US Secretary of State Antony Blinken arrives in Algeria on Wednesday as Washington makes a geopolitical play in the North African nation to try to secure more energy supplies following Russia’s war in Ukraine.
It will be the first visit by a US secretary of state to the country since 2014.
Mr Blinken did not meet his Algerian counterpart Foreign Minister Ramtane Lamamra at the UN General Assembly last year.
Any diplomatic cold front has evidently dissipated following Russia's invasion of Ukraine on February 24, with Algiers thrust into the spotlight by recent European and US visits, including this month by Mr Blinken’s deputy Wendy Sherman.
Algeria has vast gas resources and is the EU's third-largest gas provider behind Russia and Norway.
According to S&P Global Platts Analytics, Algeria benefits from pipelines across the Mediterranean Sea to Spain and Italy, and has a liquefied natural gas (LNG) terminal that helped it export about 34 billion cubic metres of gas to the EU in 2021.
Now, the US and EU are looking for Algeria to increase its spare production, and the government has shown willingness to do so even if the amount does not come close to filling in Russian imports of 130 billion cubic metres in 2021.
Robert Ford, a former US ambassador to Algeria and a senior fellow at Yale’s Jackson Institute for Global Affairs, said Mr Blinken’s trip to Algeria so soon after his deputy visited sends a clear signal.
“It is no accident that the US diplomatic traffic to Algiers has picked up after Ukraine, the Algerians may not be the biggest [gas] suppliers but they’re important especially to Italy and Spain,” Mr Ford told The National.
But beyond Algeria’s willingness to increase its LNG capacity and discuss potential energy investments with US delegations, there are limitations on its co-operation with Washington, said Mr Ford.
The Biden administration has maintained former president Donald Trump's policy on the disputed Sahara region, where Washington recognises the legitimacy Morocco's claim to sovereignty over most of the area, "a policy that is 100 per cent against the Algerian position," Mr Ford said.
"I'm sure Wendy [Sherman] heard about it,” he noted.
Mr Trump introduced that policy a month before leaving office in December 2020. In return, Morocco agreed to normalise relations with Israel under the Abraham Accords. The Biden administration has shown no interest in reversing the decision.
Algeria has also shied away from taking a position on Russia’s war, and has abstained at the UN from condemning Moscow.
“The Algerians are proudly non-aligned,” Mr Ford said, stressing that despite a strong defence relationship with Moscow, Algeria is in the driver’s seat when it comes to pursuing their interests with US and Europe.
The US is also watching closely as China woos Algeria.
“China has recently developed greater relations with Algeria, prompting Washington to actively attempt to rebuild its own relations with Algeria for strategic reasons,” Mohammed Soliman, a scholar at the Middle East Institute said.
With sanctions aiming at Russia, the expert said Algiers will find more investment and commercial interests with US and Europe.
“Unlike Qatar, Algeria's closeness to Europe makes it a more realistic choice,” Mr Soliman told The National.
The void created by sanctions on Russia gives Washington a rare opportunity.
“US leading diplomats are aware of this fact and the fact that China under the Belt and Road Initiative would also be interested in filling the void if the US does not,” he said.
Mr Blinken is scheduled to meet Algerian President Abdelmadjid Tebboune, Mr Lamamra and other senior officials.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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