Algeria tries to get Saudi Arabia and Iran to confirm OPEC output cut
Even if cut is small, deal is expected to at least stop crude oil prices falling further.
A September 2016 file picture shows Algerian Prime Minister Abdelmalek Sellal (R) talking to Saudi Minister of Energy, Industry and Mineral Resources Khalid al-Falih prior to the opening of the 15th International Energy Forum Ministerial meeting in Algiers. (Reuters)
2016/11/20 Issue: 82 Page: 18
The Arab Weekly
Tunis - Algerian Prime Minister Abdelmalek Sellal met with Saudi King Salman bin Abdulaziz Al Saud in Riyadh in an attempt to consolidate an Organisation of the Petroleum Exporting Countries (OPEC) agreement to trim oil production before he travelled to Tehran to try to confirm Iran’s commitment to the deal.
OPEC officials, meeting on the sidelines of the International Energy Forum in Algiers in late September, forged a tentative agreement to trim crude oil. The deal foresees OPEC countries cutting oil production from about 33.24 million barrels per day (bpd) to 32.5 million-33 million bpd.
Even if the cut is small, the deal is expected to at least stop crude oil prices falling further. It may not push them significantly higher though because of challenges to OPEC unity and other market factors. Several attempts to reach such a deal have failed over the past two years but Algeria’s diplomacy helped broker the cartel’s first coordinated response to the oil price slump, which began in June 2014.
Algiers fears the effects of falling oil prices on its economy and would like major OPEC producers Saudi Arabia and Iran to confirm the deal ahead of an OPEC meeting November 30th in Vienna.
“For now, the priority of both Algeria and Saudi Arabia is, without doubt, to prepare for the OPEC meeting in Vienna, which is crucial for oil prices,” said analyst Rachid Mahmoudi. “The goal is to stop the pummelling of oil prices.”
Algeria’s economy could struggle if the OPEC agreement is not upheld. Sellal was to visit Tehran after Riyadh, Algerian state media said, in an attempt to mediate a “consensus” on the deal to trim oil output. The prime minister has said “2017 will be our last opportunity” to execute a plan to diversify the economy by investing oil money to reform the state-dominated economy.
“After the decline of the value of oil and gas exports from $67 billion to $27 billion, the state might fail to pay the wages of the government employees,” said Ahmed Ouyahia, Algerian President Abdelaziz Bouteflika’s office chief.
“Algeria would collapse if it would pursue its social spending and might fall hostage to the International Monetary Fund within a few years to borrow $5 billion annually,” Ouyahia said in an address to government supporters.
Sellal did not elaborate on oil policy and OPEC during his visit to Saudi Arabia but Algerian officials see policies to sustain oil prices on international markets as the barometer of relations between Algeria and Saudi Arabia.
Relations between the two Arab countries have thawed despite Algeria’s refusal to take sides in Middle Eastern disputes between the powerful Sunni kingdom and its Shia rival Iran. Algeria has been at loggerheads with Saudi Arabia over conflicts in Syria and Yemen and policy towards Iran’s allies in the region such as the Lebanese militia Hezbollah.
A day before Sellal’s visit to Saudi Arabia, Algiers showed its intent to stay out of the rivalry between Riyadh and Tehran by not joining 11 other Arab countries in sending the UN General Assembly a letter accusing Iran of sponsoring terrorism and stirring up instability. The letter cited Iran’s support for Shia Houthi rebels in Yemen and Hezbollah fighters in Lebanon and Syria and accused Tehran of supporting “terrorist groups and cells” in Bahrain, Iraq, Saudi Arabia, Kuwait and elsewhere.
The letter was a response to a statement by Iranian diplomat Abbas Yazdani at the General Assembly’s annual ministerial meeting in which he dismissed as “absurd and hypocritical” accusations that Tehran was supporting the Houthis.
Sellal said in Saudi Arabia that Algeria “is looking to upgrade bilateral relations to turn them into a strategic relationship because of the existence of huge potential of complementary and political goodwill of the two countries’ leaders”.
He cited the possibility of joint ventures in the hydrocarbon industry, farming, manufacturing, tourism and telecommunications. Algerian officials and analysts argue that ties between the two countries were improving mainly since OPEC members struck a deal in Algiers in September to curb production.
“Backed by the United States, Saudi Arabia had since 2011 staged wars and other campaigns to assert its dominant role in the region but today there is a shift as the Saudis lost allies and support,” said Algerian analyst Nadjia Bouaricha, referring to strained ties between Saudi Arabia and the United States.
“The thaw with Algeria reflects not only the economic aspect. It could mirror a change in Riyadh’s foreign policy to try to calm the anger in Syria and elsewhere. Algeria could play a mediation role.”