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Is Italy pursuing a 'rebalancing' in North Africa?

Algeria is set to double liquified natural gas exports to Europe as Algeria finesses ties with Italy.
An employee works at the Tunisian Sergaz company, that controls the Tunisian segment of the Trans-Mediterranean (Transmed) pipeline, through which natural gas flows from Algeria to Italy, in El-Haouaria, some 100km east of the capital Tunis, on April 14, 2022.

As Europe continues to reduce its dependence on Russian supplies, Algerian President Abdelmadjid Tebboune recently announced ambitious plans to double Algeria's liquified natural gas (LNG) exports to the region. The news came just days after Italian Prime Minister Giorgia Meloni traveled to Algiers at the end of January to strengthen the energy relations between Italy and Algeria.

In 2021, Algeria supplied 23% of Italy’s piped gas imports and exported $6.62 billion worth of goods, the vast majority of which was natural gas. This energy relationship grew even more important to Italy in 2022, when Rome signed an agreement to boost imports of natural gas from Algeria. This agreement came in light of Italy’s decision to reduce imports of Russian energy following its invasion of Ukraine.

Aldo Liga, a research fellow at the Middle East and North Africa at the Institute for International Political Studies in Milan, spoke to Al-Monitor that ties between Rome and Algiers predated Algeria’s independence. He said, "This relationship is a pillar of Italy’s foreign policy in North Africa.”

However, there are also signs that Italy is seeking to engage other economic partners in the Maghreb — not least Algeria’s main adversary, Morocco.

Since 2019, Italy has focused on markets in the Mediterranean in a bid to strengthen its exporting and manufacturing. According to Michael Tanchum at the Moroccan Institute for Policy Analysis, the success of this strategy has helped make Italy the European Union’s second largest manufacturer.

This progress means that Italy has increasing economic interests in the Maghreb other than natural gas imports from Algeria. Morocco now imports more Italian goods than Algeria, exports over $500 million worth of automobiles and automotive components annually and is an important partner in several renewable energy projects.

Andrea Dessi, head of the Mediterranean, Middle East, and Africa Program at the Institute of International Affairs in Rome, told Al-Monitor that Italy’s closer economic relationship with Morocco is partly motivated by Italy’s desire to “regionalize” supply chains.

“In the context of the COVID-19 pandemic and the conflict in Ukraine, the key driver of Italy’s approach to international trade has been a regionalization of supply chains,” Dessi said. “North Africa, along with the Balkans, is a key area in this — for geographic reasons, because of the cost of labor, and because Italy has relatively stable political relations in the region.”

Are these changing dynamics in the region encouraging Italy to shift further away from Algeria and toward Morocco? Dessi believes that although bilateral trade with Algeria remains much bigger overall, Morocco is an increasingly attractive market for a wider range of Italian companies. “For Italy, when it comes to economic and trade relations with Algeria, there isn’t much more that can be done aside from energy and gas,” he said.

“While if we look at the macroeconomic data, the relationship between Algeria and Italy is clearly more substantial in terms of money because energy is costly; the economic relationship with Morocco is more differentiated. It probably contains within it more opportunities for Italian companies, particularly small- and medium-sized enterprises, to engage Morocco,” Dessi added. In 2021, trade between Italy and Morocco totaled $3.5 billion, while trade between Italy and Algeria totaled $7.33 billion.

However, Liga emphasized the importance of Algeria as a natural gas partner. He told Al-Monitor, “Algeria and Italy have started to talk about the growing importance of energy transition, including renewables and green hydrogen,” which could indicate that Rome views Algiers as an important economic partner even as it gradually seeks to wean itself off fossil fuels. He also noted, “Natural gas is bound to maintain its predominant role in electricity generation for the coming decades,” meaning any potential “economic rebalancing” would also have to take place over an equally long period.

That said, both Liga and Dessi questioned whether Italy would have to “choose” between Algeria and Morocco. After all, on the divisive issue of Western Sahara, Rome has traditionally taken what Dessi called a “neutral, standard position.” Italy has supported the United Nations framework and the idea of holding an UN-led referendum in the region. Dessi argued that any changes to this position would “depend on broader international developments” and that Italy would be unlikely to take “a unilateral step” that broke with either the European or the transatlantic framework.

Because of this, Rome has the diplomatic space to pursue deeper economic relationships with both Algeria and Morocco. Liga does not foresee a situation in the immediate future that could drag Italy into the debate surrounding the Western Sahara. He told Al-Monitor, “Rome has the room to develop quite calm bilateral relations without being obliged to take a clear position on this.”

Morocco is certainly becoming a more important market for Italy in the MENA region as Italy seeks to regionalize its supply chains and develop other relationships apart from its decades-old energy partnership with Algeria. Under current geopolitical circumstances, pursuing strong ties with both Morocco and Algeria would appear to be feasible.

However, as these relationships progress, Dessi thinks that Italy’s attempts to maintain this economically lucrative position will need to be delicate. As it becomes an increasingly more important figure in the Maghreb, Rome could consider the risks surrounding the Western Sahara dispute to be of greater concern.

Dessi said, “It is important to balance the two correctly so that Rome does not lose either one [of Algeria and Morocco]. But it is also important to avoid moves that may contribute to heightening tensions in an increasingly vital region for Italian energy and trade interests.”

He went on, “In this respect it is inevitable that sooner or later renewed political and diplomatic effort must be directed towards resolving the outstanding dispute, particularly at a European level. Anything less will only postpone the challenge, heightening threats to all in the region.”

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