Dr Nakhle explains that the relationship between Italy and Algeria spans decades, particularly in the energy sector, with ENI being a prominent investor in the country. The upward march in gas prices in Europe which started last year (and even earlier in Asia) and Europe’s quest for reducing its reliance on Russian gas have provided support to boosting Algeria’s gas exports. It has been reported that Algeria will increase its exports to Italy by 50% which equates to 7 billion cubic meters (bcm) – not a huge amount given the scale of the crisis, but it can enable Algeria to become Italy’s biggest gas supplier ahead of Russia.
The question, however, is whether Algeria will be able to further increase its gas exports to play a more meaningful role in Europe. This depends on taming domestic demand growth and boosting investment to support increase in production. The latter requires supportive government policies.
The EU will not be able to completely replace Russian gas imports and surely not in the short term. However, it is determined to significantly curtail its dependence on Russian gas. Agreements such as the one with Algeria will first signal to Russia that alternatives are present and second will help to ease the pressure on gas prices, especially if no sanctions on Russian gas take nor Russia cuts off its gas exports.
Dr Nakhle further discusses the issue of sanctions arguing that in the EU this is a collective matter, i.e. at the Union level and there is a significant divergence between countries in terms of dependence on natural gas and Russian gas in particular. This explains the dilemma facing the EU’s reluctance to impose sanctions on Russian gas.
Watch the discussion (in Arabic):
“Sanctions and the Economic Consequences of Higher Oil Prices“, Christof Rühl, Apr 2022
“Energy Markets and the Design of Sanctions on Russia“, Christof Rühl, Mar 2022
“No endgame for Ukraine“, Christof Rühl, Feb 2022
“Oil Prices and EU Energy Crisis“, Dr Carole Nakhle, Apr 2022
“Putin demands gas exports to be paid in rubles, and US SPR release“, Dr Carole Nakhle, Apr 2022
“Energy Market Dynamics“, Dr Carole Nakhle, Mar 2022
“The EU’s 4th round of sanctions on Russia“, Dr Carole Nakhle, Mar 2022
“Can Europe completely cut its reliance on Russian energy supplies?“, Dr Carole Nakhle, Mar 2022