EU-Algeria tensions rise over trade restrictions and arbitration move

Ya Biladi

18-07-2025

Relations between Algeria and the European Union are facing renewed strain. In response to what it views as violations of their association agreement, the EU has announced it is launching a dispute settlement procedure against Algeria and has requested consultations with Algerian authorities to address multiple restrictions affecting EU exports and investments.
According to a statement from Brussels, the trade barriers introduced by Algeria since 2021 violate the liberalization commitments set out in the EU-Algeria association agreement, signed on April 22, 2002, and in effect since September 1, 2005.
The EU says its move aims to «engage constructively with Algeria with a view to removing the restrictions on several market sectors, spanning from agricultural products to motor vehicles». These include an import licensing system that effectively amounts to a ban, subsidies for car manufacturers conditioned on the use of local inputs, and a cap on foreign ownership for companies importing goods into Algeria.
Algeria «Surprised» by EU's Move
On Thursday, Algeria expressed surprise over the EU's decision to initiate arbitration. Foreign Minister Ahmed Attaf addressed a letter to Kaja Kallas, High Representative of the European Union for Foreign Affairs and Vice-President of the European Commission, denouncing what he described as a «hasty and unilateral decision» to end the consultation phase and trigger arbitration.
Attaf argued that the move came despite only two meetings having taken place in the past two months, during which six of the eight issues raised by the EU were reportedly close to resolution. He added that Algeria had also proposed concrete solutions for the remaining two disputes but had received no formal response from its European counterparts.
It's worth noting that Algeria had previously imposed sanctions on Spanish companies following Spanish Prime Minister Pedro Sanchez's public support for Morocco's autonomy plan for Western Sahara, a position that drew EU concern. Brussels had attempted to persuade Algiers to lift the restrictions.
A Financial Squeeze and Growing Isolation
Efforts to mediate, led by former European Council President Charles Michel and former EU foreign policy chief Josep Borrell in 2022 and 2023, have so far failed to resolve the tensions. French companies have also reportedly faced retaliatory measures, particularly following President Emmanuel Macron's recognition of Morocco's sovereignty over the Sahara.
Beyond the geopolitical rift, Algeria is grappling with economic challenges. Since taking office in December 2019, President Abdelmadjid Tebboune has pushed for drastic import reductions, contributing to shortages of key consumer goods.
According to a July report from the Bank of Algeria, the country's foreign exchange reserves have dropped sharply, from $51.4 billion in December 2024 to $39 billion by the end of June 2025, a decline of over 20% in just six months.
Adding to the pressure, the EU recently placed Algeria on its blacklist of countries deemed high-risk for money laundering and terrorist financing, further souring already fragile relations between Brussels and Algiers.