CABINET RESHUFFLE BRINGS OUYAHIA BACK

S E C R E T SECTION 01 OF 04 ALGIERS 000728

SIPDIS

E.O. 12958: DECL: 06/24/2018
TAGS: PREL PGOV EAIR ECON AG
SUBJECT: CABINET RESHUFFLE BRINGS OUYAHIA BACK

REF: A. ALGIERS 509

B. ALGIERS 704

Classified By: Deputy Chief of Mission Thomas F. Daughton;
reasons 1.4 (b) and (d).


1. (C) SUMMARY: The AlgeriantopkQ/2QW]Qz&p_QQUQJune 23
a long-rumored cabinet reshuffle that catapulted Ahmed
Ouyahia back into the prime minister's chair for the third
time. Prime Minister Abdelaziz Belkhadem was downgraded to
minister of state without portfolio, a role unlikely to
represent a step forward in Belkhadem's political career.
The appointment of new ministers of transportation and
health, both cabinet stalwarts who tend to espouse old-school
socialist points of view, does not bode well for progress
towards an Open Skies agreement and the resolution of
intellectual property disputes in the pharmaceutical
industry. By contrast, the new telecommunications minister
brings an extensive technical and sector-specific resume to
the table, representing the most developed business
perspective in the cabinet to date. Other moves announced
included internal reshuffling at agriculture and finance, and
a modification of portfolios at the ministry of national
solidarity. The big winner in the minor reshuffle was
Ouyahia, whose longer-term prospects in the Algerian
leadership brightened considerably. END SUMMARY.

HE'S BA-ACK!
--------------


2. (C) Ahmed Ouyahia's star has been publicly rising again
for over two months (ref A),with a series of international
trips as Bouteflika's personal representative possibly
serving as his warm-up to move back into the prime minister's
chair. Ouyahia, the head of the coalition member National
Democratic Rally (RND),now begins his third mandate as prime
minister, having served in the role from 1994-1999 under
President Lamine Zeroual and again under Bouteflika from
2003-2006. Even after he was pushed aside in 2006 to make
way for Belkhadem, Ouyahia was "never really out of the
picture," in the words of journalist Rosa Mansouri of the
French-language daily Le Soir d'Algerie, given his strong
ties to the army leadership and security services. The
perception that Ouyahia was being rehabilitated has been
growing since early April as he represented Bouteflika
overseas at summit meetings and conferences in New Delhi, New
York and Ghana, among other places.


3. (C) Born in 1952, Ouyahia began his career as a diplomat,
specializing in African issues. He joined the MFA in 1978,
Ouyahia served in Cote d'Ivoire from 1981, moving on the
Algerian mission to the UN in New York in 1984. He became
Algeria's co-representative to the Security Council in 1988,
then returned to Algiers to serve as Director General of
African Affairs at the MFA. In 1992 he became Ambassador to
Mali, helping negotiate a peace agreement between the Malian
government and a Tuareg rebel group. Given the current
Algerian intent to reengage on the Algiers Accords (ref B),
the addition of Ouyahia's personal experience with the region
can only strengthen this engagement.


4. (C) Ouyahia's career became decidedly more political when
he was nominated as President Liamine Zeroual's chief of
staff in 1994, then serving in his first of two stints as
prime minister from 1994 to 1999. He became the head of the
RND party in 2000, serving as minister of justice during
Bouteflika's first term and passing the aggressive Penal Code
of 2001, which is considered tough on Islamist activities.
Bouteflika also tasked Ouyahia with working on the peace
negotiations between Ethiopia and Eritrea, and a deal was
signed in Algiers in December 2000. Ouyahia served a second
mandate as prime minister from 2003 to 2006, resigning over
political differences with Bouteflika's flagship National
Liberation Front (FLN) party.

OLD FACES, NEW SEATS
--------------


5. (C) Health Minister Amar Tou traded his post to become the
new minister of transportation. Former Minister of
Transportation Mohammed Maghlaoui is believed to be in
failing health and received no new assignment. Agriculture
Minister Said Barakat moved to replace Tou at Health.

ALGIERS 00000728 002 OF 004


Neither move represents a progressive step forward, as both
Tou and Barakat are old-time loyalists adept at towing the
party line. Some of our journalist contacts joke about Tou's
inability to communicate effectively, as he has often gotten
himself into trouble with the press. Tou himself prefers a
centralized, controlling management style, and had suppressed
the communication division at the health ministry, declaring
that he would handle communication himself. Tou has not been
receptive to meeting requests and program engagement
opportunities from the Embassy. While we believe that some
of his reticence towards us stemmed from the sensitivity of
the health sector as a whole, his move to the ministry of
transportation is unlikely to represent a step forward in our
relationship with that ministry, including our stalled
efforts to conclude an Open Skies agreement.


6. (C) Barakat, the new health minister, is a physician who
brings tangible medical experience to his new ministry. He
hails from Biskra and studied medicine at the University of
Algiers. Our contacts in the medical community have long
expressed their desire to have an actual doctor at the helm
of the health ministry. Barakat is known as a discreet
official and a centralized manager, with an anachronistic
socialist mentality reminscent of Tou's. One business
contact in the dairy industry told the Ambassador the story
of his encounter with Barakat, in which our contact offered
to import dairy cows to ease Algeria's milk crisis. The deal
fell through because Barakat insisted that the cows and part
of the milk produced would have to belong to the workers who
milk them. Barakat was also lampooned in the press during
Ramadan 2007 for the potato crisis, in which he had brokered
a deal for the importation of thousands of tons of potatoes,
most of which turned out to be rotten or of poor quality.

A RAY OF HOPE FOR TELECOMS?
--------------


7. (C) Algeria's rapidly growing telecom sector may benefit
the most from the cabinet reshuffle. Minister of Post and
Telecommunications Boudjemaa Haichour left his post and has
no new assignment. Haichour is a writer, poet and historian,
and did not bring significant industry experience to his
work. He bore the brunt of media criticism for the recent
scandal over Algerie Telecom's unpaid bills, when prominent
business leaders cast doubt on the accuracy of the billing
process. Following the scandal, Algerie Telecom slashed its
internet prices dramatically in an effort to improve
competitivity and its corporate image.


8. (C) Minister of Post and Telecommunications Hamid
Bessalah, new to the cabinet, is a telecommunications
professional who brings a wealth of industry expertise and
experience to the table. Bessalah was formerly director
general of the Development Center of Advanced Techniques, a
research and development center focusing on telecom
technology and robotics. In a recent meeting of the Council
of Ministers, contacts on a minister's staff told us that
Bouteflika expressed his dismay that internet penetration
stood at a mere eight percent in Algeria. Bessalah will have
internet development at the top of his agenda, along with the
privatization of part or all of Algerie Telecom, whose long
search for a "strategic partner" has been well documented in
the Algerian press. With his industry experience, Bessalah
may represent the most evolved business perspective of any
minister, which might prove useful in advancing reforms to
improve the investment climate.

NATIONAL SOLIDARITY ADDS NEW PORTFOLIO
--------------


9. (C) Minister of National Solidarity Djamel Ould Abbes
remains in his position, adding the Algerian community abroad
to his portfolio. Nouarra Saadia Djaffar will be Ould Abbes'
minister-delegate handling this new mandate. Ould Abbes was
born in Tlemcen, near the Moroccan border, and graduated from
Leipzig University in East Germany. A physician by trade, he
founded the Algerian medical union in 1971 and has been its
president since 1979. Elected to parliament in 1982, he
became minister of national solidarity in 2006.

INTERNAL MOVES AT AGRICULTURE AND FINANCE
--------------


ALGIERS 00000728 003 OF 004



10. (C) Rachid Benaissa, formerly a minister-delegate at the
agriculture ministry, was promoted on June 23 to be the new
agriculture minister. Born in the province of Bou Saada, he
has an extensive background in the agricultural sector and in
the ministry. He served as private secretary to the minister
from 1994-2000 and as Secretary General of the ministry from
2000-2002. Benaissa is a veterinarian by trade and has been
the minister-delegate of rural development since 2002.


11. (C) Minister-delegate for Financial Reform Fatiha
Mentouri has been relieved of her duties. Mentouri is a good
Embassy contact and had a reputation for being
forward-leaning and progressive on reform issues. A reliable
source at the Presidency told us that Mentouri's relationship
with Finance Minister Karim Djoudi has grown tense as Djoudi
felt threatened by Mentouri's rising star within the
ministry. Mentouri's removal has had a small but immediate
impact on Embassy business: we were to meet with her staff on
June 24 to discuss details and logistics of an upcoming
cooperation program involving Treasury's Office of Overseas
Technical Assistance (OTA) and the Small Business
Administration (SBA). Her chief of staff emailed us late
June 23 that said simply, "because of the ministerial
reshuffling, our meeting must be postponed." In a telephone
call on June 24, he said there was no indication of who might
replace Mentouri, and suggested that her position may simply
be eliminated with the portfolio folded back into the direct
oversight of the finance minister.

COMMENT: NOT JUST MUSICAL CHAIRS
--------------


12. (S) We can expect significant differences in our
relations with a government led by Ouyahia. His predecessor
Belkhadem is a strong Arab nationalist of the 1970s tint and
a conservative Islamist as well. (He recently told the press
that Shari'a is the constitution of Algerian society.) He is
rigid and has sought to crush dissent within his FLN party.
Belkhadem has been sharply critical of U.S. policy in Iraq
and confrontational on our bilateral relations on issues
ranging from Guantanamo to spurring democratic opening. It
is no secret in Algiers that the control-oriented Belkhadem
dislikes the Embassy's outreach to political parties, the
Algerian press and NGOs.


13. (S) Ouyahia also wants to dominate and control; he is a
calculating man of the system and is deliberate in measuring
how much change can advance. His RND party is managed with
tight and clean efficiency from the top down. That said, the
English-speaking former diplomat is more nuanced in his
approach on foreign policy issues like Iraq and the
Arab-Israeli dispute. Unlike Belkhadem (who used to hang out
with the Iranian ambassador before the Algerian government
closed the embassy in 1991),Ouyahia strongly distrusts the
Iranians. It is hard to imagine Ouyahia shifting Algerian
policy much on the Western Sahara, but he is more likely to
do so than the doctrinaire Belkhadem. And while Belkhadem
has no understanding of market economics, Ouyahia's inner
circle of advisors readily tell us in private that Algeria
has to move ahead on economic reform by taking steps, for
example, to join the WTO. Given the choice between Belkhadem
and Ouyahia, certainly almost all of the younger Algerian
business class who want faster economic change will
grudgingly prefer Ouyahia to Belkhadem as the lesser of two
evils (though neither one appears to enjoy widespread popular
support). That said, Ouyahia is no free-wheeling liberal
economist; he recently criticized foreign banks operating in
Algeria for not helping investment -- ignoring the billions
of dollars in loans to the energy sector from Citicorp, for
example. Ouyahia is also unlikely to dramatically open up
the political system to more genuine competition.


14. (S) Sensitive to any moves at the top, Algerians are now
asking the broader question of what the prime ministerial
change signals for the future. For over a year, rumors have
swirled about plans to amend the constitution to permit the
ailing Bouteflika to seek a third term, or possibly to extend
his existing mandate. The complete lack of movement on the
amendment -- first bruited by Bouteflika in 2005 -- has been
taken as a sign of a continuing struggle within the senior
leadership over who will succeed Bouteflika. Contacts who
themselves talk to officials close to Bouteflika agree that
the president would prefer for Belkhadem to succeed him.

ALGIERS 00000728 004 OF 004


Family is very important to Bouteflika, and Belkhadem has an
established modus vivendi with Bouteflika's brothers who are
enmeshed in various kinds of private business. The most
common refrain we have heard is that Belkhadem would leave
the Bouteflika family alone in return for the presidential
chair.


15. (S) Ouyahia, in contrast, has been widely thought to be
the preferred choice of the head of military intelligence,
LTG Toufik Mediene. Many of our contacts say Bouteflika
personally dislikes the younger and assertive Ouyahia.
Ouyahia's recent and rapid rehabilitation suggests that the
struggle over a successor has finally been resolved, with
General Mediene's candidate coming out on top. The print
media and our parliamentary contacts now speculate that a
constitutional amendment will be introduced and passed in the
next few weeks. If they're right, the form of the amendment
-- perhaps a simple extension of Bouteflika's term until 2011
-- will clarify Ouyahia's new standing, but for the moment
his longer-term future in the Algerian leadership is looking
considerably brighter.
FORD