The grueling conflict in Gaza, deadly exchanges of fire along the Israel-Lebanon border and yesterday’s assassination of Hamas leader Ismail Haniyeh are raising fears of an all-out regional war pitting Israel and its Western allies against Iran and its Axis of Resistance. What would such a war mean for North Africa and its energy sector?
🔺🔻 None of the North African countries would join the conflict directly, but all would be affected by its fallout.
🔻 Egypt would immediately incur a heavy cost. Like in the Gaza crisis, Houthi attacks on Red Sea shipping would hammer Suez Canal revenues – a key source of foreign exchange for Cairo. Another major source, tourism revenues, would also plummet. Even more critically, a regional war would squeeze East Med gas production and transport, deepening Egypt’s existing energy shortage. If operators in Cyprus could fast-track projects there, they might provide Egypt a critical lifeline.
🔺 Algeria and Libya could see record energy revenues. With war throttling oil and gas shipments from the Persian Gulf, Europe would look to these North African exporters to fill the gap – in a repeat of the dynamics around the Ukraine war. But will they rise to the occasion? Despite record European demand these last years, Algeria has struggled to increase exports, given mismanagement and underinvestment in its energy sector. Libya has more room to grow, but its domestic disarray is also far deeper. Incumbent IECs who could help these countries jump-start output growth may find unprecedented opportunity.
🔻 Tunisia and Morocco, which import most of their energy supplies plus key food products, would be hit by spiraling prices, as would Egypt. The Covid-19 pandemic and Ukraine war already raised food insecurity, malnutrition and inflation in these countries. A new war throttling shipping lanes would do the same. While the energy exporters reap windfall profits they can use to buy social peace, their poorer neighbors would face serious domestic distress, possibly leading to unrest.
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