Algeria has adopted a new strategy of international engagement as it seeks to modernize its economy, but continued dependence on hydrocarbon revenue and its persistent stance on some geopolitical rivalries involving Israel and Russia will limit its transformation. Since President Abdelmajid Tebboune began his tenure in December 2019 after longtime leader Abdel Aziz Bouteflika’s ouster, he has tried to shift Algeria’s foreign policy from the isolationism that characterized Algeria in the 1990s and 2000s. In 2022, the Algerian Foreign Ministry made several moves underscoring the North African country’s efforts to participate more actively in global and regional affairs. 

• Algeria hosted the Arab League summit in November 2022 after working to shore up its relations across the Arab world during a flurry of bilateral meetings. Algeria also hosted meetings with neighboring Tunisia that resulted in Tunisia switching its stance on the sensitive issue of Western Sahara, and also repeatedly hosted Palestinian factions in an effort to broker an understanding between rival groups. In 2022, the Algerian Foreign Ministry also repeatedly expressed a desire to join the BRICS (Brazil, India, Russia, China and South Africa) bloc. 
• Algeria’s largely self-imposed isolation from global affairs dates back to its bloody battle for independence from France, which hardened the revolutionary government’s distrust of the West and contributed to Algiers’ affinity for nonalignment. Tebboune took over from longtime president Bouteflika, who was known for shepherding Algeria through the violent 1990s civil war — which required an intensely inward focus — and for ruling Algeria with an increasingly authoritarian style. 

Algeria is enjoying a period of domestic political stability and near-term economic strength that is enabling the government to adopt a more active foreign policy. Algeria, where elections are not due until the presidential vote in 2024, will likely experience near-term political stability. This will give the government more space to focus on foreign policy. Algeria’s economy meanwhile has been buoyed by higher energy revenue in 2022, and Algerian gas is in great demand due to European countries diverting their energy imports from Russia in the wake of the invasion of Ukraine. (Algeria’s budget for 2023 is the largest Algeria has ever drafted, highlighting just how much energy-revenue-dependent Algeria has benefitted from higher energy prices in 2022.) This will allow the Algerian government to funnel revenue back to the population in the form of expanded benefits and subsidies, reducing the risk of economically motivated protests. 

• Politically, Algeria is stable, and the government’s delicate power balance between the powerful military and the presidency — and the oligarchs who influence the balance behind the scenes — does not show signs of breaking down in the near future. 
• An anti-government protest movement known as “Hirak” (Arabic for “movement”) emerged in 2019 and helped lead to Bouteflika’s ouster. Pandemic-driven restrictions on gathering and government crackdowns plus increased funding for certain economic subsidies all led to the dwindling of the Hirak protests. While anti-government protests connected to the group remain a risk moving forward, they do not present a potent risk because of improved socioeconomic conditions and the government’s demonstrated power to halt demonstrations in the last few years. So if demonstrations happen in 2023, they are unlikely to amount to much. 

Algeria will use some of its economic windfall to elevate its regional profile and protect its national security. Algiers is in discussions with Tunisia and Libya about boosting its gas and electricity exports to both countries at discounts. Tunisia and Libya are both struggling to afford energy and power, while Algeria wants to stabilize its eastern neighbors to prevent the spread of instability to Algeria. In the coming year, Algeria also plans to continue to host rival Palestinian factions Hamas, Fatah and others to broker an agreement to their impasse and build a stronger counter to the Israeli government. This satisfies a key Algerian imperative to support the nonaligned movement — a postcolonial effort rejecting the perceived need to align with any of the world’s strongest powers — and counter the Israeli government across the region, and positions Algeria as a powerful regional voice along with other Mediterranean mediators like Egypt and Turkey. Algeria could try to use some economic aid to convince other African and regional countries that have yet to follow the lead of the Abraham Accords signatories and normalize ties with Israel for domestic reasons.

• In 2020, Algeria passed a constitutional amendment that allows its military to deploy forces abroad, a change to Algeria’s typically inward, domestic stability-focused military doctrine. As Algeria becomes a more vocal regional diplomatic voice, the question emerges whether Algeria might back that up with military deployments, particularly in neighboring Mali and Libya. This remains a low likelihood, but potentially high impact, possibility in the year ahead. Jihadist movements in Mali and Libya have remained one of the Sahel’s most potent threats, with the potential to create a terrorist threat extending into Algeria.

Despite a stable short- and medium-term economic outlook, long-term economic uncertainty still looms, leading Algeria to court foreign investment to fund its modernization efforts. The dramatic expansion of pensions, retirement benefits and public wages in Algeria’s 2023 budget was only possible due to the increase in energy revenue Algeria received in 2022, underscoring the country’s continued reliance on hydrocarbons. This means that any decline in energy revenue will bring budget pain. Thanks to recent legislation passed under Tebboune, Algeria intends to court more foreign investment than ever before in the coming years for use in Algeria’s private sector and non-oil sectors of the economy including services. Whether investors will bite, however, remains to be seen. 

• Algeria passed a new foreign investment law in mid-2022 relaxing formerly strict regulations including rules requiring 49/51 percent ownership of businesses in the country in Algeria’s favor and limiting foreign investors’ ability to access capital and financing outside of the Algerian banking system. 

Even slightly shifting its foreign policy exposes Algeria to security risks. Algeria’s existing geopolitical rivalries, particularly with Morocco, are likely to flare up the more Algeria tries to bolster its relationships with sub-Saharan and North African countries. Algeria faces the greatest risk in this area with regard to Western Sahara, where Algeria supports the pro-autonomy Polisario Front. Meanwhile, if Algeria were to deploy military forces abroad, terrorist groups with links to any of those conflict zones might target Algeria.

• Algeria probably has asked Tunisia for political support in countering Morocco on Western Sahara; Tunisia shifted positions on the issue in Algeria’s favor late in 2022 after receiving economic aid from Algeria. 

Algeria’s close relationship with Russia creates a low risk of sanctions that could diminish Western investor interest in the country to some extent, but the growing demand for Algerian gas means the West will still prioritize maintaining good ties with Algeria. Deepening Algerian ties with Russia have become more obvious in recent years, with the North African country having become Russia’s third-largest arms customer in the world according to SIPRI. As Russia continues its war in Ukraine, the U.S. and EU governments are likely to express concern over supporting a country like Algeria spending so much money on Russian arms. The need for Algerian natural gas amid a time of shortage, however, means that Western governments are likely to maintain positive, pragmatic ties with Algeria. 

• According to Algerian media reports in November 2022, Algeria plans to dramatically increase its acquisition of Russian military equipment in 2023; its purchase plans call for stealth aircraft, bombers and fighter jets, and new air defense systems. 
• Calls have emerged recently in the United States and the European Union to sanction Algeria for its military purchases from Russia. A group of European members of parliament in November 2022 urged European Commission President Ursula von der Leyen to respond to Algeria’s growing ties with Russia, while a bipartisan group of 27 members of Congress drafted a letter to the Biden administration urging the White House to sanction Algeria using the Countering America’s Adversaries Through Sanctions Act.