Algeria’s retaliation puts almost 3,000 million in Spanish exports at risk: “We are desperate” | Economy | The USA Print

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The commercial punishment that Algeria has imposed on Spain for its change of position on the Sahara is causing concern in the sectors and companies most exposed to the North African country. It is not one of the main destinations for Spanish goods and services —in 2019, before the pandemic, it barely accounted for 1% of exports—, but even so, they added up to almost 3,000 million euros that year.

The general feeling in some employers is one of surprise and uncertainty, because the exact impact of the measures is still unknown. Everything is at the expense of the evolution of the conflict and diplomatic efforts to channel the situation. Meanwhile, Spanish firms are already contacting their Algerian clients to find out first-hand the scope of the veto on their products. By economic sectors, according to data from the Secretary of State for Commerce, those that sell the most to the North African country are semi-manufactured (more than 1,100 million the year before covid), mainly metallurgy; capital goods (605 million) and automotive (almost 460 million euros). For Algeria, Spain is its fifth supplier, behind China, France, Italy and Germany.

The point that most worries companies, and at the same time, the one that generates the most doubts, is the freezing as of this Thursday of bank direct debits in operations coming from and destined for Spain, as announced by the Algerian Association of Banks and Financial Establishments ( Abef). In practice, this will prevent trade, since the firms will not be able to charge for the orders they send, but La Moncloa is studying whether it is possible to denounce Algeria before the European Union for this decision, according to government sources, since they believe that it may violate the Euro-Mediterranean Agreement of 2005, which established a preferential association regime between the European Community and Algeria.

The Algerian sanction is reminiscent of the one taken by the European Union and the United States against Russia after the offensive on Ukraine. However, in this case it is not an abrupt cut in the relationship between the financial systems. “The connections are not isolated or severed. Banks can maintain their operations, although indirectly the result is similar to limiting or freezing commercial payments to Spanish companies”, explain sources from the banking sector.

Concern among companies

Concern spreads among those affected. For enamel manufacturers, based mainly in the province of Castellón, Algeria is their second market after Italy, with sales of 90 million euros in 2021 to the North African country. Therefore, the consultations have already begun. “We are very worried. We know that our partners have contacted their clients in Algeria to see how the situation is there. This year sales were increasing. We have to be cautious, follow what happens in the coming days and see how it will affect us, ”explains Manuel Breva, general secretary of the employers’ association that groups them (Anffec).

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Somewhat lower were the sales of manufacturers of ceramic tiles and pavements. In 2021 they made shipments to Algeria worth 39 million euros, the 22nd destination globally. “Algeria was years ago an important destination. However, at the same time that its local industry prospered, trade barriers to our exports grew,” says Ascer, the sector’s employer, which puts a 63% drop in its shipments between 2015 and 2020 due to tariffs.

Companies with interests there are confident that a solution will eventually be found. Otherwise, it would be a new setback in a few years that were already very convulsive after chaining a pandemic, supply problems and war. At the Barcelona-based firm PMS International, dedicated to the international trade of raw materials and chemical products, among others, the situation is critical. 90% of its turnover —about 35 million— corresponds to Algeria. “We have a lot of containers stopped in Algerian ports. We are desperate and our Algerian clients are desperate because they cannot recover the merchandise and the stay costs are incurred”, says its general director, Job Pero, who these days participates in endless crisis meetings about possible exits.

On the phone, the manager explains that the problems did not start this Thursday. “We have been suffering from it since the very day that [Pedro] Sánchez changed his position on the Sahara. There already began to occur blockades in customs. There were veiled instructions to block imports of Spanish product”, he affirms. They also participate in several water treatment plant awards that are now at risk. “They are telling us that they are not going to take Spanish companies into account. I am considering taking the family to Portugal and opening a company there”, he maintains.

The Spanish food and beverage association (FIAB) explains that the North African country ranks 23rd in the classification of markets to which they export. In 2021, Spain sent food and drinks worth 297.55 million euros there. Among the main exported products are other oils (which excludes olive oil), prepared dishes, cocoa, chocolate and confectionery, as well as milk and dairy products.

Automakers will also be affected. Although in your case the impact will be very limited. The Anfac employer explains that last year only 5,171 vehicles were exported to Algeria, 0.3% of the total sold abroad. Despite this, they recognize that all markets are important and will closely follow the evolution of the conflict. The crisis is also being closely followed at the cargo loading ports and, above all, if it causes orders to be left on land. Supply chains are highly stressed by bottlenecks and Algerian restrictions could further complicate their operations.

Gas, immune to sanctions

On the part of imports, Spain buys mainly energy. This business is exempt from the sanctions and is not affected by the veto on commercial payments. At least in principle, according to industry sources. In fact, the negotiation of the new gas price contract for the three-year period 2022-2025 remains open. An example of this apparent normality is that this Thursday the shipment of gas by tube continues as planned. In addition, the Spanish Foreign Minister, José Manuel Albares, has insisted that the retaliation taken does not affect energy.

This is a relief for Spain. The economy of the North African country depends heavily on energy exports, and in the case of gas, moreover, it would be very complex for it to divert the loss of Spain as a customer to other markets. In other words, it has a lot of production capacity, but no way to sell it abroad beyond the tubes it has to Spain and Italy or by ship, where capacity is smaller. Thus, even if it increased sales per ship, it would not be enough to compensate for the volume that would be caused by a supposed loss as a partner in Madrid.

In all Algerian exports, Spain is the third customer after Italy and France, although Algeria’s commercial ties with the Vladimir Putin regime are growing. It is one of the big buyers of Russian wheat and is reducing the purchase of European wheat. It is also a big buyer of Russian weapons. In fact, Sergey Lavrov, Russian Foreign Minister, met with President Abdelmayid Tebune at the end of May in Algiers. This factor raises the confrontation with Spain to a higher dimension amid the concern of Brussels, which calls on Algeria to back down on the decision to suspend the friendship treaty with Spain.

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