Volatility between Morocco and Algeria—driven by historical tensions, geopolitical rivalries, and economic competition—significantly influences both countries’ business environments. Companies operating in North Africa must understand the geopolitical dynamics at play, chiefly the shifting diplomatic relations surrounding the Western Sahara dispute, to effectively mitigate risk and maximise opportunity in the region.
Morocco’s autonomy plan for Western Sahara remains the crux of its conflict with Algeria. While Morocco advocates for autonomy under its sovereignty, Algeria supports the pro-independence Polisario Front through political, financial, and military channels. These opposing stances have far-reaching implications for regional and international investors.
- Spain’s 2022 recognition of Morocco’s Western Sahara autonomy plan led to Algerian economic retaliation, disrupting trade for over 600 Spanish companies, while Morocco deepened cooperation with Spain in security and trade.
- France’s recent full support for Morocco’s autonomy plan, incentivised by investment prospects tied to Morocco’s World Cup 2030 co-hosting, has sparked a diplomatic crisis with Algeria, though economic reprisals remain pending.
- Morocco and Algeria will continue to use carrot-and-stick policies with nations and affiliated companies based on their stance on the Western Sahara conflict.
- In this complex landscape, businesses must proactively manage geopolitical risks, adapt to shifting diplomatic dynamics, and capitalise on emerging opportunities.
Spain’s endorsement
On 18 March 2022, Spain formally endorsed Morocco’s autonomy plan for Western Sahara, describing it as a credible solution to the long-standing conflict. This marked a departure from Spain’s neutral stance and significantly strengthened Morocco-Spain ties in diplomacy, trade, and security.
Algeria, opposing Morocco’s sovereignty claims, retaliated by freezing trade agreements with Spain and targeting over 600 Spanish businesses. Notably, Algeria’s economic measures excluded its critical gas supply to Spain, highlighting its selective retaliation strategy. However, Algiers did imply it might increase prices in future negotiations for contract renewal with Spanish energy companies.
Unofficial yet impactful, the boycott of Spanish companies cost at least EUR 600m for Spanish companies and demonstrated Algeria’s use of economic tools to advance its geopolitical goals. In contrast, Morocco capitalised on Spain’s support to deepen collaboration in key sectors such as migration management, infrastructure, and agricultural exports. This cooperation culminated with their bid to co-host the FIFA World Cup in 2030.
Algeria softened its approach towards Spain in November 2023, restoring diplomatic relations with Spain despite Madrid’s unwavering stance on Morocco’s autonomy plan. A year later, Algeria officially ended bank restrictions on Spanish companies initially imposed in June 2022 by the Algerian Association of Banks and Financial Institutions (ABEF). This policy shift was likely influenced by the European Union’s threats of sanctions against Algeria for violating the 2006 Association Agreement.
France’s endorsement
In July 2024, France officially endorsed Morocco’s autonomy plan for Western Sahara as the primary and best-suited solution to the conflict, going further than Spain’s position and prompting new tensions with Algeria. In response, Algeria recalled its ambassador and reportedly imposed informal trade restrictions, including advising against French imports and excluding French companies from tenders. While Algerian officials denied these measures, the resulting uncertainty further complicates the investment climate. Additionally, Algiers accused French intelligence services of recruiting militants to destabilise Algeria, escalating diplomatic strains by reprimanding the French ambassador.
Meanwhile, France’s relations with Morocco have significantly improved since Paris recognised Rabat’s autonomy plan, creating substantial opportunities for French companies. During President Emmanuel Macron’s October 2024 visit to Morocco, French firms secured deals worth EUR 10bn in several sectors, including rail, green energy, and water. These agreements underscore Morocco’s appeal as a stable and strategic investment hub, bolstered by its upcoming co-organisation of the 2030 FIFA World Cup with Spain and Portugal.
Implications for investors
The Morocco-Algeria rivalry highlights how geopolitical tensions directly translate into business risks.
Algeria’s retaliatory measures against nations supporting Morocco’s Western Sahara autonomy plan foster an unpredictable investment climate. Morocco is likely to grow more assertive under the incoming US administration of President-elect Donald Trump, who initially recognised Morocco’s sovereignty over the disputed territory of Western Sahara in December 2020 in exchange for Morocco’s normalisation of ties with Israel. This recognition is likely to continue to embolden Rabat to persuade neutral nations or those supporting the Polisario Front to align with its stance, potentially prompting further Algerian retaliation against additional countries. These retaliatory actions can include official economic boycotts, protectionist measures, or informal pressure on companies to avoid engaging with firms from countries Algiers perceives as supporting pro-Moroccan positions in the Western Sahara conflict.
For businesses, navigating this landscape will remain crucial as Algeria and Morocco continue to employ carrot-and-stick policies toward nations and their affiliated companies, depending on their stance on the Western Sahara conflict.