The Algeria-EU relationship is unfair, what can Algiers do?

Speaking at the Europe Day reception in Algiers on May 10th EU Ambassador Diego Mellado Pascua declared that Brussels wants to engage Algeria on an “equal footing”, Maghrebi.org reported.

The charm offensive was interpreted by Algerian media as evidence of Europe’s growing reliance on the country for energy security and Sahel stability, and could provide the long-awaited opportunity for the North African nation to revise what they view as a lopsided relationship. Algeria could seek to leverage Europe’s current energy vulnerabilities stemming from the war in Ukraine, as well as the price rise from the war in Iran, to force a restructuring of these ties. 

A one-sided trade agreement

The cornerstone of which is the EU-Algeria Association Agreement, signed in 2002 and in effect since 2005. Designed to eventually create a free-trade area, the pact was intended to integrate Algeria into the European market by gradually removing trade barriers and encouraging economic diversification. However, Algiers now argues that the deal has served as a one-way street, benefiting European exporters while stifling domestic Algerian industry. At its core, the economic relationship is unfair. The trade dynamic is structurally unequal simply because one country exports raw gas while the other floods the market with high-value manufactured goods. A whopping 92% of Algeria’s exports to the EU are mineral products, while European exports to Algeria are far more diversified: machinery and appliances make up 38% of the EU’s 2025 exports to Algeria, closely followed by chemicals at 17.7% and agri-food products at 17.2%.

As foreign trade expert Ali Bey Nasri noted, the results of the pact have been “unfavourable,” leading to a 28 billion dollar loss in customs duties since 2005. This represents tax money that the Algerian government stopped collecting on European imports as part of the 2002 Association Agreement. Highlighting the fundamental imbalance of the deal, Nasri pointed out: “The EU countries buy oil without tax, and Algeria buys it refined ten to fifteen times more.”

This fiscal erosion averages $2 billion in annual tax losses. One could argue that it has stripped the state of the capital necessary to fund the very industrial diversification the agreement was supposed to foster.

All bark and no bite?

Despite Algiers’ talk of independence and its actions, viewed by Brussels as an attempt to ban European imports, Algeria arguably doesn’t really have a choice but to cooperate because of its own problems. Domestically, high energy demands and ageing infrastructure actively cap Sonatrach’s export potential. Geographically, Algeria is physically bound to Europe via subsea pipelines; it cannot easily pivot its gas to Asia. Furthermore, to fund its ambitious 60 billion dollar energy expansion plan, Algiers needs the extraction technology and capital that only Western energy companies can provide. This financial and physical dependency limits its ability to fully walk away, forcing it to remain within the European economic orbit.

Rich country, poor strategy: how neighbours are pulling ahead

While Algeria relies almost entirely on oil and gas, its neighbours have taken different paths. Morocco, for instance, has built itself into a manufacturing hub for European cars and aerospace parts, while Tunisia has focused heavily on services and textiles. Because Algeria is so dependent on one single resource, it has less economic backup than its neighbours. When gas prices are high, Algeria is wealthy; when they fall, or when its fields underperform, the country has no other industry to catch its fall.

Europe’s preference for investing in Morocco over Algeria boils down to a deliberate strategy by Rabat. While Algeria invested heavily in its state-owned energy sector, Morocco launched free-market reforms, including its Industrial Acceleration Plan. The Moroccan government established specialised free trade zones, like Tangier Automotive City, where European manufacturers are entirely exempted from corporate taxes for the first 5 years.

Algeria, by contrast, has found itself in a sticky situation. Algiers did sign up for free-trade frameworks and accepted low tariffs for European goods via the 2002 Association Agreement, but it failed to catch the resulting investment due to protective measures. To protect local businesses, they kept strict economic barriers in place. The most famous roadblock was the “51/49 rule”.” This law legally mandated that any foreign company wanting to open a business or factory inside Algeria could only own a maximum of 49% of their own project. For European corporations, this rule made building factories in Algeria highly risky because they couldn’t fully control their own investments or technologies. 

Algeria and Sahel security

While Algeria is recognised as an important ally of Europe, its involvement is not a choice or a favour; it is a defensive reflex. The entire Sahel region is currently experiencing a surge in instability, marked by military coups, shifting alliances, and heavily armed terrorist networks. This includes al-Qaeda-affiliated Jama’at Nusrat al-Islam wal-Muslimin (JNIM), who are besieging Bamako currently, a neighbour of Algeria. For Europe, this heightened chaos is a security threat: a lawless Sahel could turn into a launchpad for terrorism and trigger waves of irregular migration. However, as intense as Europe’s anxieties are, Algeria fears this reality even more. For Algiers, this is an existential crisis of pure survival happening directly on its 1,300-kilometre southern border. If the unstable military regimes in neighbouring Mali or Niger completely collapse, the ensuing vacuum will instantly spill over into Algeria’s desert south.

Despite the Algerian regime’s anti-Western posturing, it knows that the EU has a shared interest and the means to deploy the long-term financial and developmental resources to stabilise the region’s root crises.

After all, what other viable options does Algiers have? Russia’s presence in the Sahel, through paramilitary forces like the Africa Corps, has not only failed to protect the juntas and stabilise the region but has actually driven a wedge between Algiers and Moscow. 

Maghrebi.org, Le Jeune indépendant, Bilaterals.org, Council of the European Union, European Commission, Algeriainvest.com, Embassy of Algeria in Brussels, Clifford Chance law firm, Atalayar, Ministry of Industry and Trade of Morocco, Times of Israel, European Union External Action, Al majallah