Algeria Defense Market

With a budget of $9.45 billion for the current fiscal year, Algeria is Africa’s largest defense market and is the world’s sixth-largest arms importer.  Military modernization, terrorist threats from Libya, oil and gas field surveillance, and a quest for regional military superiority in the Sahel all drive Algeria’s demand for new defense systems. Despite the size of its market, however, Algeria’s defense trade with the U.S. is limited due to several factors. Most significantly, Russia enjoys preferential status as the result of a long-lasting competition with Algeria’s Western-supplied neighboring rival, Morocco. As a result, Russia has unrivaled access to Algeria’s defense market and supplies nearly 75 percent of its existing equipment. Industry analysts expect Russia to continue filling the lion share of Algerian demand, as it can provide Algeria on advantageous terms relating to energy access.

Despite Russia’s dominant trading position with Algeria, limited but noteworthy commercial opportunities exist for American defense systems companies in Algeria. Algerians look to U.S. suppliers mainly for military communications and electronics, as well as ground vehicles. In the future, there may also be opportunities for U.S. companies in the areas of military medical supplies and training, drones, and avionics. U.S. suppliers should note, however, that Algeria does not currently not participate in U.S. Foreign Military Sales (FMS) or Foreign Military Finance (FMF) programs. All defense sales in Algeria are made based on Direct Commercial Sales (DCS), which give the Algerian Ministry of Defense direct negotiating power and the option to purchase more mission-specific systems.

In addition to challenges posed by Russian competitors and a lack of FMS/FMF, U.S. suppliers should also know that the Government of Algeria’s discomfort with American export controls also limits sales in this market. Qualifying for an export license through DCS is based on how a product or service is categorized. The State Department’s Directorate of Defense Trade Controls (DDTC) issues licenses to all defense-related products and services on the U.S. Munitions List, under the International Traffic in Arms Regulations (ITAR). The Department of Commerce’s Bureau of Industry and Security (BIS) grants export licenses to “dual-use” defense products and services on the Commerce Control List (CCL) under the Export Administration Regulations (EAR). Because both types of licenses require end-use monitoring, which the Government of Algeria chooses to limit to the maximum extent possible, the total number of U.S. DCS transactions authorized per year is typically less than 30 per year.

U.S. defense suppliers interested in the Algerian market should contact the U.S. Commercial Service in Algeria for assistance, given the complex nature of the market. To bid on a tender, the Ministry of Defense must invite a company. To facilitate such an invitation, the U.S. Commercial Services advises U.S. companies to send a prequalification package to the Direction des Relations Extérieures et de la Coopération (DREC) at the Ministry of National Defense (MND) and the Defense Attaché at the Algerian Embassy in Washington D.C. The U.S. Commercial Service at the U.S. Embassy in Algiers can provide comprehensive support that includes introductions to the DREC and Defense Attaché.

For more information contact our office in Algiers, office.algiers@trade.gov.