'Severe turmoil’ looms for Africa’s number 2 oil producer

Pierre Andrieu | AFP | Getty Images

As Algeria gears up for its presidential election on April 17, there is growing anxiety about the political future of Africa's second-largest oil producer. It dodged most of the neighborhood troubles, but rare protests in recent weeks and an ailing incumbent president running for a fourth time have clouded the outlook.

"There is high potential risk of severe turmoil," Lahcen Achy, Senior Associate at the Carnegie Middle East Center, told CNBC.

"The vote is taking place in a different context, after the Arab uprisings, with a very angry youth population and a sick president who is competing again," he explained. "All these factors make this vote historical, and it might be a turning point".

The 77-year-old Abdulaziz Bouteflika, celebrated as a veteran of the Algerian War of independence from France, came to power in 1999. He has been largely absent from public life after suffering a stroke last year. "It cost me to remain deaf to your calls," he wrote in a long letter to the public on Saturday. "I decided not to disappoint you…and put all my energy into the realization of your wishes".

(Read more: Algeria attack 'wake-up' call for oil markets)

He is not the only candidate on the list, with five others competing (four having run in two previous presidential polls). Several political parties, including Algeria's largest Islamist group, say they will boycott the election. Although all forms of protests are banned in what is Africa's largest country, there have been smaller demonstrations in the run-up to the vote.

"Cross-party and military establishment support for a Bouteflika fourth term stems from their concerns that any change to the status quo could see Islamist parties come to the fore, or destabilizing protests emerge, as in neighboring Egypt and Tunisia," Anna Boyd, Manager, MENA at IHS Country Risk, pointed out.

The army is understood to wield enormous influence on political decisions, yet its generals have preferred to stay under the radar. Even if another candidate was endorsed the army, economists cite high youth unemployment and lack of economic diversification as a ticking time bomb.

Geopolitics push oil prices

Scholars have repeatedly argued that there is little appetite for events that could lead to violence or instability in the country. Memories are still fresh from the bloody civil war against Islamist factions that cost the lives of an estimated 100,000 people, and only ended in 2002.

Algeria slid into the spotlight again in January of 2013 when Islamist militants stormed a gas plant in In Amenas, killing at least 66 people including 37 foreign hostages.

International oil companies are present and account for a fifth of production, ranging from France's Total to Norway's Statoil.

(Read more: As security costs rise, oil firms stay put in Algeria)

OPEC member Algeria posted an average output of 1.15 million barrels per day in 2013, according to the International Energy Agency (IEA). The majority of oil exports are destined for the United States, and together with Europe take up 85 percent of volumes.

Disruptions to oil infrastructure could also happen through state-controlled unions shifting support away from Bouteflika.

"Algeria's military is highly capable of dispersing protests at oil production and export locations, in contrast to Libya which lacks any effective state armed force," Boyd added.

The government is heavily reliant on oil and gas revenues that generate over 60 percent of finances. For now, it still has the financial muscle to boost handouts as it did in response to mounting domestic pressures three years earlier.

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