MOROCCO AND ALGERIA'S QUIET ECONOMIC RAPPROCHEMENT

C O N F I D E N T I A L SECTION 01 OF 02 CASABLANCA 000207 SIPDIS FOR STATE NEA/MAG E.O. 12958: DECL: 11/03/2018 TAGS: AG ECIN ECON ENRG MO PGOV PREL SUBJECT: MOROCCO AND ALGERIA'S QUIET ECONOMIC RAPPROCHEMENT Classified By: CG Elisabeth Millard for reasons 1.4 (b),(d). -------------- Summary -------------- ¶1. (C) Despite their closed land border, the Moroccan and Algerian economies have become increasingly interconnected in sectors ranging from energy to banking. Revenues for General Electric (GE) Morocco total 250 million USD per year in Algeria; the CEO of the National Office of Phosphates (OCP) and high-level Algerian officials have held a series of low-profile meetings to explore opportunities for cooperation in the fertilizer field; and the largest Moroccan bank, Attijariwafa, is close to finalizing a contract that would permit it to operate in Algeria. Moroccan business leaders stress, however, that the longstanding political tensions between Morocco and Algeria must be resolved before further progress towards regional economic integration can be made. End Summary. -------------- Formal and Informal Integration -------------- ¶2. (SBU) In the energy sector, collaboration between Algeria and Morocco occurs on both the formal and informal level. For example, GE Morocco provides close to 70% of Algeria,s power plants and a large number of water facilities with turbines and compressing pumps, while providing electrical parts for the Algerian airline fleet. GE Morocco CEO Kamal Kassis recently told econoff that its revenues in Algeria total 250 million USD per year, explaining that business in Algeria has grown exponentially in the last three years. He further noted that GE Morocco had in the last year equipped two new power plant facilities in Algeria. ¶3. (SBU) Moreover, the CEO of a large electrical supplies company, Abdelmalik Kettani, tells us that he distributes a surprising amount of products to a client in Oujda, a Moroccan town that borders Algeria, and is convinced that the products are being transported into Algeria illegally. According to Kettani, a fair number of his business colleagues also have an unusually high demand for shipments to border towns. ¶4. (C) A senior official at the Moroccan National Office of Electricity, Adnane Belachin, described to us the economic relationship between Algeria and Morocco in his field as a flourishing one. He highlighted the Electricity Rescue Plan established between Algeria and Morocco, which stipulates that if the Algerian electrical output ceases, Moroccans will temporarily provide electricity and vice versa. Belachin also flagged a Moroccan-led renewable energy project with Algeria in Oujda, which he believes is a model for collaborative projects between the two countries in the future. -------------- Quiet Rapprochement -------------- ¶5. (C) Collaboration in the phosphate sector has occurred through a series of technical meetings held between Morocco,s state owned National Office for Phosphate (OCP) and high-level Algerian officials. On October 9, the CEO of OCP, Mustapha Terrab (please protect throughout) told us and visiting EEB Desk Officer that such cooperation poses no difficulties, provided it does not assume a public profile. ¶6. (C) Terrab is a strong advocate of regional economic integration between the two largest Maghreb economies, pointing out the strong benefits this would offer OCP. He noted that Morocco holds about three-fourths of the world,s phosphate reserves and is the world,s biggest phosphate exporter. As the price of oil increased globally in recent months, exporting raw phosphates has become expensive and global demand for fertilizer, a highly desirable final product of phosphate, has shot up. However, to produce this product, OCP needs large quantities of ammonium ) a by product of gas. Algeria,s proximity and huge gas production make it an ideal trading partner. (Note: Morocco currently imports ammonium from Russia.) According to Terrab, with Algeria as a partner, Morocco could become the world leader CASABLANCA 00000207 002 OF 002 in the production of inexpensive fertilizer. ¶7. (C) During the past year, Terrab has met with high-level officials from the Algerian government on this issue in a series of quiet meetings, which - at the demand of the Algerian authorities - were held at a secluded beach in Algeria. During those meetings, Terrab proposed to build an OCP ammonium extraction plant in Algeria, which would have an Algerian proprietor so as to conceal its Moroccan connections. Although he received positive feedback, the Algerians concluded that such a project must wait for improvement in political relations between the two countries. ¶8. (C) Nonetheless, Terrab said that there have been four technical exchanges in the past year to explore the feasibility of pursing cooperation in the fertilizer sector. The technical teams have traveled from Algeria to Morocco with reciprocal visits from the OCP team to Algeria. Such technical cooperation is not a problem, he said, as long as it stays below the political and media radar screen. -------------- Almost There -------------- ¶9. (SBU) The banking sector is on the verge of becoming another area of integration. The CEO of Attijariwafa Bank, Mohammed El Kattani, told the Consul General in Casablanca in a recent meeting that the bank has taken concrete steps to open branches in Algeria. Kattani added that the banks are a pivotal component to any Maghreb integration. He has said, &When the banks of a certain country go to another country, the industrial and service companies of that country will follow them.8 He further opined, &We have to overcome the political obstacles and take advantage of all holes in order to make progress towards desired integration8. -------------- Stumbling Blocks -------------- ¶10. (C) Despite these positive developments, Moroccan business leaders stress that only political rapprochement between the two countries will permit further progress and realization of the potential synergies integration could provide. Terrab in particular has been a staunch public advocate for a rapprochement with Algiers, and has directed OCP to finance studies highlighting the economic benefits of such integration. He conceded that the moment has not yet arrived for progress on the dossier, but argued that renewal of past U.S. efforts, as in the decade-old Eizenstat Initiative for U.S.-North African economic partnership, might offer an avenue for progress. Noting Morocco,s openness to such an evolution, he suggested that any such effort focus in the first instance on Algeria, and permit it to take the lead. Otherwise, as a &Moroccan initiative,8 akin to the King,s recent overture in his Throne Day speech, it might well fall on deaf ears. -------------- Comment -------------- ¶11. (SBU) The Peterson Institute study financed by OCP (among others) demonstrates the potential synergies that economic integration in the Maghreb would permit. Political constraints cloud the short term picture, but clearly efforts on a technical and practical level to advance day-to-day contacts should continue. End Comment. MILLARD