RUSSIA AND ALGERIA SEEK CLOSER ECONOMIC TIES,

C O N F I D E N T I A L MOSCOW 000705 SIPDIS SIPDIS E.O. 12958: DECL: 03/13/2018 TAGS: PGOV PREL ENRG ETRD MARR AG RS SUBJECT: RUSSIA AND ALGERIA SEEK CLOSER ECONOMIC TIES, DOWNPLAY MIG SNAFU Classified By: Political M/C Alice G. Wells for reasons 1.4 (b/d). ¶1. (C) Summary: President Bouteflika's February visit to Moscow focused on improving Russian-Algerian economic ties and not on Algerian complaints about the quality of MIG-29s purchased from Russia, according to Russian and Algerian diplomats. Neither side wanted the MIG issue to overshadow other elements of their relationship, and a confidential agreement that addressed Algerian concerns about the planes was reached. Putin and Bouteflika's meeting focused on bilateral economic matters, with little time spent on regional issues or the proposed "gas OPEC." Boutelfika was accompanied by Algerian Energy Minister Khelil, who discussed with his Russian counterparts expanding currently limited energy cooperation and possible construction of a nuclear power plant in Algeria. While Russia's historically strong political relations with Algeria may help its burgeoning economic ties, Moscow faces competition and cannot rest assured of landing Algerian contracts. End summary. MIGs Overshadow Presidential Visit -------------- ¶2. (C) MFA Middle East and North Africa Senior Counselor Leonid Barkovskiy told us on March 11 that Algerian President Bouteflika's February 19 meeting with Putin focused on enhancing economic ties and not military matters. The two sides reached an agreement that addressed Algerian complaints about the quality of MIG-29s purchased from Russia, the terms of which were confidential. Both the Russians and Algerians planned to quietly handle the MIG issue, so as not to overshadow the visit. However, the story leaked to the press, which speculated that the MIG issue was a sign of worsening Russia-Algeria relations. Barkovskiy said that, "to be frank," the reports were accurate regarding many details of the matter. (Note: Russian media reported that Algeria was unhappy with the technical quality of 15 MIG-29s delivered in 2006 and asked that Russia suspend deliveries of an additional 28 planes until a solution could be found. A spokesperson for the MIG manufacturer denied to the press that the solution included returning the planes. End note.) ¶3. (C) Barkovskiy admitted that the MFA did not know the whole story behind press reports that Algeria awarded a $300 million contract to modernize the Algiers train system to �A;Russian Railways in order to convince the GOR to take back the MIGs. He speculated that it was possible Bouteflika told the Algerian Transport Ministry to structure the tender in such a way as to be benefit the Russian bid, but denied that this was part of any deal regarding the MIGs. Energy Ties Limited, For Now -------------- ¶4. (C) Barkovskiy and Algerian Minister Counselor Sid-Ali Abdelbari told us separately that expanding currently limited energy ties was a focal point in Russian-Algerian relations. Bouteflika was accompanied to Moscow by Algerian Energy Minister Khelil, who met both Minister of Industry and Energy Khristenko and Rosatom Chief Kiriyenko, with whom he discussed possible construction of a nuclear power plant in Algeria. Barkovskiy offered that this discussion was a "surprise," considering that Algeria recently signed a nuclear cooperation agreement with France and the GOR considered Khelil more inclined to enhancing ties with the West than with Russia. Discussion of a proposed "gas OPEC" was limited, despite press reports to the contrary. ¶5. (C) Barkovskiy said that Khelil and Khristenko discussed renewing a 2006 MOU between Gazprom and Algerian state energy company Sonatrach to establish joint projects, which had been allowed to expire in 2007. Abdelbari explained that Algeria had not been satisfied with the level of Russian cooperation and determined not to renew the MOU in 2007, but added that Bouteflika's visit was intended to help overcome such problems. According to Abdelbari, Russian involvement in the Algerian energy sector is limited to Rosneft presently developing two oil fields and an existing pipeline that was constructed by Stroytransgaz. Lukoil recently opened an office in Algeria in order to look into potential projects in the country. Algeria Wants Close Economic Ties, Not Trouble Over MIGs -------------- -------------- ¶6. (C) Abdelbari told us that both Russia and Algeria sought to bring their limited economic ties to a level more in keeping with their close political relationship. He explained that although Moscow had allowed relations to atrophy in the 1990s, Russia was still "thought of fondly" by Algerians thanks to close ties with the USSR and the fact that the Russian Embassy remained open in Algiers throughout the worst of the country's recent civil war. Under Putin, Russia sought to reinvigorate ties with Algeria and President Bouteflika went to Moscow in 2001, followed by Putin's visit in 2006 that saw the cancellation of $4.7 billion in Algeria's USSR-era debt and the signing of a $8 billion arms deal. ¶7. (C) Abdelbari emphasized that since closer economic cooperation with Russia was an Algerian priority it was not in the GOA's interest to "stir up trouble" over the MIGs. He denied that the GOA was looking to drop Russia as an arms supplier, and told us that Algiers was satisfied with the Russian tanks and Sukhoi fighters that made up the rest of the 2006 arms deal. Finally, Abdelbari said that while Russia might be a close partner, Algeria would not have a "tete-a-tete" with one country and sought the best deals it could get from companies located elsewhere. Russian Railways might have won a contract, but larger rail contracts went to non-Russian companies. BURNS