Case 106 - The Algerian Gas Negotiations

Zartman, I. William and Antonella Bassani

In the late 1980s, Algeria undertook wide-ranging negotiations in an attempt to impose demands for a higher price base for its natural gas. Though competing Western European contracts looked commercially less attractive than contracts Algiers had already negotiated with the Soviet Union, Belgium, France, Italy, and Spain were all willing, for political reasons, to pay a higher price. U.S. purchasers refused to pay this political price premium, however. This case study’s analysis of this contract process offers insights into the relative bargaining power of the exporters of natural gas, and how this bargaining power depends on shifting economic conditions in the natural gas market. It also describes the tactics that a single-party demander can use against an array of opponents.