POTENTIAL NEXT GENERATION ALGERIAN LEADER COMMENTS

C O N F I D E N T I A L SECTION 01 OF 04 ALGIERS 002245

SIPDIS

E.O. 12958: DECL: 11/07/2025
TAGS: PREL PGOV EFIN MARR AG
SUBJECT: POTENTIAL NEXT GENERATION ALGERIAN LEADER COMMENTS
ON CLANS, THE MILITARY, AND POLITICAL DYNAMICS

Classified By: Ambassador Richard W. Erdman, reasons 1.4 (b) and (d)

SUMMARY AND COMMENT
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1. (C) Arslan Chikhaoui (strictly protect),a private
consultant in his late thirties or early forties, has close
ties to the Algerian military and intelligence communities,
the business world, and the political leadership. A strong
advocate of Algerian reform and modernization, Chikhaoui is a
thoughtful observer of the local scene, a long-time
participant in the prestigious Davos Conference, the nephew
by marriage of MOD Minister-Delegate Guenaizia, a former
communications adviser to former Armed Forces Chief of Staff
Lamari, and an informal adviser to both President Bouteflika
and Prime Minister Ouyahia. Chikhaoui, a UCLA Berkeley
graduate, believes he can contribute most to the reform
process at this stage from outside of government but expects
to assume a senior position, including even the prime
ministership, within the next 2-3 years. Over a one-on-one
lunch with Ambassador November 5, Chikhaoui shared his
thinking on: clans as the key to understanding the balance
of political forces in Algeria; pro-French "lobbies" imbedded
through Algerian bureaucracy; key military intelligence
figures as a force for reform; the role of the military in
revealing and prosecuting recent corruption cases; resistance
to bank reforms; interpersonal relationships and tensions
within the Algerian military; MOD Minister-Delegate
Guenaizia's support for U.S.-Algerian military cooperation;
and the potential dangers of not opening up the political
system in a way that permits real political debate, includes
the younger, post-Liberation war generation in
decision-making, and assures peaceful political change. (End
Summary and Comment)

CLANS ARE KEY TO UNDERSTANDING
BALANCE OF POLITICAL FORCES IN ALGERIA
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2. (C) Chikhaoui said there were about 15 major clans in
Algeria, the elements that made up the balance of forces in
Algerian society. The clans played an informal but important
role in shaping government decisions, implementing decisions,
and securing financial favors, jobs, party and government
positions, housing, and other perks. The important clans had
a heavy regional cast and most involved a mixture of
business, military, banking, civil society figures, and a
least one senior Sonatrach executive, in order to assure
access to Algeria's cash cow. Other clans involved
functional groupings centered around generals, political
personalities like former President Chadli and Zeroual, and
francophiles. The regional and functional clans overlapped
to some extent and their influence was sometimes
cross-cutting. For example, Military Intelligence Chief
Mediene and former Armed Forces Chief Nezzar were associated
with the same clan but the former supported Bouteflika and
the later despised him. In the reform process, it was the
second and third tier of these clans imbedded in government
bureaucracies that were often responsible for delaying or
blocking reform efforts being pushed by President Bouteflika.



3. (C) Among the fifteen clans there were two from the
Kabilye and an assortment of others from places like Souk
Ahras and Annaba, Batna, Tlemcen, and Tiaret. The clans from
Souk Ahras were very close and often collaborated, as did the
others when interests meshed. While the clans from the East
were spread out among various cities, the clan from "the
West" was fairly unified and included many close associates
of President Bouteflika. Asked for specific examples, he
said Minister Belkhadem was from the Tiaret clan, which was
traditionally linked to the zaouias in the region. He
commented that Belkhadem had never gotten involved in the
financial/business side of clan dealings. Belkheir, probably
the smartest individual in the leadership, came from the same
clan initially, though he now had cross-cutting interests,
remained close to former President Chadli, with whom he
worked closely in the 1980s, and of course had strong ties
throughout the military. Long-serving Education Minister
Benbouzid had kept his portfolio throughout numerous
government changes because he was part of the clan associated
with his brother-in-law, former President Zeroual. Chikhaoui
said his own uncle-in-law, MOD Minister-Delegate Guenaizia,
with whom he has relations both as a relative and a friend,
was part of a clan involving generals who participated in the
1967 Six Day war. This group included Nezzar, Betchine, and
Belkheir, though the later did not literally serve on the
front. He said that while he did not have "proof," there
was a good chance that his uncle was also linked to various
generals by virtue of his suspected management of their
financial interests during his fourteen years as Algeria's
ambassador in Bern, Switzerland.
PRO-FRENCH LOBBIES PERVASIVE
WITHIN ALGERIAN BUREAUCRACY
--------------


4. (C) Chikhaoui commented that pro-French lobbies are found
throughout the Algerian system, slowing what has been a
steady evolution out from under the French umbrella. In this
context, he said the recently announced $4 million MEPI
program to strengthen English teaching in Algeria via
training of teachers, upgrading English curricula, and
introducing new information technologies, was a particularly
important step that would send a strong signal to the public
about Algeria's priorities and direction. The pro-French
lobbies had different motivations. Some were financial, i.e.
kickbacks, payments, and favors for directing business toward
French firms. In the military, the lobby was formed of those
who had studied at elite French military academies like
Sancerre, though this was changing as more and more Algerian
officers concluded that France was a second-tier military
power and looked to the U.S. for training, equipment, and
technology.


5. (C) Many entrenched bureaucrats also had a clear
pro-French bias, shaped by habit, ideological attitudes, and
a desire to win favors such as visas for their friends and
family, Chikhaoui commented. These attitudes, he suggested,
sometimes blocked or delayed projects that could invite
increased U.S. presence or influence. The inability of Fox
News and the New York Times to get journalists accredited for
purposes of preparing programs or supplements on
investment/trade opportunities in Algeria could have been the
result of such hidden forces. The Ministries of Culture and
Communication (which have had responsibility for
accreditations and have often been joined in the same
ministry) were particularly notorious for the pro-French
lobbies imbedded in their ministries. He recalled his own
experience representing Business Week where he had
circumvented MinCulture/Communication stonewalling by working
directly with the Ministry of Commerce on a commercial
publicity project (similar to the New York Times supplement),
on grounds that it was not journalism, but marketing.

SOME KEY MILITARY LEADERS CONVINCED LACK
OF REFORM THE GREATEST THREAT TO STABILITY
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6. (C) Chikhaoui said the military intelligence leadership
was actually a progressive force in terms of fighting
corruption and encouraging economic reform. Because their
job was to coldly analyze the real threats to society and the
system, they understood, as others did not, that failure to
achieve visible and concrete progress in improving the living
standards of the average citizen, via increased economic
development and job creation, was the biggest threat to
Algerian stability. In their analysis, it was in the
military's interest to avoid a repeat of the situation in the
late 1980s and early 1990s, when instability was mounting,
the situation risked spinning out of control, and the
military was faced with the unpalatable choice of chaos or
intervention.


7. (C) To prevent such a situation from developing, senior
figures like Military Intelligence Chief Mediene wanted to
see action for reform and against corruption because they
were key to unblocking the situation, allowing more rapid
economic progress, job creation, and modernization of the
country. Chikhaoui said that an important factor enabling
some military circles to press for reform was the tacit deal
offered by the National Reconciliation Charter. While the
latter explicitly spared the military from prosecution for
security offenses, it also implicitly signaled, in
Chikhaoui's view, that in return for not blocking needed
reforms and opening up the system, the military's past
success in lining its own pockets through various schemes,
legal, semi-legal, and illegal, would not be challenged.

RECENT BANK SCANDAL REVELATIONS REPORTEDLY
PART OF MILITARY'S ANTI-CORRUPTION EFFORTS
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8. (C) Chikhaoui claimed that recent revelations concerning
the diversion of huge sums abroad by the Banque Nationale
d'Algerie were in fact prompted by Military Intelligence, and
were just the first of such revelations involving diversion
of state bank funds. (In a conversation 3-4 months ago,
Chikhaoui said that a financial/business scandal involving
Sonatrach employees had also been brought to light, and the
employees suspended and prosecuted, as a result of a private
memo Mediene wrote to President Bouteflika recommending such
action.) In the case of BNA, Chikhaoui said that military
intelligence had "convinced" a BNA secretary to rat on her
bosses and make photo copies of documents proving
malfeasance. The secretary had been rewarded and promised
full protection. Unsecured loans to well-connected political
and military officials and even to prominent private sector
individuals were also a source of corruption. In a country
that purchased over 80 percent of its needs from abroad,
over-invoicing and taking personal commissions on imports
were also common methods of distributing petroleum "rent,"
lining pockets, and transferring funds abroad.

GREATEST RESISTANCE TO BANKING REFORM
COMES FROM WITHIN THE STATE BANKS
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9. (C). Modernization and privatization of the banking system
would go a long way toward preventing or at least greatly
reducing this kind of illegal activity, Chikhaoui contended.
That was why some of the staunchest resistance to banking
reform came from inside the state banks, where there was a
culture of non-transparency and vested interests. In this
regard, he claimed, the Prime Minister's famous banking
directive (instructing state enterprises to use only state
banks) was actually drafted by the heads of three state
banks. The latter interpreted the President's much more
general instruction not to allow a repeat of the Khalifa
scandal -- where over $2 billion public monies were lost due
to inadequate regulatory supervision and Khalifa's collapse
-- to their own advantage by drafting a directive that
brought them the business of private banks. Chikhaoui noted
that the subsequent but delayed replacement of the state bank
directors involved in orchestrating this step backward had
sent a quiet but clear signal of the direction in which the
government wanted to move.

DIFFICULT PERSONAL RELATIONS
IN SENIOR MILITARY RANKS
--------------


10. (C) Chikhaoui said MOD Minister-Delegate Guenaizia and
MOD SYG Senhadji had very poor personal relations. Senhadji
had asked to retire several months ago but Bouteflika had
refused permission, leaving Senhadji in an awkward position,
with diminished authority and purely administrative work. He
said Senhadji would likely be going off before long to NATO
to represent Algeria, which was an honorable exit and an
orientation of growing importance for Algeria. According to
Chikhaoui, Guenaizia also couldn't stand Armed Forces Chief
Gaid-Salah and had told Bouteflika he "could not continue to
work this way" (i.e., with Gaid-Salah). While it had been
thought Gaid-Salah would retire in October, this has now been
pushed forward into the new year. In a previous
conversation, Chikhaoui said that generals from eastern clans
were responsible for pressing Bouteflika to create the new
position of Minister-Delegate for National Defense and to
name his uncle, an easterner, to the post. The reason was
that eastern military clans were upset that so many senior
positions -- including presidential Chief of Staff Belkheir,
the current and former Finance Ministers (Medelci and
Benachenhou),Privatization Minister Temmar, Energy Minister
Khelil, and MOD Secretary General Senhadji, among others --
were filled by "westerners."

GUENAIZIA SEES U.S.
AS STRATEGIC PARTNER
--------------


11. (C) Asked how Guenaizia felt about cooperation with the
U.S., Chikhaoui said in the early post-independence days his
uncle, like many others at the time, opposed what was seen as
American "imperialism" and wanted to keep distance. He had
significantly evolved since then, however, and his views had
been influenced by his 14 years in Switzerland, where he had
attended Davos conferences and gained a much better and more
realistic view of the world, modernization, and
globalization. During these years, he came to see France as
essentially a second-rate military power that, with all the
changes in the world and the end of the Cold War, no longer
had a viable economic model, a real military mission, or much
that was useful to teach Algeria. By contrast, and in the
context of converging interests with the U.S., he had come to
see the U.S. as an important strategic partner for Algeria.
Chikhaoui quoted him as saying that Algeria needed to frankly
recognize that "the U.S. does not need Algeria; it is Algeria
that needs the U.S." In a word, Guenaizia was very
supportive of current trends toward increased military
cooperation.

DESPITE OPTIMISM RE FUTURE, LACK
OF AUTHENTIC POLITICAL LIFE A WEAKNESS
--------------

12. (C) Chikhaoui overall voiced optimism about the future.
Prospects for Algerian economic growth and change were
especially good over time, and steps had been taken that
would make current trends difficult to reverse. Bouteflika
dominated the political scene and was using his authority to
press for reform, despite resistance from vested interest and
lower levels of the bureaucracy. Non-violent fundamentalism
was a problem, but was manageable in his view. Politically,
Algeria basically remained an oligarchy, with youth on the
sidelines, real power in the hands of older political and
military elites, a "democracy of clans" at best, and
political parties weak and not representing the real forces
in society in a way that allowed real debate, mediated
political pressures, and promoted peaceful change over time.
In Chikhaoui's view, the government was making a mistake by
not agreeing to give political groupings like Wafa formal
status as a recognized political party. By default,
therefore, the real dividing lines politically were not the
formal political parties but, more generally, "the
establishment" and its parties versus Islamic voices not
allowed a formal political voice. By not opening up the
system more quickly and providing expanding opportunities to
the younger generation, the government risked ceding ground
to Islamic elements that were skilled in appealing to the
young, cynical, and disenfranchised. Despite this
difference, the establishment and the Islamic forces
generally shared the same autocratic mindset, Chikhaoui
commented. Real change would only come when new blood from
the younger generation was brought into decision-making in a
meaningful way.




ERDMAN