The Wheel of Misfortune – Russia Takes Advantage of US Lethargy in North Africa

Those who follow US policy in the Middle East and North Africa are increasingly concerned with a lack of a robust or consistent American presence in the region outside of support for Israel and mixed messages on Syria and Iraq. Arab governments initially were pleased that the Trump Administration took a high profile on pursuing a Middle East peace settlement, inserting itself into the Israel-GCC-Iran quagmire, and issuing some soothing words in the Qatar boycott fracas. But the rest of the region, including Egypt and Yemen, are apparent afterthoughts in policy discussions at the State Department and National Security Council, while North Africa may as well be on another planet.

Aside from bewildering our Arab allies and stoking Israel’s anti-Iran fury, it is hard to discern the strategy or results of the Administration’s actions to date. Among the signs of discontent are mutterings about the lack of Ambassadorial appointments to the majority of Arab countries and the opaqueness surrounding the work of the President’s special envoy to the region. As with the Obama Administration, Arab leaders are wondering what can be done to engage the US outside of its seemingly very narrow agenda.

Another consequence of the Administration’s perceived lack of engagement was recently highlighted in an article from the Washington Institute for Near East Policy (WINEP), remarking on the extensive outreach of Russia in North Africa, ostensibly a region of low priority to the US.

In the article, the authors, Sarah Feuer and Anna Borshchevskaya, make a point of the heightened pace of Russia’s dealings with the region in hopes of offsetting traditional US influence and promoting its own “geostrategic, economic, and political interests.”

They point out that, “In Putin’s estimation, Russia’s ascendancy depends on countering the United States and its European allies. Expanded access to the Mediterranean serves this broader goal by establishing a foothold in a European sphere of influence and reducing the U.S. ability to maneuver militarily. In economic terms, North Africa presents an opportunity for Russia to sell arms, forge partnerships in the energy sector, and invest in infrastructure development. Moscow can also claim it is in the region to fight terrorism.”

Although Russia has traditionally had strong relationships with Libya and Algeria, its moves into Tunisia and Morocco should be troubling to the US.

In Libya, Russia is seeking to maintain its foothold by supporting Gen. Khalifa Haftar and positioning itself as a neutral force between the major factions in the country. In addition to its energy resources, Libya offers important access to Egypt and port facilities that expand Russian presence on the Mediterranean.

Russia’s relationship with Algeria is perhaps the longest one it has enjoyed in North Africa, dating from the time of its enormous weapons sales as the Soviet Union. More recently its dealings with Algeria encompass debt forgiveness, more weapons sales, intelligence sharing, and cooperation in the energy sector, despite Algeria being a competitor in natural gas exports. Russia has also signed exploration and development agreements covering oil and gas concessions in the country.

Although Tunisia has long been considered pro-Western, it is benefitting from closer ties to Russia. The article notes: since 2011 the bilateral relationship has focused on counterterrorism, nuclear energy, and tourism… In 2016, roughly 600,000 Russian tourists visited Tunisia, a tenfold increase from the previous year and over 10 percent of the country’s visitors that year. Tunisian retail businesses have welcomed Russians’ presence, and the government has spoken positively of Russia’s assistance in counterterrorism. Officials have also publicly acknowledged Russia’s growing regional sway, including in Syria.”

Morocco-Russia relations are where the hedging of bets by traditional US allies in securing their interests is most apparent. Since his trip to Moscow in 2016, King Mohammed VI has “strengthened economic relations through a renewal of the countries’ free trade agreement and an expansion of Russian access to Moroccan fisheries on the Atlantic coast.” While Morocco-US relations flounder without clear signals from the US side, Russia has continued to build its ties by becoming a major importer of Moroccan agricultural products, providing technical assistance in the energy sector, and supplying liquefied natural gas to the country.

As importantly, “As it does Tunisia, Russia views Morocco as an economic gateway to Africa; it also regards the kingdom as a model to emulate in countering Islamist extremism in its own vicinity.”

Given the stasis that seems to permeate US diplomacy outside of conflict situations, there is much more that the US could do to assert its common interests with the Maghreb countries, starting with appointing competent and active Ambassadors to fill all the empty posts.

Additionally, “In cooperation with its European allies, policymakers should promote greater regional counterterrorism cooperation among the Maghreb states and expand the US Navy’s presence across the Mediterranean. Stationing more vessels out of Rota, Spain, for example, would help constrain Russian actions.”

Despite the cuts to foreign assistance programs, the US must continue to build its cultural, education, and capacity-building programs with North Africa whenever possible, developing regional programs when useful. North African countries could greatly benefit from encouragement to strengthen civil society and protect individual liberties; the U­S can do much more in this regard.

Promoting stronger economic relations can also play a role in enabling local economies, which are in need of resilient and sustainable projects that create valued jobs and include women and youth. Programs that support entrepreneurship and the creation of SMEs should be continued and expanded as an antidote to the growing numbers of restless, unemployed youth susceptible to negative messaging.

North Africa should not be Russia’s for the taking. The US has invested decades of efforts in supporting the development of these societies. Many individuals within these countries’ public and private sector leadership have taken advantage of US exchange and educational programs and have an inclination to support closer ties. Without a commitment to husbanding these ties and building long-term relationships that engage North Africans across sectors and parties, the US is signaling its intentions to become a second-rate friend in the region, and American influence will wane accordingly.

Too Few Solutions from Algeria’s Leadership for Economic Woes

The economic news for Algeria, tied to its opaque political-business regimen, is hardly heartening. Despite the recent decree of yet another attempt at reform, the country remains stagnated within a system that inspires little confidence in international investors and drives away its talented youth looking for opportunities elsewhere.

Robert Looney in Foreign Policy, argues that the country has done little to a significantly change its business culture, characterized by an interlocking coterie of politicians and businesses that still regard foreign investment as a Trojan horse for breaking their stranglehold on the commercial life of the country. Worse still, the country “is perceived to be among the world’s 10 most corrupt.” Its indicators are all moving in the wrong direction as “Fiscal and trade deficits have shot up, international reserves are falling rapidly, and the currency has been devalued by nearly 30 percent.”

Similar negative outcomes are project for GDP growth, which will end up around half of last year, largely due to the over-reliance on all things hydrocarbon. Looney paints a damning picture. He asks, “Will the new strategy [New Economic Growth Model] be the stabilizing force the government needs? If Algerian history and international experience are any indication, the answer is no.”

He goes on to note that on critical indicators such as quality of governance, rule of law, control of corruption, government effectiveness, and regulatory quality, it ranks below all of its North African neighbors. Algeria is unable to mobilize its population of 40 million, shrinking foreign reserves now around $150B, and proximity to Europe and Francophone African countries to take steps as its neighbor Morocco has done to implement a more sophisticated and open investment regime.

Looney mentions that there are “too many vested interests with a stake in blocking economic, social and political reforms have been created. Since it appears that the new reform plan was designed precisely by such vested interests in the corrupt government inner circle, it is unrealistic to expect the plan to set off a virtuous circle of reforms.”

Downward Trends

Some indications of how far Algeria has yet to go were noted in an article in the Sada Journal. It says that “This new approach has failed to convince some Algerian economists, who insist the current system needs a wholesale transformation, including tackling the structural obstacles that deter foreign investors or the emergence of a dynamic private sector.”

ITs over-reliance on hydrocarbons has stagnated Algeria's development

Over-reliance on hydrocarbons has stagnated Algeria’s development

This recommendation flows from the assumption that needed reforms, which would, among other steps, shift trade and investment responsibility to technocrats, free the financial and monetary system from its political albatross, provide transparency to contracting and commercial laws, and accept international accounting and banking standards, would be forthcoming. Not likely.

The basic structure of the economy, under the new model, like Saudi Arabia, is meant to move from its dependence on hydrocarbons to a more diversified economy. While the kingdom has Prince Mohammed bin Salman as the cheerleader-in-chief for Vision 2030, there is no comparable leadership in Algeria. It is ironic that it hosted the most recent meeting of OPEC, which will only continue to make it difficult to wean itself away from hydrocarbons if the price of oil even incrementally rebounds, thus making it easy for the Algerian leadership to once again postpone needed reforms.

The latest figures from Algeria paint a very difficult lie ahead. According to BMI Research, using Algerian government sources, “Cuts in public spending, mainly affecting capital expenditure, and higher taxes and import duties will be negative for investment and consumption. While Algeria’s remaining fiscal buffers will help to delay a more dramatic fiscal and economic adjustment, the next few years are likely to see subdued growth and rising macroeconomic challenges.”

The problem with business as usual is broad and deep. For example, due to declining hydrocarbon exports, the trade deficit went from a $4.3B surplus in 2014 to a $13.7B deficit in 2015, with the rate continuing throughout 2016. As the BMI report points out, “With investment largely dependent on public spending, there are few other domestic sources to pick up the slack. Private investment has long been constrained by Algeria’s byzantine operating environment, marked by difficult access to credit and numerous regulations and time-consuming procedures.”

There can be little satisfaction to watching Algeria weaken itself by continuing to bring on its own debilitation by continuing to rely on inadequate assumptions for economic strategies. Even the agreement with China to build and run a new port project valued at some $3.5B will not alleviate the long term consequences of failing to restructure and relaunch its economy based on a globally competitive series of assumptions that takes advantage of the keen human resources in the country.

 

Image: BBC.com