Report delivered at the Conference on "The EU and North Africa on energy and migration: what prospects after the Arab spring?" - Roma, March 19-20 , 2012.
The North African Countries
The North African countries are at least as different among them as the Southern European Countries, and it may be difficult to deal with them as a group. Some North African countries share with European Countries, and especially with Mediterranean European Countries, a serious migration problem: it is mainly Libya, Tunisia, and, perhaps less, Algeria, and Morocco. Some are both transit areas and sources of migrants.
Egypt does not seem to be in the same situation
The Oil Countries
Two North African Countries, Algeria and Libya, are oil and gas exporters. In 2010 Libya exported 1.5 million barrels a day and Algeria 1.2 mbd for a total about 2.7 mbd. In 2011 Libya fell to 450 thousand barrels per day, while Algeria kept its position with 1.28 mbd. Libya will be back to its full potential in the current year. Both countries are connected with gas pipe line to Italy, and export gas to Italy. Both countries enjoy a relevant income from oil and gas sales.
Egypt also used to export oil, about 750 thousand barrels per day in 2010, but it seems that the imports of oil products are today so high, that the country is a net importer of oil and oil products. The country also exports liquefied natural gas.
The common institutions
These countries are members of some specific International Institutions.
The two oil exporters, Algeria and Libya, are member of OPEC. They followed a similar strategy, basically of high price, and are classified as hawks, both in price policies and in the agreements with international companies. Both countries produce light oil, which is more valuable than the heavy one. However, because of a large difference between the two countries in population, the oil money may play a more important role in Libya than in Algeria.
Egypt is not a member of OPEC, and has an “opportunistic” price strategy.
The Arab oil producing countries are also members of OAPEC, The Organisation of Arab Oil Exporting Countries, which is housed in an extraordinary beautiful building in Kuwait, and would be qualified to take some initiatives on the matters we are discussing. As we will see, it was OAPEC which participated in the Great Interdependence Study Project in the’80s with ENI.
North African and Mediterranean European Countries are members of OME, Observatoire Mediterraneen de l’Energie, which Michel Grenon and I started after he completed his famous study on the Mediterranean economy, Le Plan Bleu. This Institution works on the interconnection of the national electric grids, and to insert element of common planning in the countries’s programmes. OME is already an important factor for a better coordinated strategy for common development. A stronger role would probably be desirable, requiring perhaps a higher level of commitment of the European Countries, which are OME’s founder members, and may have the necessary human resources. OME has just published a paper on Energy called “20 years of OME: Linking the Mediterranean for more than twenty years” which is quite informative.
How to spend the oil money
An important matter for any oil country is how and on what to spend the oil money. It seems to me likely that in the near future the oil price will keep its tendency to grow, because of speculation on the futures market, and of strong demand from emerging countries, like China and India. The income of the oil countries will therefore tend to increase and the countries will have to define how to use these riches, and how to make them serve the country, and not the country serving them.
Up to now, the experience of the oil countries has been not always positive, some having put all their economy on the oil business, and feel very bad at every reduction of the price; and some other being unable to use the oil money for the development of the country. The use of oil money must be democratically defined and controlled, in order to avoid creating situations of excessive dependency, or worse, the creation of “oil lords“who get to be superior to the Republic.
Libya has a distinct situation. It is the ninth country in the world for the size of its oil reserves, which are estimated 46.420 million barrels. The Country is now at the starting point of a new history, and must take the decisions that the previous regime would not take. The country has all the possibility to use correctly the oil money in order to create a modern economy, based on an equal position of the citizens of the country.
In all the three producing countries the relationship between the Government and the Oil Companies are run quite as a matter of fact, and the oil companies are interested in both of them. There is, therefore, the usual kind of cooperation between the two, who basically need each other to work effectively.
A little bit of history
As we have said, cooperation between buyer and seller may produce maximum positive effect, maximising the interest of both of seller and buyer: in reality the matter is not that easy. Speaking of a common platform for European and North African Countries, we might go back in time, and remind ourselves of the exhaustive study performed by Arab and European economists and presented in 1981, about thirty years ago, in Rome , to a large international meeting , the “Seminar Between OAPEC (not OPEC) and South European Countries” , financed by ENI, and by OAPEC.
The Interdependence Model compared non-cooperative versus cooperative strategies of both producers and consumers of oil, and concluded that the second option was by far the best. Price of oil and investment in the oil countries, and in their poorer relations, could be optimised for maximum common economic development. The European Countries would open their market to agricultural and craft products from North Africa, and the general effect on income would be optimal for both the two areas, as well as for all the oil producing countries. The surplus population would be absorbed in the development of agriculture, and the ugly phenomenon of mass migration (which almost did not exist at that time, and was not considered) would never appear.
The “Rome Meeting” was a great success, and –of course- immediately forgotten. European Governments were not prepared to embark in such a daring, long term policy, for fear of reducing too much each single Country’s area of political initiative. The oil producers were still hoping, against any logic, to keep the very high prices, which had already seriously reduced the call on OPEC. The US response was –unofficially- strictly negative: at that time they refused any cooperation with OPEC countries. Moreover, the price of oil was collapsing on the decision of Saudi Arabia to abandon the by now impossible level of OPEC prices, and to sell its oil on the open market. The opportunity was lost, perhaps forever. The files, kept in the seat of OPAEC in Kuwait, were late r destroyed by the looting Iraqi soldiers.
I don’t think that what happened years ago should discourage us. Quite the contrary.
Let’s try to think again at the idea of cooperation under present circumstances.
1. The main engine of the economy of the oil producing countries is the money coming from the production and export of crude oil. Oil is “depletable”, although in the long term, and, in principle, the oil money should therefore be used not to finance internal demand, but to create new sources of income: that is, it must be invested. It may be of course necessary and urgent to reduce discomfort and misery in certain areas or social groups, but the basic principle should be that oil be used to create new sources of income, by financing both infrastructure and productive equipment. We have here a strong argument in favour of agriculture.
2. The money invested in agriculture is usually beneficial everywhere.
First of all, it shapes in a way or another the very earth on which we stand. It consolidates the soil, and usually creates a pleasant place in which to live. One may take the example of the Tuscan Hills, which were shaped by the peasants, who found the optimum way to operate on them, and shaped them in the way we see them now, and we wonder at their beauty. And those hills do not stop producing fruits, food and drink, permanently improving the quality, and increasing the volumes obtained from them. The same can be said of the Po Valley that was conquered inch by inch from the River Po. This should be a primary task for any country having desert areas, which must be contained, and eventually reduced. And, to day, science and machinery would produce result much faster than in the past.
Second, investment in agriculture creates basic infrastructure, e.g. the network of small roads or local railways to bring the produce to the market. Modern agriculture is basically energy intensive, but still requires a lot of workers, especially in the first years, when fields must be created, and water provided.
Moreover, the development of modern agriculture creates a demand for mechanical equipment and therefore stimulates the creation of companies producing it. Such equipment is not too sophisticated, and can be produced in small series. This was, for example, the major force in the industrialisation of the Po Valley in Italy, after the fifties of the last century. Of course, the machinery must be adapted to the number and the quality of people willing to work there.
Investment in agriculture would do a lot of good to oil rich countries in North Africa, and could, in a number of cases, absorb in the new projects at least a part of the migrating people. Those countries could work on the development not only of the Mediterranean Belt, but also on other areas, which may be reached by extended, or local, water systems.
3. Today, a strong flow of migrants moves from Africa to Europe, partly originating from middle Africa, and partly from North Africa Countries, which are crossed to reach Europe. The flow, induced by the colossal difference in the standard of living in the two extremes, will not abate simply because countries close their frontiers. Police operations have been clearly insufficient to stop it. The whole flow is illegal, and therefore impossible to stop with police controls.
It may seem that the flow was somewhat reduced in the last year, probably because of the financial and economic crisis of Southern European Countries, but it will resumed, if and when the European economy starts growing again. Today, many of these countries are in an economic situation that won’t absorb a steady high level inflow of migrants. According to figures just published (IHT February 17, 2012) the young generation (15 to 24 years of age) finds it extremely difficult to get jobs in many European countries. In two of them , Spain and Greece, about 50% of the young workers of both sex is unemployed ; in Italy it is about 32%, France 25%, and Britain 22%. Netherland, Austria and Germany are around ten per cent.
These figures are partly due to the present recession, induced by the harsh penalties imposed by European Commission on indebted countries, but I suspect that there is a structural pattern. Industrial and Service Companies don’t hire in a recession, and if they do, they prefer to poach from other companies, rather than hiring young people without experience. And this is now a habit, and, probably, at the end of the recession the rate of young men’s unemployment may be perhaps somewhat reduced, but not cancelled. It seems to me that opportunities have shrunk a lot for immigrants, although totally unqualified jobs may still be available.
4. Perhaps an effort should be made to settle at least part the migrants, before they reach the seaside. Migration is an epochal movement which can only be moderated, and perhaps reduced, by a similar epochal operation of containment that would stop some of the people by offering them work. The idea might appear naïve, easy to say and impossible to implement. However, I can’t imagine any other way of containing it.North African countries still have a strong potential to develop agriculture , and a strong interest to do so, even independently from the possibility to absorb part of the flow of people coming from South , to reach Europe by crossing the North African States .
The concept would need quite a large supply of energy, first for irrigation , second for working equipment , and for the first treatment of the produce , including the necessary refrigeration. Plants for shipping liquefied natural gas do need refrigeration in large supply.
Of course, agricultural development requires investment. It needs a very detailed network of roads or railways, to collect the produce and send it towards the seaports, where one could imagine the treatment may be performed before shipping. There may be problems related to the property laws, which may be revised so that the effort of the peasant is actually remunerated, and not completely absorbed by the trading intermediaries or by the landlord. Moreover, and a matter of first importance, the immigrants must not be considered like slaves, but as workers who can expect to be paid for their work. There must be a network of agricultural experts to advise the peasant on the choice of production techniques, and of product, which must be acceptable to European consumers.
5. European Countries could, on their side, share the objective of such an agricultural development in North Africa. They have a long experience in agricultural development, and of water planning and control, and should put their experience and also some of their capital in some of the projects. In any case they would fully open their markets to agricultural products. To reduce problems of competition with European agriculture both sides would try to specialise on products related to the conditions of the various areas. So, such a project requires a definite cooperation not only of Southern Europe, but of all Europe, which is an open market.
6. Of course, proposing something does not mean that the project may in fact be realistic. The main problem is the possibility of accepting an inflow of foreigners to settle in any country. The thing would perhaps be possible if the drive to agriculture is shared by the citizens of the country, the migrants being welcome to start with the lower jobs, with the possibility to climb up for the best workers. In any case, a country with a large share of desert must tackle the problem of the desert, and to try to create a better place to live. Some of the oases are historical settlements, which may very well be modernised without destroying what remains of the past. On the other hand, the European Countries have their own interest in reducing the inflow of migrants to a more manageable size.
7. A second area of development is tourism, already well developed in countries like Tunisia, or Egypt, but not elsewhere; it never existed in Libya. It is an important option, very attractive, which may however need to be taken with prudence, in order to avoid the negative effects which are so visible in Southern Europe. Libya is the country of the Central Mediterranean that has more Greek and Roman memories. It has those great remains of past civilizations, a very clean sea, and the fascination of the desert. It is quite near to Europe, and it has never been open to tourists.
The flow of tourists may however be overwhelming, and change the face of the country and the habits of its people. The tourist is not in conditions to understand the effect of his presence, the crowding of the best areas, the decadence of the traditional crafts, et cetera. A road that can be taken with a clear idea of the risk, for example, choosing to follow a “quality tourism“rather than a “mass one”. That business needs qualified operators, who must be able to deal with people, and their unusual request, speak their languages, etcetera. In fact tourism would not absorb unqualified labour, which is on probably a large part of the migrants moving towards Europe.
8. Finally, the European Countries have a large area in which they should participate actively, in a way on another as co-operators and in some cases perhaps also as leaders. They should take the initiative to create a general interest in the projects like getting solar electricity from the desert. This particular area is of such an importance that it should in any case be made into a common effort. A common structure should be created to complete the technological and environmental aspects still extant. The oil countries do not need to worry about it, as oil is basically for transport - by land sea or air - and electricity is increasingly produced from gas , coal , water, or nuclear, and not oil. And selling electricity would nicely increase the inflow of money into the North Africa.
In conclusion
The oil countries of North Africa know very well that oil is “depletable”, and therefore the money coming from it should be directed to investments, that is, the creations of new sources of income production. Among the various options, that of Agriculture, if properly developed with all the scientific supports available, will improve the territory, and stabilize in new agricultural areas at least a part of the flow of migrants.
The cooperation with the European Countries must be realised in agriculture and care of the territory and on the full opening of markets, but also on big projects in energy, mainly to utilise the large number of sunny hours in the day, and the strength of the sun. The present economic situation is not great in Southern Europe, but it will eventually improve and the possibility of a Common Plan for the Development of the Mediterranean Region, I hope, will not be forgotten.