise would violate a Quranic injunction. Some takfiris erroneously consider Ibadis to be Shia.Hide Footnote

A. Ghardaia

1. Ethno-sectarian conflict: Mozabites vs Arabs

Since 2013, local flare-ups between Mozabites and Arabs have been quick to ignite and nearly impossible to extinguish.[fn]Outbreaks have occurred in Ghardaia, Berriane and Guerrara. The current violence broke out in 2013, but clashes date to 1985, when land in Ghardaia belonging almost entirely to Mozabites was appropriated and distributed to Arabs as part of the sedentarisation process of extending control over remote and often nomadic southern populations.Hide Footnote Ghardaia province (wilaya) has a dozen towns and some 360,000 residents. In October 2015, after hundreds of riot police were stationed there for ten months under difficult conditions, they returned to the capital and, with others who remained in Ghardaia and a few dozen in Oran, launched the country’s first-ever strike by security forces, demanding improved working conditions and an end to long deployments.[fn]The Compagnies républicaines de sécurité (CRS) riot police unit was responsible for the strike, demanding better working conditions, the right to unionise and departure of the managing director of the Direction générale de la sécurité nationale (DGSN), Major-General Abdelghani Hamel.Hide Footnote When those in Algiers marched to the presidency’s El Mouradia palace, they found themselves in a standoff with the presidential guard. Prime Minister Abdelmalek Sellal met with them that evening, promising to respond to their demands, though not their leading one, the departure of police chief Major-General Abdelghani Hamel.

Destruction des mausolées berbères de la vallée du Mzab en Algérie

ImazighenLibya

The escalation between Mozabite and Arab groups began in November 2013, when 150 people were arrested during clashes over a football match in Guerrara, 100km north east of Ghardaia. Neutral observers supported the Mozabite perception that security forces intervened on the Arab side.[fn]Crisis Group interviews, Mozabite activists, local journalists, Ghardaia and Algiers, May 2015; Ghardaia, May 2016.Hide Footnote The next month, Mozabite protesters shut down Ghardaia’s centre, demanding that authorities divulge public housing and land allotments. After the police reopened the area, the Mozabite businesses there were burned, leading to more reprisals and counter-reprisals. In the end, fifteen people were killed, mostly Mozabites.[fn]Mozabites say the wilaya security head, Abdelhak Bouraoui, is clearly visible in a cellphone video of the desecration of a Mozabite cemetery and destruction of the mausoleum of the Mozabite Sheikh Ammi Said, a UNESCO world heritage site sacred to Mozabites. See ImazighenLibya, "Destruction des mausolées berbères de la vallée du Mzab en Algérie", YouTube, 6 Feb 2014 and mzab europe, "attaque des criminels chaamba et mdabih sur la cimetière Ammi Said vandalisé encore une fois", YouTube, 14 April 2014.

For the next two years, amid sporadic deadly violence, the community’s mixed neighbourhoods self-segregated. Long-term residents were driven out by neighbours’ threats and their own fears. Mozabites and Arabs who ventured from their streets or neighbourhood risked danger; only Sub-Saharan migrants, seen as neutral, could confidently cross the invisible boundaries. Armed with knives and Molotov cocktails, Mozabites formed self-defence groups and filmed and distributed videos of police sheltering Arab protesters, proof, they say, of authorities’ bias.[fn]Crisis Group interview, local journalist, Ghardaia, June 2015. “We started forming self-defence groups when we noticed our houses were being burned, and the police intervened on the side of the Arabs”. Crisis Group interview, Mozabite self-defence group leader, Ghardaia, May 2015. He said dozens of neighbourhood patrols have since formed, and even high school students had units with light weapons. “En Algérie, Ghardaïa enflammée par les violences communautaires”, Le Monde, 19 February 2014.Hide Footnote

Violence crested in 2015. In June, at Ramadan, Arabs threw Molotov cocktails into a car in Berriane, leaving four Mozabites gravely burned. The next month, dozens on both sides were killed and hundreds wounded in less than a week. The military was deployed to contain the situation, but by then thousands of homes and businesses had been burned and schools closed for long stretches.[fn]“Ghardaia: nouvelles échauffourées entre jeunes à Berriane”, Algérie Press Service, 17 June 2015. The most intense, sustained fighting was in mixed neighbourhoods such as Thienniet al-Makhzen and Hajj Massoud, and around the al-Qurthi housing block, which 1,000 Arab residents could access only via a Mozabite area, where they were pelted with rocks and Molotov cocktails.

2. Intra-communal differences

Tensions highlighted differences not just between the two communities, but within them as well. As social and economic conditions have worsened, Mozabite elites – who form highly structured, interlocking spiritual, political, tribal and neighbourhood networks – have lost traction with the community’s youth.[fn]There are roughly 200 tribal groupings in the Mozabite community, split among seven main cities – the Ghardaia pentapolis plus Guerrara and Berriane – each with a tribal authority (majmua ashair) responsible for social issues such as education. The Majlis al-Qurthi groups together elites of the seven cities and serves as the political interface with the Algerian authorities.Hide Footnote Traditional authorities, unable to protect their people and seen as co-opted by the state, are losing ground to fiery activists like Fekhar Kameleddine, the doctor-turned-activist who founded the Mouvement pour l’Autonomie du Mzab and wrote the UN Secretary-General denouncing an “ethnic cleansing” campaign by the Algerian state.[fn]Appel de détresse et demande d’intervention urgente!!”, open letter to UN Secretary-General Ban Ki-moon by Dr Kameleddine Fekhar, 3 July 2015, as published by siwel.info.Hide Footnote

Many Mozabite youth, framing their predicament in communal terms, have concluded their only realistic option is to fight back.[fn]Crisis Group interviews, Mozabite self-defence groups, Ghardaia, June 2015. Pro-Amazigh websites like siwel.info and tamazgha.fr portray Mozabites as facing campaigns of eradication; some Facebook groups openly incite violence.Hide Footnote This contrasts with the community’s traditional conservative bodies such as the Majlis al-Qurthi, the regional council that maintains strong links to the state, has called for calm and explains the climate of insecurity as a product less of ethnic violence than the breakdown of law and order. Explaining its preference to negotiate, a member said:

It’s not our point of view that these are inter-community incidents. There are repeated attacks by organised criminal mafias. But we have tried first on our side, aware that most of the damages suffered has been on our side, to take a moment to reflect and observe. And we reminded the state of its duty according to the constitution to preserve the security of citizens and their goods.[fn]Crisis Group interview, Majlis al-Qurthi leadership, Ghardaia, May 2015.Hide Footnote

While the council claims satisfaction with how the state is handling the situation, a member recently left his house of 40 years in the once-mixed, now self-segregating Ghardaia neighbourhood of Tahnia el-Makhzen after Arabs ransacked it and lamented: “All we can do is to swallow the indignity and smile”.[fn]Crisis Group interviews, members of Majlis al-Qurthi, Ghardaia, May 2015.Hide Footnote

Message to the Algerian government

سقلاب ابوالبراء

Arab communities are also fragmenting, though differently. Compared with Mozabites, the Arabs of the Ghardaia region lack unifying structures. They are an amalgamation of regional tribes – the Chaamba, Medebi, Said and Mokhadema – in addition to economic immigrants from elsewhere in Algeria. On the whole, they are becoming more Salafi, with some militant elements among them.[fn]Crisis Group interview, Dida Badi, research director, National Centre for Prehistoric, Anthropological and Historical Research, Algiers, May 2015.Hide Footnote Incitement to violence came from, for instance, Ahmed Seqlab, a young, Saudi-trained preacher from Berriane with a significant online following. Also, the privately-owned Saudi satellite television channel Iqraa, popular among Algerian Salafis, broadcast a fatwa from an Algerian cleric declaring Ibadis “enemies of Allah”.[fn]سقلاب ابوالبراء, “Message to the Algerian government”, YouTube, 4 August 2014. “Ghardaia: les tenants et aboutissements d’une fitna organisée”, Algerie-Focus.com, 9 July 2015.Hide Footnote

Arab antipathy for their Mozabite neighbours has other sources, too. Having long ago settled in cities, built trade links and invested in education, Mozabites tend to be more commercially successful. They also benefit from certain exclusive minority rights; their private schools and mosques, for instance, are not subject to state control of teaching and content, unlike those of Arabs. Yet overall, Arabs tend to feel represented by the Algerian state.[fn]Crisis Group interview, Moustapha Rebbahi, Arab professor of sociology, University of Ghardaia, Ghardaia, June 2015.Hide Footnote In this sense, Mozabite cultural autonomy is less something for Arabs to emulate than a threat to be contained, and the state is an ally in doing so. An Arab community leader said:

Mozabites who pass through private schools have complexes against Arabs. The Ibadis call themselves the only group that is on the right path; they consider themselves superior. The state should put these schools under its control.[fn]Crisis Group interview, Arab community leader, Ghardaia, June 2015.Hide Footnote

3. A confused response

Neither local nor national authorities have been able to negotiate an end to the impasse. Appeals for peaceful dialogue by traditional Mozabite and Arab authorities failed to stem the violence, and national authorities have yet to respond to calls by Arabs, Mozabites and parliament for an official public investigation into the clashes. Calm was restored only with the militarisation of the province, which in July 2015 was placed under the authority of Major General Abderrazak Cherif.[fn]Algerie – La wilaya de Ghardaia passe sous l’autorité de l’Armée”, Canal Algérie, 8 July 2015.Hide Footnote However, the deployment of thousands of police, gendarmes and soldiers is at best a temporary solution. At worst, it risks creating more violence, as evidenced by clashes between police and Arabs in Arab-majority neighbourhoods, and between gendarmes and Mozabites in mixed neighbourhoods like al-Qurthi.

Political parties, in capitalising on the growing sectarianism, have worsened it. The city’s FLN, the national ruling party, has long been dominated by the powerful Chaamba Arab community, which combines Arab nationalist and cultural identities with sometimes thuggish behaviour.[fn]A Ghardaia-based source recalled local FLN politicians turning a blind eye to Arab-led expropriation of Mozabite land. Crisis Group interview, Algerian journalist, Ghardaia, May 2015.Hide Footnote Radicals have weakened traditional Mozabite elites who have sided with the moderate mainstream discourse of the second ruling party, Rassemblement National Démocratique (RND).[fn]Crisis Group interviews, members of the Majlis al-Qurthi, Ghardaia, May 2015.Hide Footnote Fekhar Kameleddine, for instance, established ties to the Front des Forces Socialistes (FFS), a historical pro-Amazigh opposition party, before founding his own militant separatist movement. Only Islamist parties – Nahda and the Mouvement de la Société pour la Paix (MSP, the Algerian branch of the Muslim Brotherhood) – span the communal divide and count members of each among their ranks.[fn]The Ghardaia mayor is an Ibadi member of the Islamist Green Alliance coalition, for instance.Hide Footnote

Accusations of responsibility for the chaos flourish. The government has sought to pin the blame on various outsiders: Prime Minister Abdelmalek Sellal, President Bouteflika’s chef de cabinet, Ahmed Ouyahia, and Foreign Minister Ramtane Lamamra have blamed Morocco for stirring up trouble, while Religious Affairs Minister Mohamed Aissa attributed the violence to a Salafi conspiracy.[fn]Ghardaia: Lamamra prend le relais de Sellal et Ouyahia pour accuser le Maroc”, yabiladi.com, 1 August 2015; “‘Un pays frère a financé ce qui s’est passé à Ghardaia’ selon Sellal”, algerie1.com, 12 July 2015; “Ghardaia: Mohamed Aïssa met en cause des salafistes extrémistes liés à l’école yéménite de Dammaj”, Huffington Post Algerie, 19 July 2015.Hide Footnote Mozabites say the government has stoked fears and created discord to keep Bouteflika in power and perpetuate his camp’s control, pointing to the promotion of several security officials who presided over periods of chaos in Ghardaia. Still others from Mozabite and Arab camps, trying to show that his promises to maintain stability are hollow, allude to a DRS conspiracy to stoke violence in Ghardaia.[fn]Crisis Group interviews, Mozabites, Ghardaia, May 2015.Hide Footnote

Such theories underestimate the complex roots of communal conflict. Though national and regional factors ought not to be discounted, local causes are more important, among which Mozabite lack of trust in the authorities and the secrecy of government operations figure prominently. As a first step, the authorities should publicly investigate the clashes, especially the role security forces may have played.

B. In Salah

1. From a peaceful grassroots movement …

There was little reason to think In Salah, 1,200km south of Algiers, with fewer than 40,000 inhabitants, would become the centre of a nationwide environmental movement. In December 2014, the day after Energy Minister Yousef Yousfi announced Algeria’s first successful shale drilling test, 30km from In Salah, some 5,000 townsfolk occupied the central square, Sahat Soumoud, and closed roads. The town, like the rest of the country, learned of the drilling from the news; even local officials had not been informed. Mobilisation was spontaneous, the result of high levels of education, particularly about the hydrocarbons sector; a traditional environmental consciousness, especially among women; and social media forums like Facebook, which spread information on fracking risks.[fn]Crisis Group interview, Mohamed Belamine, parliamentarian, Front National pour la Justice Sociale, May 2015. Two of the movement’s most vocal leaders, Hacina Zegzag and Fatiha Touni, led the town’s women in marches and sit-ins and spoke with the press. Women, traditionally tasked to provide water in Saharan societies, are especially sensitive to fracking’s potential to pollute groundwater. The U.S. documentary “Gasland”, in which a woman holding a lighter under her faucet triggers a gas explosion, was widely disseminated on social networks.Hide Footnote  That the authorities permitted the French company Total to test unconventional extraction techniques outlawed in France was met with acute resentment in In Salah, partly because the area previously had been used as a laboratory for testing new and dangerous technology, including French nuclear weapons in the 1960s.[fn]Total acquired a 47 per cent stake in the Ahnet basin in 2009. Officially, Sonatrach undertook the pilot shale gas drilling project, but Total’s involvement was an open secret and confirmed when it announced in January 2015 it had not been at the site since June 2014. “Total Algérie: Nous n’avons jamais eu de license de gaz de schiste”, Algerie-Focus.com, 3 March 2015. Hydraulic fracturing has been banned in France since 2011, due to public pressure fuelled by environmental concerns. See Tara Patel, “The French public says no to ‘le fracking’“, Bloomberg Businessweek, 31 March 2011.Hide Footnote

Rassemblement Anti-Gaz de schiste à Alger

DZ Militant

The night the test drill was announced a local Sonatrach engineer and renewable energy activist, Abdelkader Bouhafs, organised students and geology, hydrogeology and drilling engineers to go door-to-door warning households that fracking would pollute the water table.[fn]Crisis Group interview, Hacina Zegzag, founding member, Committee for a National Moratorium on Shale Gas, Adrar, June 2015.Hide Footnote  These activists, most of whom worked in the hydrocarbons sector, subsequently formed the “Committee of 22”, which steered and represented the thousands who turned out the next day at Sahat Soumoud. The atmosphere was joyful and family friendly, with men, women and children reading poetry and singing and volunteers in yellow vests leading hundreds through the streets. The gathering became the nucleus of the anti-shale drilling movement, drawing support from elsewhere in the country.[fn]See, for instance, DZ Militant, “Rassemblement anti-gaz de schiste à Alger”, YouTube, 18 January 2015.Hide Footnote

By contrast, zaouias, Sufi brotherhoods with strong religious, cultural and political influence in the area, have refused to take a position on shale gas, cementing their image as co-opted by state patrons.[fn]In the late 1980s, Algeria went from repressing to reviving zaouias in an effort to co-opt them. “The official portrayal is remarkably simplistic and essentialist: the zaouias are portrayed as ‘sanctuaries of peace’, allegedly ‘unchanged for centuries’, ‘remote from worldly affairs’ and ‘profoundly apolitical’. However, both the state’s instrumentalisation of them as well as the zaouias’ proper interests and activities stand in stark contrast to such ascriptions”. Isabelle Werenfels, “Promoting the ‘good Islam’: the regime and Sufi brotherhoods in Algeria”, Eurasia Review, 12 September 2011.Hide Footnote  Their retreat on the highly politicised issue has opened space for others: activists have encouraged proactive use of conventional and social media – long feared as instruments of meddling, foreign and domestic – to spread the idea that activism, including with civil disobedience, can block government policy.[fn]Crisis Group interview, Mohad Gasmi, anti-shale gas protest leader, Adrar, June 2015. A dozen prominent anti-shale gas and anti-unemployment leaders attended 2013 training by Laghouat CNDDC co-founder and activist Yacine Zaid on using information technologies and interacting with media. “Our activism is not centralised, but each of us benefited from this training”. Ibid.Hide Footnote  New information and communications technologies were instrumental both in coordinating actions and building support within the south and nationally: after the first In Salah protests, solidarity protests occurred in Tamanrasset, Timimoune, Metlili, Adrar, Touggourt, Ghardaia and Ouargla, which share common traditions, family relations and dependence on the same water aquifer, as well, further north, in Tizi Ouzou, Bejaia and eventually Algiers.

2. … to violence and politicisation

Surprised by the immediacy and intensity of the popular response, the government dispatched Energy Minister Yousfi to appease the Committee of 22, without success. Participants, many themselves experts in various facets of natural resource extraction, felt him condescending, especially because, they say, he questioned their grasp of fracking basics. After the sit-ins and marches continued peacefully for another two months, President Bouteflika sent a delegation to In Salah, led by national police chief Abdelghani Hamel. That too ended with failure, when he responded to the Committee of 22’s call to stop exploratory drilling (as a condition for further talks) by listing the security risks the country faces. Days later, Prime Minister Sellal’s assurances on state television that fracking was in a strictly exploratory phase and no exploitation license had been granted led protests to swell, since activists were demanding a moratorium on all fracking.[fn]Crisis Group interview, anti-shale gas protest leaders Mohad Gasmi and Hacina Zegzag, Adrar, June 2015. “Gaz de schiste: le DGSN Abdelghani Hamel quitte In Salah sans régler le probleme”, El Watan, 18 January 2015. “Quand Sellal fait flamber In Salah”, Algérie1.com, 23 January 2015.Hide Footnote

A moratorium was the central demand of an unauthorised march by the political opposition in Algiers on 24 February 2015, the 44th anniversary of the nationalisation of natural resources.[fn]On the anniversary of the 1971 nationalisation of resources, political opposition coalitions Instance de suivi et de coordination de l’opposition (ISCO) and Coordination nationale pour les libertés et la transition démocratique (CNLTD) defied the protest ban and marched through the capital with slogans linking anti-fracking mobilisation to their democratic-transition demands.Hide Footnote  It figured prominently again on 14 March with the some 8,000 demonstrators at Ouargla’s second millioniya (literally “million-man march”, a term popularised by the 2011 Arab uprisings).[fn]Des milliers des personnes au sit-in d’Ouargla”, leconews.com, 14 March 2015. Slogans included “Non au gaz de shiste” (“no to shale gas”), “samidoun, samidoun, lil ghaz essakhri raffidoun” (“steadfast, steadfast, we will remain steadfast against shale gas”), “la shamal, la janoub, el-jazair fil quloub” (“no north, no south, Algeria is in everyone’s heart”), and “el-wihda wa essiyada, li-iqqaf el- ghaz essakhri” (“unity and sovereignty, for a stop to shale gas”).Hide Footnote

The Committee of 22 succeeded for two months to keep protests peaceful. Demonstrators warmly greeted and gave cigarettes, shade and cool drinks to the hundreds of police dispatched from the north to monitor the square.[fn]Crisis Group interviews, Mohad Gasmi, Hacina Zegzag, anti-shale gas protest leaders, Adrar, June 2015.Hide Footnote  But frustrated by officials’ non-committal response and encouraged by the wider support they enjoyed, protesters at In Salah four days after the February Algiers opposition event more confrontationally tried to close the access road to a second exploratory drilling site for shale gas Sonatrach and Halliburton managed 10km north of the town. This led to the first violent clashes with security forces. Gendarmes fired teargas and live ammunition, wounding three protestors seriously, and set fire to the tent encampment in Sahat Soumoud.[fn]Crisis Group interviews, witnesses, Adrar, June 2015.Hide Footnote

The Algiers protest brought another development unwelcome in the south. During its first two months, the movement there had more or less remained above the political fray.[fn]A popular slogan was, “No political parties and no politicisation of the movement”. Crisis Group interview, Mohad Gasmi, anti-shale gas protest leader, Adrar, May 2015.Hide Footnote  Wary of being co-opted by the main opposition political parties and sceptical of their intentions since they had not opposed the 2013 hydrocarbons law authorising shale gas exploitation, leaders characterised their movement as purely social.[fn]Crisis Group interviews, anti-shale gas activists, Adrar, June 2015. “Loi no. 13-01 …”, Journal Officiel De La République Algérienne no. 11, 24 February 2013.Hide Footnote  It became harder to maintain that line after the 24 February event in the capital, as activists allied more broadly with opposition parties, linking their cause with wider criticisms of national governance.[fn]“The fact that the government is not responding to our demands means that it is the population’s right to use the opposition to assert its rights”. Crisis Group interview, Mohad Gasmi, anti-shale gas protest leader, Adrar, June 2015.Hide Footnote

The authorities eventually quelled the protests by intimidating and co-opting the Committee of 22.[fn]Crisis Group interview, Hacina Zegzag, founding member, Committee for a National Moratorium on Shale Gas, Adrar, June 2015. She added: “I don’t think they left [the square] because of the jobs. I think they left because they were afraid. They were pressured effectively”.Hide Footnote Energy Minister Yousfi, on 23 February 2015, announced creation of an independent, albeit state-funded, observatory at In Salah, where many committee members, were offered senior posts. The observatory has not been implemented. Others obtained jobs or promotions at the Sonatrach subsidiary Naftal, the pro-regime TV station Ennahar or in the wilaya of Tamanrasset.[fn]Gaz de schiste: vers la creation d’une Observatoire independent”, El Watan, 24 February 2015. Crisis Group interviews, anti-shale gas protest leaders, Adrar, June 2015. Bouhafs did not accept any post or promotion and continues his ecological activism. Crisis Group email correspondence, Abdelkader Bouhafs, November 2016.Hide Footnote

With the committee defunct, pressure on the government to change direction on shale gas evaporated. It has not replied officially to the moratorium demand.[fn]“The statement that fracking was frozen, that they would stop drilling and fracking, evaluate potential and decide by 2019 whether or not to pursue, was false, an attempt to calm the population. In reality, production is still scheduled for 2022”. Crisis Group interview, Algerian legal counsel for multinational oil company, Algiers, September 2015. The government has issued contradictory statements on the future of shale gas drilling and replaced Yousfi soon after the protests. The Collectif national pour un moratoire sur les gaz de schiste, a splinter movement of the committee, has used meetings and social media to keep up pressure for a moratorium.Hide Footnote  Oil industry executives affirm that shale gas activity was never suspended, and President Bouteflika came out clearly for exploitation when he described shale gas, alongside oil, conventional gas and renewable energies, as “gifts from God”.[fn]Crisis Group interview, senior foreign oil company adviser, November 2015. “Bouteflika: ‘Le gaz de schiste est un don de Dieu”, algeriepatriotique.com, 24 February 2015.Hide Footnote

Yet, what activism did not accomplish, the high cost of production and the oil-price crash have. In January 2016, El Khabar revealed that faced with rising costs and decreasing revenue, Sonatrach had decided to suspend shale gas production pending a price return to $80 per barrel. (Crude-oil has not exceeded $60 per barrel since November 2014; in the first nine months of 2016, the price hovered between $30 and $50 per barrel.) The government is, however, preparing for that day: Prime Minister Sellal, meeting his Russian counterpart, Dimitri Medvedev, on 27 April 2016, offered cooperation with Russia’s Gazprom on shale gas.[fn]Algérie: Sonatrach suspend l’exploitation du gaz de schiste”, Radio France Internationale (RFI), 21 January 2016. “The Algerians suspended shale gas not because they care [about environmental effects] but because it’s not profitable. Companies think [they] will eventually go ahead with shale gas when the price is right”. Crisis Group interview, Geoff Porter, CEO North Africa Risk Consulting, June 2016. “Algeria could cooperate with Russia’s Gazprom on shale gas”, Sputniknews.com, 27 April 2016.Hide Footnote

C. Ouargla: The Movement of the Unemployed

1. The men behind the millioniya

The largest southern demonstrations have been in Ouargla, a strategically important town of about 140,000 near the major oil fields of Hassi Messaoud and gas fields of Hassi Rmmel that hosts a military base for the central and north-east Saharan zone. Grievances there have mixed in ways difficult to disaggregate and no easier to solve. These include rapid population growth, agricultural decline and decreasing cross-border commerce following closure of the borders with Libya, Tunisia and Mali due to security concerns. They have inflamed a countrywide socio-economic crisis that is worse in the south, where unofficial unemployment rates are as high as 30 per cent, especially among youth.[fn]Crisis Group interview, labour expert, Algiers, March 2014. Officially, unemployment fell from 30 per cent in 2000 to 11.2 per cent in 2015, according to the National Office of Statistics (ONS).Hide Footnote

The anti-government mood around the Arab world in 2011 found fertile ground in this environment. Among the first manifestations was the Ouargla-based, largely male CNDDC youth movement. Its leaders transcend the party lines that typically pit Islamists against secular activists. Its most visible leader, Taher Belabbes, a ten-year veteran activist, recruited Yacine Zaid, a trade union and human rights activist in his 40s, and Khencha Belqacem, an Islamist dedicated to broad-based social organising.[fn]Crisis Group interview, Yacine Zaid, 12 August 2016.Hide Footnote The group sought, with fair success, to build a peaceful and inclusive movement, with wide support among liberals, Islamists and students. They united around shared beliefs that unemployment was driving southerners toward fatalism, religious radicalism and extreme acts; handouts might temporarily assuage but not eliminate grievances; the state’s economic mismanagement had created dependency for southerners, not opportunities; and the south was a “disgraced territory” due to extreme neglect in comparison with the north.[fn]Crisis Group interview, CNDDC activist, Ouargla, May 2015.Hide Footnote

On 8 June 2011, several hundred protesters clashed with security forces in Ouargla, after several months of peaceful protests, sit-ins, suicides and self-immolations there and in Hassi Messaoud brought no official response. More clashes broke out six months later 260km away in Laghouat, between security forces and residents denouncing unemployment, public-housing corruption and hiring practices said to favour northerners. The CNDDC led southerners, for the first time in memory, to demand a say in distribution of national resources and call on the government to account for its economic policies.[fn]Luis Martinez, “Algérie: le calme avant la tempête?”, Le Monde, 10 January 2012.Hide Footnote

By 2013, the CNDDC’s mobilising capacity had grown. On 14 March, between 5,000 and 10,000 protesters assembled in front of Ouargla’s city hall for a millioniya carrying flags and banners and shouting slogans demanding jobs and development of the south. Belabbes said:

With [the millioniya] we were seizing our right to protest and express ourselves publicly … all across Algeria, with the exception of Algiers, which remains to be conquered. It was also our response to the slanderous and insulting declarations of the prime minister, Abdelmalek Sellal, and of Daho Ould Kablia, then interior minister. The people of the south will always remember this unfortunate phrase of Sellal who described the young unemployed as chirdhima [insignificant] or minor terrorist groups. The outrageous words of Ould Kablia who spoke of “neutralising” the protests and controlling the security situation in the south in order to protect oil installations still resonate in my ears.[fn]“‘Je démissionne pour couper court aux subterfuges du gouvernement’, Taher Belabbes, ex porte-parole de la Coordination nationale de défense des droits des chômeurs”, El Watan, 21 February 2014.Hide Footnote

The 2013 millioniya, which went off peacefully in the presence of security forces, led the state to take the protests seriously, implementing a series of emergency measures.[fn]Sellal ordered emergency measures: making zero-interest development-oriented bank loans available in the south, pressure on foreign and domestic contractors as well as national agencies to recruit locally and raising public-employee salaries. Belakhdar, “‘l’Eveil du Sud’”, op. cit. The governor received and offered jobs, mostly in the gendarmerie, to a delegation of unemployed.Hide Footnote  Leaders felt they had established the movement as an interlocutor for local and national authorities on resource distribution in the south.[fn]Protesters said that after the event they had more self-respect and felt that by challenging those perceiving them as docile, insignificant or criminal, they had begun to play a productive role in society. Crisis Group interview, Ouargla, June 2013. Belakhdar, “‘L’Eveil du Sud’”, op. cit.Hide Footnote  However as with other protest movements in the south, their hopes were soon disappointed. Deep reform – rooting out corruption and nepotism in hiring and effective training for lucrative local jobs in the oil and gas industry – never materialised. Leadership schisms weakened the movement and slowed its momentum.[fn]A centre created in 2014 demonstrated training shortcomings: Sonatrach hired none of the 40 trainees who completed the first six-month course; only twelve found jobs. The second class of 30 was still unemployed six months after training. “Ouargla à bout de patience”, El Watan, 13 March 2015. Crisis Group interviews, Ouargla, May 2013. Belabbes began denouncing political and military figures and demanding more radical change on the national level. Zaid focused on the CNDDC itself and local goals.Hide Footnote  Perhaps most important was the constant surveillance, harassment and intimidation of organisers, whom the media, with no evidence, accused of drug or alcohol addiction, acting as foreign agents and secretly pursuing southern autonomy.

By 2015, Belabbes had left the leadership and Zaid the country, and Belqacem was in prison.[fn]Starting in 2011, Belabbes was summoned for questioning and beaten. In January 2013, he was sentenced to one month in prison for unauthorised gathering and breach of state security. “Taher Belabbes interpellé par les RG de Batna”, Quotidien d’Algérie, 17 October 2011; Syndicat national autonome des personnels de l’administration publique (SNAPAP), “les policiers frappé Taher Belabbes”, YouTube, 4 May 2011; communiqué de SNAPAP, 7 January 2013. In October 2012, Zaid was given a suspended six-month sentence for assault of a security agent. In 2014, he fled the country after threats against himself and his family. “Yacine Zaid condamné à six mois de prison avec sursis”, Le Matin d’Algérie, 8 October 2012; Crisis Group interview, Zaid, Laghouat, 2014. Belqacem was arrested in January 2015. The First Instance Tribunal of Laghouat sentenced him and eight other leaders of the unemployed movement to prison terms from twelve to eighteen months for “unauthorised gathering” after they protested for an independent judiciary before the Ouargla tribunal. Months after release, he received another six months for a Facebook video criticising imprisonment of a fellow activist. “Algeria: prison for criticizing judiciary”, Human Rights Watch, 7 June 2016.Hide Footnote  The CNDDC had grown so weak by that year’s millioniya that the national political opposition, which shared the regime’s tendency to disregard local concerns, was able to co-opt the event, diluting its unemployment and anti-fracking messages to focus instead on democratic transition.[fn]National political opposition participants included the Coordination nationale pour les libertés et la transition démocratique (CNLTD), which includes ex-Prime Minister Ahmed Benbitour and Jil Jadid (New Generation) party President Sofiane Djilali, and representatives of the Rally for Culture and Democracy (RCD) party and the Islamist Muslim Brotherhood-affiliated Movement of Society for Peace (MSP).Hide Footnote

2. Security risks of mishandling the “southern question”

Repression in Ouargla, a constant since 2011, has led some activists to embrace extreme measures. In February 2013, days after police arrested more than a dozen CNDDC activists who had come together in Laghouat to burn their diplomas in front of the employment agency, clashes broke out between security forces and demonstrators gathered in solidarity with detained colleagues. More recently, protestors have adopted new and disturbing tactics, such as stitching their mouths shut and cutting their arms and chests.[fn]“Violentes émeutes à Laghouat: les jeunes réclament du travail”, Liberté, 24 February 2013. “Les nouvelles formes de protestation des chômeurs à Ouargla”, TSA, 24 February 2016.Hide Footnote

The path of a previous generation of leaders should give the government pause before ignoring local demands. The MSJ, founded in 2004 by Abdesslam Tarmoune and Lamine Bencheneb to demand economic opportunities and improved wealth distribution in the south, is a cautionary tale. After nearly a decade of unfruitful peaceful protest, it split into a faction (CNDDC) that stayed mostly peaceful and two radicalised factions that took up arms. Bencheneb’s faction collaborated with Mokhtar Belmokhtar’s al-Mourabitoun group to plan and execute the attack on the In Amenas gas complex in the south in January 2013; Tarmoune fled to the maquis and threatened to violently restore southern youths’ “usurped rights”.[fn]Hannah Armstrong, “The In Amenas attack in the context of southern Algeria’s growing social unrest”, CTC Sentinel, vol. 7, no. 2, 24 February 2014. “Enquete sur la disparition des jeunes du Sud suspectés d’avoir rejoint les rangs du MSJ”, Echourouk Online, 17 June 2013. On 2 February 2014, residents of the southern town of Djanet, along the Tassili n’Ajjer mountain range where Tarmoune was hiding, held a sit-in in his support, asking authorities to stop military operations and open a dialogue for his surrender. “A Djanet, on veut que l’armée dialogue avec Abdessalam Tarmoune”, El Watan, 7 February 2014.Hide Footnote

Continued failure to engage with and effectively respond to southerners’ demands is particularly dangerous given the proliferation of jihadist groups and the smuggling networks that sometimes assist them. Beyond the January 2013 In Amenas attack, AQIM claimed responsibility for an 18 March 2016 rocket attack on the British Petroleum (BP) - and Statoil-operated Krechba gas facility in In Salah province. AQIM’s statement claiming responsibility said it aimed not only to wage “war on the interests of the crusaders”, but also to protect the environment and discourage shale gas exploration – evidence that jihadist groups are attuned to and seek to exploit southern grievances.[fn]Situation on Krechba plant in Algeria clarified”, statoil.com. “Algerian army kills militants behind Krechba gas plant attack: source”, Reuters, 20 March 2016. Clifford Krauss, “BP and Statoil pull employees from Algeria gas fields after attack”, The New York Times, 21 March 2016. None of over 600 employees were injured.Hide Footnote

Moreover, the Algerian Sahara, in the midst of an increasingly troubled region and connecting Libya and West Africa with Mali and Niger, is vulnerable also to flourishing networks of illicit commerce. Smuggling can attract young southerners without jobs who feel abandoned by the authorities. Arms smuggling in particular is on the rise: the army seized more large-calibre weapons between February and April 2016 than at any time since the “black decade” began in 1992.[fn]“Dans le sud algérien, le spectre de la radicalisation des mouvements de protestation”, tsa-algerie.com, 5 March 2015. “Saisies d’armes: du jamais vu dans l’histoire de l’Algérie”, El Watan, 15 April 2016.Hide Footnote

IV. State Responses

A. Managing Southern Unrest

Algerian authorities are taking some measures to improve administration in the south and pursue dialogue. In May 2015 for instance, they announced an administrative redistricting, creating ten new districts, each under a delegate wali (provincial governor), including Ghardaia and Ouargla, as well as Tamanrasset, where In Salah is located. Local elected officials welcome the move, which could strengthen administration, though there is some wariness that it also will expand and refine security structures and control.[fn]Crisis Group interview, Mohamed Hadou, regional deputy, Assemblée populaire de la Wilaya d’Adrar, Adrar, May 2015. The reform, which began as a 2014 Bouteflika campaign promise, is meant to develop public services, increase public sector employment and improve citizen-state relations in the south, taking into consideration the vast territory a single central wilaya manages and the expense of doing so. It is also to make monitoring citizens and cross-border traffic easier.Hide Footnote Also well received have been Education Minister Nouria Benghebrit’s efforts since 2016 to close the gap between educational indicators in south and north, though this long-term project will not soon solve the former’s challenges.[fn]“Education: Benghebrit au secours du Sud”, El Watan, 27 May 2016.Hide Footnote  Dialogue between local stakeholders and high-ranking officials has led to fulfilling certain protester demands, such as job creation.[fn]In Ouargla, the millioniya established the unemployed movement as an interlocutor with local authorities, with negotiations around distribution of jobs. See Section III.C above.Hide Footnote  The unrest has had some intangible benefits as well, such as elevating the visibility of southern populations, which has helped them push their agenda and argue that solutions can come only through engagement, not top-down imposition.

While positive, the state’s responses so far have largely been tactical and tentative and do not address issues that require far-reaching policy changes,

It is unlikely, however, that this will be enough. While positive, the state’s responses so far have largely been tactical and tentative and do not address issues that require far-reaching policy changes, such as rooting out corruption and nepotism and consulting on controversial drilling techniques. Southern activists are even more pessimistic that the state will go further to recognise their “dignity as citizens”, code for building an inclusive national society that takes full account of their cultural identity and provides broadly for their economic well-being. Without that, small steps, though appreciated, come off as a way of managing dissent.[fn]Crisis Group interviews, CNDDC activists, Ouargla, May 2013. “They [the authorities] react as they always do to a socio-economic crisis: they send a high-ranking government official, commit funds, then vanish. There’s no security when there’s no development. Development would be tourism, marathons, bringing people here. It’s not happening”. Crisis Group interview, Western diplomat, Algiers, May 2015. “When there is a problem that may have political consequences, it’s insufficient to give directives to recruit the people of the south. More must be done, for example a Marshall Plan …. Does the government not realise this? … To force an American company to hire in the south does not work and does not solve the problem”. Crisis Group interview, Moustapha Bouchachi, ex-FFS parliamentarian, Algiers, May 2015.Hide Footnote  Dida Badi, an anthropologist from Tamanrasset, argues:

There’s no strategy. First they tried to use local elites, because they thought it was a problem of the youth. When that didn’t work, they used police, force, repression, in Ghardaia, in Ouargla, in In Salah. Then they saw that wasn’t working, because these movements were becoming national, and even international. Now what will they do?[fn]Crisis Group interview, Algiers, May 2015.Hide Footnote

The recent government response indicates its direction, as well as the difference from three decades ago: 1980s protests in the north were brutally put down; today’s more nuanced tactics target protest leaders and favour co-optation.

B. The South as Bellwether

The fourth-term Bouteflika administration has undertaken sweeping measures, first promised in 1999, in the name of promoting rule of law, culminating in dismantling the powerful DRS in January 2016 and ratifying an amended constitution in February. But while these measures have radically circumscribed and even eliminated security agency meddling in politics and might indicate new guarantees for civil liberties and minority rights, the future remains in doubt.[fn]The amended constitution enshrines Tamazight as an official language (Article 4) and eliminates mention of press offences. For the full text, see Journal Officiel de la République Algérienne N°14, 7 March 2016, joradp.dzHide Footnote  The presidency has been strengthened and a rival power centre removed, but whether this will lead to the institutionalisation of rule of law remains to be seen. Ultimately, the government must strengthen reforms if it is to convince citizens it is working on their behalf, particularly given the most serious economic crisis in decades and turmoil on most borders.

The historical context has imbued southern concerns with national political significance for both government and opposition. The latter sees potential leverage for rejuvenating its fortunes and pushing for democratisation, starting with a transparent transition.[fn]“We’re starting to understand that in order to be more effective, it is necessary to coordinate our actions and move in the same direction, at the right moment”. Crisis Group interview, Salah Dabbouz, president, LADDH national bureau, and member, Instance de suivi et de concertation de l’opposition (ISCO), Algiers, May 2015.Hide Footnote  The opposition bloc CNLTD initially gathered steam as it united Islamist and secular parties for the first time, against Bouteflika’s fourth term in 2014. It has lost relevance, however, because it has come to be seen as hijacked by pro-regime figures and internally fragmented. Most coalition members are veterans of past governments, lack a platform for change and focus their critique narrowly on the president rather than the broader system.[fn]Crisis Group interview, Western diplomat, Algiers, May 2015.Hide Footnote  By joining the millioniya in Ouargla and sending a delegation to In Salah in 2015, the CNLTD was trying to regain some of its lost credibility.

Southern activists are wary of co-optation but seem willing to risk cooperation with the opposition given its substantial resources and the visibility it brings their cause.[fn]Crisis Group interviews, activists, Ouargla, In Salah, Algiers, May 2015.Hide Footnote  The opposition itself has yet to garner much support in the south; isolated appearances are insufficient either to win a broad base or convince its populations that their commitment is genuine rather than opportunistic.

Perhaps more importantly, the south has become a bellwether for regime intentions. The protests offer an opportunity to show what movement toward democratic civilian rule and improved governance would look like. Signs are not encouraging. The combination of security measures, buying off or prosecuting protest leaders on flimsy charges does not inspire confidence that the state will address the most consequential national issues.

V. Conclusion

Southern unrest is acutely sensitive in and for Algeria not only because of the resource reserves located there, but also because of longstanding national sovereignty concern. Recent geopolitical reconfigurations, such as an increasingly autonomous Iraqi Kurdistan, an independent South Sudan and a fracturing Libya, have fuelled concern, some would say paranoia, about Western designs to partition Arab states to control their energy reserves.[fn]Algeria favours preservation of national unity and post-independence borders and has worked to ward off partition talk in Mali, Libya and Syria. Crisis Group Report, Algeria and Its Neighbours, op. cit.; interviews, Algerian diplomats, security officials, Algiers, 2015.Hide Footnote  But the authorities imagine separatist inclinations where there are none among southern protesters, whose issues are unfairness and mismanagement: that the state hides shale gas drilling, exacerbates intercommunal tensions and does not engage effectively with legitimate southern grievances such as unemployment. The security-centric government approach treats protesters as a public order risk, not a party to engage substantively.

After armed forces put down the violence in Ghardaia without addressing underlying factors, the calm is brittle. Compensating merchants for sacked and looted stocks is a start but will not prevent future clashes. As requested locally, authorities should appoint a committee to investigate recent violent outbreaks and ensure accountability among both Mozabite and Arab communities and security forces.

Southern demands for jobs and environmental protection, embodied in the movement of the unemployed in Ouargla and the anti-shale gas protesters in In Salah and beyond, raise challenges of inclusion and representation that authorities must address. A start might be to improve communication with protest leaders and their constituencies. Dialogue efforts should begin with the state clarifying its policy where there is ambiguity. If economic exigencies mean shale gas is its only option, it should declare so. Tunisia announced in June 2016 the “total and immediate” publication of all its oil contracts in response to the “Where is the oil?” campaign and clashes with security forces.[fn]La Tunisie entame la publication des contrats pétroliers en ‘open data’”, Jeune Afrique, 17 June 2016.Hide Footnote  Likewise, if Algeria has a good case that shale gas can be extracted without harming the environment, it should make it transparently. The same applies to the discussion of job creation.

Such efforts should be carried out, where relevant, together with Sonatrach and its partners operating in the area, since they are major employers and directly affected by local unrest. Foreign oil and gas companies complain that the state makes corporate social responsibility difficult if not impossible. This is a problem because sustainable investment relies on social engagement and requires not only formal operating licenses, but also a “social license” from local stakeholders.[fn]Crisis Group interview, senior foreign oil company analyst, Algiers, June 2015. The secrecy and bureaucracy imposed by the state ensure that the gulf between companies and residents remains wide. “In corporate social responsibility, you talk about social license operators …. You want local stakeholders to see your presence and your operation as something positive that they can benefit from. When it comes to shale gas, you have protests against fracking but not against conventional projects, which means that it will be more challenging to receive this kind of social license to operate. But unconventional [projects] of course are seen as the future”. Ibid.Hide Footnote

The challenge for both government and opposition is to understand the south and its grievances on its own terms, rather than as a foreign tool of destabilisation or a popular groundswell to be co-opted. This is also a wider opportunity to rethink governance and seize the moment as the country enters a transition or at least a leadership change. Adding urgency is the risk that southern discontent could become an instrument of an opposition seeking to paint the current system as illegitimate and ineffective, or worse, exacerbate the anti-state sentiment and feelings of neglect and exclusion upon which radical groups prey.

Algiers/Brussels, 21 November 2016

Appendix A: Map of Algeria

Map of Algeria. Courtesy of the University of Texas at Austin

Appendix B: Map of Oil and Gas Fields in Algeria

Map of Oil and Gas Fields in Algeria Mike Shand/Crisis Group

Appendix C: Glossary of Terms

Ansar Dine: Tuareg-led jihadist group in northern Mali with ties to AQIM.

AQIM: al-Qaeda in the Islamic Maghreb.

CNDDC: Comité National pour la Défense des Droits des Chômeurs (National Committee for the Defence of the Rights of the Unemployed).

CNLTD: Coordination nationale pour les libertés et la transition démocratique (National Coordination for Freedoms and Democratic Transition), opposition coalition.

CRS: Compagnies républicaines de sécurité (Republican Security Companies), riot-control police.

DRS: Département du Renseignement et de la Sécurité, once powerful military intelligence agency disbanded in January 2016.

FFS: Front des Forces Socialistes (Socialist Forces Front), historic opposition party with a stronghold in the Kabylie region.

FLN: Front National de Libération (National Liberation Front), historical post-independence ruling party.

GSPC: Groupe pour la Prédication et le Combat (Group for Preaching and Combat), precursor to AQIM.

ISCO: Instance de suivi et de coordination de l’opposition (Authority for Follow-up and Coordination of the Opposition), opposition coalition.

Mourabitoun: Jihadist group led by Mokhtar Belmokhtar, affiliated with AQIM.

MSJ: Mouvement des Enfants du Sud pour la Justice (Mouvement of the Children of the South for Justice), southern activist group.

MSP: Mouvement de la Société pour la Paix (Movement of the Society for Peace), leader of the Alliance Verte Islamist coalition, the largest opposition group in parliament.

MUJAO: Mouvement pour l’Unicité et le Jihad en Afrique Occidentale (Movement for Monotheism and Jihad in West Africa), AQMI offshoot focused on West Africa.

Nahda: Islamic Renaissance Movement, part of the Alliance Verte Islamist coalition.

RND: Rassemblement National Démocratique (National Democratic Rally), junior partner in the governing coalition led by the FLN.

Sonatrach: The state oil company.