Sonatrach’s shadow war: How Yemen’s strikes test Algeria’s oil

Saudi Arabia’s 40 airstrikes across four Yemeni provinces on Thursday mark the latest escalation in a conflict that quietly threatens Algeria’s energy security—and the fortunes of its entrepreneurs. The strikes, reported by the Houthi-run Saba news agency, targeted Al-Hudaydah, Al-Jawf, Marib, and Taiz, areas critical to global oil transit. For Algeria, where Sonatrach dominates the economy, the escalation raises hard questions: How vulnerable are its Red Sea supply routes? What risks do new sanctions or insurance hikes pose to its oil exports? And how will the diaspora’s businesses—from logistics to trade—adjust to a region growing more unstable?

The strikes were concentrated in key districts. In Al-Hudaydah, nine strikes hit Al-Salif, Al-Tuhayta, and Kamaran Island. Al-Jawf saw 10 strikes in Al-Hazm and Al-Ghayl, while Marib’s Al-Jubah district faced three. Taiz province absorbed the heaviest barrage, with 18 strikes across Mawza, Maqbanah, and Mocha Junction. The report did not confirm casualties or damage, but the scale of the operation signals a deliberate push to disrupt Houthi control. Yemen’s conflict, now in its twelfth year, has left its ports and infrastructure in ruins. For Algeria, the instability threatens the Red Sea’s role as a critical transit route for its oil exports.

Sonatrach’s hedging strategy under pressure

Algeria’s oil exports rely heavily on the Red Sea corridor, particularly for tankers bound for Asia and Europe. The conflict in Yemen forces Sonatrach to recalculate risks. The Houthis’ control of Al-Hudaydah, a major port, has already disrupted shipping lanes. Now, Saudi airstrikes risk further escalation, potentially drawing in regional powers or triggering Houthi retaliation. If the conflict spreads, insurance costs for tankers could surge. Some underwriters may refuse coverage altogether, forcing reroutes around the Cape of Good Hope—a detour that adds weeks to voyages and millions in fuel costs.

Sonatrach’s state-backed resilience won’t shield private players. The company’s ability to absorb shocks through hedging and diplomatic channels is limited when global markets react. Smaller Algerian firms tied to oil logistics—such as those handling storage, loading, or transit—face direct exposure. A single insurance hike or delayed shipment can cripple their margins. The diaspora’s import-export networks, which rely on Gulf trade hubs, are also in the crossfire. Stricter security checks at Saudi ports or Houthi-controlled chokepoints could delay shipments of goods ranging from electronics to construction materials.

Diaspora businesses caught in crossfire

Algerian entrepreneurs abroad, particularly those in the Gulf, are already feeling the pinch. Many operate in trade, logistics, or construction—sectors deeply entwined with Yemen’s instability. The Houthis’ frequent attacks on commercial shipping, including their recent claim of striking a Saudi oil tanker, signal a willingness to target economic lifelines. For Algerian firms, this means higher insurance premiums, longer lead times, and the risk of goods being held up in conflict zones.

The diaspora’s businesses are also vulnerable to secondary sanctions. If the U.S. or EU tightens restrictions on Houthi-linked entities, Algerian companies with indirect ties—such as those using Saudi or Emirati intermediaries—could face scrutiny. Banks may freeze transactions, and letters of credit could be denied. Even firms not directly involved in Yemen’s conflict may struggle to access financing for Gulf-bound shipments. The ripple effect extends to Algeria’s domestic market, where imported goods become more expensive or scarce.

Insurance costs climb, deals vanish

The most immediate threat to Algerian oil trade is the insurance market. Reinsurers are already pulling back from high-risk routes near Yemen. A single incident—a Houthi missile strike on a tanker, for example—could trigger a domino effect. Premiums for Red Sea transit could double or triple, making some shipments unprofitable. Sonatrach may absorb the cost for its own tankers, but private operators have no such safety net.

For Algerian entrepreneurs, the consequences are clear: fewer deals, higher costs, and tighter margins. A logistics firm in Dubai that once moved containers through Al-Hudaydah may now face a 30% increase in shipping fees. An import-export business in Oran relying on Saudi ports could see orders canceled if insurers refuse coverage. The uncertainty is pushing some firms to diversify routes, but alternative paths—like the Suez Canal’s southern approach—are no safer. Pirates and militant groups operate in those waters too.

Sonatrach’s silent diplomacy at stake

Behind the scenes, Sonatrach is engaged in quiet diplomacy to protect its interests. The company has long maintained ties with Gulf states, including Saudi Arabia, to secure stable oil routes. But the latest strikes test those relationships. If Riyadh escalates further, Algeria may find itself caught between its historical alliances and the need to safeguard its energy exports. Sonatrach’s leverage is limited—it cannot single-handedly de-escalate the conflict, nor can it guarantee the safety of private-sector shipments.

The company’s ability to hedge risks depends on global market reactions. If oil prices spike due to supply fears, Sonatrach could benefit from higher revenues. But the private sector will not share in those gains. Smaller firms, already struggling with currency devaluations and bureaucracy, will bear the brunt of disruptions. The diaspora’s networks, which rely on informal trade channels, are particularly exposed. Without state protection, they must navigate a landscape where insurance is scarce and routes are unpredictable.

Opportunities in chaos? Not for most

Some may see Yemen’s conflict as a chance for Algerian firms to pivot—perhaps by investing in alternative energy or diversifying trade routes. But the reality is far bleaker. The chaos in Yemen is not an opportunity; it is a cost center. The risks of doing business in or near the conflict zone outweigh any potential rewards. Even if Sonatrach secures short-term stability through diplomacy, the long-term damage to supply chains will linger. Insurance markets will remain skittish, and shipping costs will stay elevated for years.

For most Algerian entrepreneurs, the only viable strategy is risk mitigation. That means diversifying suppliers, securing backup insurance, and avoiding over-reliance on Gulf trade hubs. Firms tied to oil, shipping, or Gulf commerce must accept that higher costs and delayed deliveries are the new normal. The diaspora’s import-export networks should prepare for stricter security protocols, longer transit times, and the possibility of lost shipments. The state’s resilience will not trickle down to private players.

Key takeaway for entrepreneurs
Algerian businesses linked to oil, shipping, or Gulf trade must brace for higher costs and delayed deliveries. Sonatrach’s state-backed resilience won’t shield private players—insurance hikes and route disruptions will erode margins. The diaspora’s import-export firms should prepare for stricter security checks and potential supply chain breaks, especially for goods moving through Yemen or Saudi ports. The conflict’s fallout will be felt long after the last airstrike.

Sources

• middleeastmonitor.com