Oiling an Alliance

For 20 months, France has been determinedly negotiating to get its hands on a rich and vital resource: the oil reserves in its former colony, Algeria. Locked in that country's Sahara Desert is 1% of the world's proven reserves--more than 3.6 billion barrels--and 79 trillion cubic feet of natural gas, about 10% of the world's known supply. Colonel Houari Boumedienne, Algeria's new strongman, has been as anxious to get French development help as Ahmed ben Bella before him, and last week in Paris the two governments buried their bitter memories of the Algerian war and reached a tentative agreement that is all but certain to be signed within a month. The deal gives France a big stake in Algerian oil, promises large-scale French aid in building up Algeria, severely pinches the U.S., British and even French private firms already drilling there.

Monopolizing the Desert. The two governments plan to form a "cooperative association"; that will monopolize future oil and gas exploitation. Foreign companies already in Algeria--including Royal Dutch Shell, British Petroleum and Jersey Standard--will be allowed to stay, but will have their taxes substantially increased. The tax changes alone are expected to swell Algeria's oil revenues from $72 million in 1964 to as much as $120 million in 1965.

France will also provide $400 million to finance a five-year Algerian industrialization program, and will supervise the building of petrochemical and steel complexes. The agreement calls for the establishment of a French-Algerian common market that would allow the countries to trade some goods duty-free, others at low tariff rates.

Strengthening Prestige. In exchange for its largesse, France will be assured of enough Algerian oil to satisfy growing French consumption (which doubled to 309 million barrels between 1959 and 1964) and thereby will attain Charles de Gaulle's goal of independence from the Anglo-American oil companies. By paying francs for oil from the only major source within the franc zone, France will also save $280 million a year in foreign exchange. Perhaps most important, the agreement is a long step toward returning Algeria politically--as well as financially--to France's sphere of influence. It also serves to strengthen French prestige throughout Africa and to frustrate the economic ambitions of Russia and Red China in left-leaning Algeria.

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