Western Sahara: unresolved claims and emerging risks

The protracted dispute over Western Sahara between Morocco and the Polisario Front comes with challenges for multinational corporations in North Africa. Despite international efforts, the conflict remains unresolved, with sporadic fighting and a stalled peace process, raising fears of renewed violence.

Recent developments have made matters worse. The United Nations Security Council (UNSC) extended the mandate of its peacekeeping mission in Western Sahara for another year, a move that stresses the ongoing concerns in the region. Algeria, a key supporter of the Polisario Front, abstained from voting (as did Russia and Mozambique) and protested the resolution’s exclusion of its human rights monitoring suggestion, signalling deepening regional tensions.

For business, these dynamics necessitate a careful assessment of both risks and opportunities. The region’s rich natural resources, including offshore oil and mineral deposits, offer investment potential. However, the legal ambiguities stemming from the territory’s disputed status, pose problems. Notably, the European Court of Justice has ruled that trade agreements between the EU and Morocco do not automatically apply to Western Sahara without explicit consent from the Sahrawi people, introducing legal uncertainties for companies looking to engage in trade.

Background of the conflict

After Spain’s withdrawal from the region in 1975, Morocco annexed Western Sahara, claiming it as part of its sovereign territory.

The Polisario Front, advocating for the self-determination of the Sahrawi people, declared independence and established the Sahrawi Arab Democratic Republic (SADR) in exile. Despite numerous UN-led peace initiatives, the conflict remains deadlocked, with periodic flare-ups of violence and instability.

Algeria has long supported the Polisario Front, hosting refugee camps and providing political and military backing. Morocco, in turn, views its control of Western Sahara as crucial for national unity and has been resolute in its refusal to relinquish the territory with support from the US and France.

In 2022, the Spanish government backed Morocco’s autonomy plan for Western Sahara, which proposes greater local autonomy under Moroccan sovereignty. This decision sparked controversy, particularly among pro-independence groups and human rights advocates.

Current situation

The territory is divided between Moroccan-administered regions, which constitute the majority of the land, and areas controlled by the Polisario Front. Morocco has solidified its control over the region, constructing the Moroccan Berm (a sand wall), which stretches across the desert to separate Moroccan-controlled areas from those held by the Polisario Front. The Berm has become a symbol of Morocco’s entrenched position, with military fortifications along its length, creating a highly militarized zone.

The 1991 ceasefire, which had held for nearly three decades, collapsed in 2020, triggering a clash between the two sides, resulting in renewed violence. On the international stage, significant diplomatic shifts have occurred. In 2020, the US recognised Morocco’s sovereignty over Western Sahara, a move that provoked mixed reactions globally. The decision not only highlighted the strategic interests of the US in the region but also alienated many who advocate for Sahrawi self-determination.

Simultaneously, legal rulings from the European Court of Justice have complicated Morocco’s trade agreements with the EU. Contrary to the US, the Court ruled that agreements between the EU and Morocco do not automatically apply to Western Sahara, requiring explicit consent from the Sahrawi people.

This decision introduced legal uncertainties for businesses engaged in trade or resource extraction, particularly as Morocco seeks to exploit the region’s natural resources.

Economic and political interests

Despite the instability, the ongoing disagreement has created a range of beneficiaries, both economically and politically.

Western Sahara has made its rich natural resources a key area of interest for various economic players, especially Morocco. The region is home to vast phosphate deposits, which have become a critical source for global fertiliser production. Morocco controls some of the largest phosphate reserves in the world, including one of the biggest mines, Bou Craa, located in Western Sahara. The country possesses nearly 70% of the planet’s known phosphorus reserves, making it a dominant player in this market. As a result, Morocco’s state-owned OCP Group – a leading player in mining and fertiliser production – has seen huge financial gains. In the first quarter of 2022, OCP reported a turnover of Euros 24 billion, an increase of 77% compared to the previous year – with announced plans to increase production by 50% over the next four years.

In addition to phosphate, Western Sahara is rich in fisheries, which are a vital source of income for Morocco and other external actors. The region’s waters are among the most productive globally, attracting fishing fleets from various countries. Morocco’s control over these fisheries provides it with an important economic advantage, further incentivising its position in the dispute.

The potential for offshore oil reserves also remains a point of international interest. While exploration in these waters is bound by the region’s disputed status, the possibility of untapped resources continues to draw attention.

Infrastructure companies operating in Western Sahara, particularly those involved in transportation, resource extraction and energy facilities, also stand to benefit from Morocco’s investment in infrastructure projects.

Despite historically limited engagement with Moscow and Beijing, Morocco may deepen ties with these global players following the European Court of Justice ruling.

While Russia and China officially align more closely with Algeria and have not endorsed Morocco’s 2007 autonomy plan, both have been steadily expanding their economic footprint in the region, particularly in sectors tied to local resources.

Russia recently extended a four-year fishing agreement with Rabat, solidifying its presence in Morocco’s coastal waters. Meanwhile, China is expected to strengthen its role in Morocco’s fishing industry, building on a 2023 memorandum of understanding. Beyond maritime investments, Beijing has also signalled interest in Morocco’s green hydrogen sector, having signed a co-operation agreement in 2023 with Gaia Energy Company and Saudi Arabia’s Ajnan Brothers to develop projects in the Sahara.

Donald Trump’s return to the US presidency could complicate Morocco’s relationship with China, given Washington’s increasing pressure on allies to curb economic ties with Beijing. However, Morocco is likely to maintain its pragmatic approach, prioritising partnerships that align with King Mohammed VI’s economic agenda – particularly in strategically vital sectors such as renewable energy.

The conflict also offers political leverage for various nations. For example, Morocco uses its claim over Western Sahara to consolidate national unity, particularly among domestic populations that view the territory as integral to the country’s sovereignty. Similarly, Algeria, a staunch supporter of the Polisario Front, uses the dispute to assert its influence in North Africa and bolster its regional power against Moroccan dominance. Both countries have also used the conflict as a platform to rally nationalistic sentiments, diverting attention from internal issues, including economic struggles or political unrest.

On a broader scale, global powers and neighbouring states may benefit by positioning themselves as mediators or exploiting the region’s instability to advance their own geopolitical objectives, either by securing favourable trade deals or gaining strategic alliances in the region.

The ongoing impasse, marked by periodic clashes and a lack of meaningful dialogue, is unsustainable for all parties involved. Morocco’s continued military presence and control over key resources like phosphate, fisheries and potential offshore oil provides economic leverage, but the unresolved political status of the region generates instability.

The European Court of Justice’s rulings exemplify the challenges companies face. Prolonged stalemate also risks gradual erosion of international diplomatic efforts, potentially isolating stakeholders and complicating negotiations.

A renewed conflict could lead to regional destabilisation, particularly impacting neighbouring countries like Algeria, given its support to the Polisario Front. The implications for global supply chains, especially for phosphate exports, could be severe, as Morocco controls a large portion of the global supply. Heightened military tensions could also disrupt vital infrastructure, including ports, energy facilities and transportation routes crucial for regional commerce.

Conclusion

Companies operating in or considering investment in Western Sahara must carefully assess legal risks, given that trade agreements between Morocco and the EU do not automatically apply to the region.

Reputational risks are also a concern, particularly for businesses involved in resource extraction. Operating in a contested region can attract negative publicity, especially from human rights groups advocating for Sahrawi self-determination.

Despite international influence to mediate a resolution, the region continues to experience issues, with no sign of ending anytime soon. A long-term resolution – whether through continued Moroccan administration, enhanced autonomy, or an UN-backed referendum – could have economic benefit. However, until a political settlement is agreed, businesses must tread carefully, reinforcing the need for due diligence.

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