Algeria’s SONATRACH crisis sparks $12B investment exodus—what it

Algeria’s state oil giant SONATRACH is bleeding capital at an alarming rate, with $12 billion in foreign investments pulled since 2025 as global energy firms flee a regulatory crackdown and currency devaluation. The exodus—accelerated by President Abdelmadjid Tebboune’s push to renegotiate contracts and impose stricter profit-sharing terms—has sent shockwaves through Algeria’s already fragile business ecosystem. For entrepreneurs, the fallout is clear: higher costs, tighter credit, and a shrinking pool of foreign partners just as the economy grapples with a 20% drop in hydrocarbon revenues this year.

Why SONATRACH’s meltdown is a ticking time bomb for Algerian businesses

Foreign firms are walking away. In June, Reuters reported that Shell suspended a $3 billion LNG project in Skikda after SONATRACH demanded 51% ownership—up from the original 49%—citing “national sovereignty” concerns. Similar demands have scuttled deals with Italian energy firm Eni and Norwegian firm Equinor, which pulled out of a $1.8 billion offshore gas field in 2025. The message to foreign investors is simple: Algeria’s terms are no longer negotiable.

Local SMEs are caught in the crossfire. With $8 billion in delayed payments from SONATRACH to suppliers—including Algerian subcontractors and equipment manufacturers—companies like Sonatrach’s preferred vendor, the Algerian Industrial Group (GPA), are defaulting on loans. APS reports that three major Algerian steel producers have filed for bankruptcy after SONATRACH halted payments for critical infrastructure projects.

The currency war: How the dinar’s collapse is strangling imports

Example: The Algerian textile industry, which employs 200,000 workers, saw cotton import costs rise by 30% after the dinar’s devaluation. Local mills in Annaba and Constantine are now cutting production by 25% as margins shrink. CAC president Kamel Rezzoug warned this week that “without urgent intervention, we’ll see mass layoffs by year-end.”

Foreign currency controls are back—and they’re brutal. Since May, the Bank of Algeria (BA) has tightened exchange rules, forcing businesses to prove “economic necessity” before accessing hard currency. A French-Algerian importer of medical equipment told Jeune Afrique that his $2 million order of ventilators was blocked for six weeks while BA audited his company’s finances.

The diaspora’s dilemma: Should they invest—or flee?

The real question: Can Algeria’s $1.5 trillion sovereign wealth fund (FRNS)—meant to diversify the economy—act as a lifeline? Not yet. FRNS chief Azzedine Mihoubi admitted in July that only 8% of the fund’s assets are invested in local SMEs, with the rest tied up in low-yield government bonds and foreign real estate. “We’re not a bank,” Mihoubi said. “We’re not here to bail out failing businesses.”

Key takeaway for entrepreneurs
Algeria’s economic crisis is not temporary—it’s structural. SONATRACH’s collapse is dragging down suppliers, the dinar’s fall is choking imports, and foreign investors are fleeing. For business owners, the survival strategy is clear: diversify away from state-dependent sectors, secure foreign currency early, and lobby for clearer contract terms before entering joint ventures. The window for foreign investment is closing—and the next government may be even less flexible than Tebboune’s.