A/S FELTMAN'S MEETING WITH ALGERIAN PRIME MINISTER

C O N F I D E N T I A L SECTION 01 OF 03 ALGIERS 000970

SIPDIS

COMMERCE FOR NATE MASON
STATE PASS USTR FOR BURKHEAD

E.O. 12958: DECL: 10/26/2019
TAGS: PREL PGOV ETRD ECON KWBG KPAL KISR IS IR AG
SUBJECT: A/S FELTMAN'S MEETING WITH ALGERIAN PRIME MINISTER
OUYAHIA

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Classified By: Ambassador David D. Pearce. Reason: 1.4 (b),(d).

Summary
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1. (C) In an October 21 meeting with NEA A/S Feltman, Prime
Minister Ouyahia was broadly receptive to the USG theme of
economic and security partnership in the region. He said
Algeria wants to adopt a market economy but needs time to
strengthen its industry to meet world competition. While
urging that U.S. firms invest in Algeria as a strategic
platform to sell to African and European markets, he defended
GOA measures tightening regulation of investment and trade as
a response to skyrocketing imports and illegal foreign
exchange practices. He supported resuming consultations with
the U.S. under our Trade and Investment Framework Agreement.
Ouyahia welcomed conclusion of a customs agreement and mutual
legal assistance treaty, but asked for time on Open Skies.
Ouyahia said Algeria would support measures on Western Sahara
proposed by UNSYG Personal Representative Chris Ross while
pursuing better relations with Morocco. In the Middle East,
Algeria would neither move to normalize relations with Israel
prior to a general settlement nor do anything to upset the
situation. He believed U.S. and Algerian aims in Africa were
largely congruent. End summary


2. (C) NEA A/S Jeffrey Feltman met with Algerian Prime
Minister Ahmed Ouyahia October 21 in the latter's office in
the Palace of Government. Ouyahia was accompanied by Foreign
Minister Mourad Medelci, MFA Americas Department Director
General Fatiha Bouamrane Selmane, MFA U.S. Desk Director Ali
Drouiche, and an MFA contract translator. Feltman was
accompanied by the Ambassador, Feltman staff aide Schwedt,
and Embassy Pol/Econ Chief (notetaker). A/S Feltman
explained that his visit was intended to build on our
bilateral relationship, currently focused on counterterrorism
and energy. We wanted to deepen our cooperation with Algeria
in the region: Algeria had a strong voice in Africa, the
Arab and Islamic worlds, and non-aligned fora. The Obama
administration placed a new emphasis on partnership and on
reviving efforts in international organizations. Terrorism
in the Sahel was a good example of a problem that could be
fought only in a multilateral effort. The PM said the U.S.
and Algeria had excellent ties since independence. During
the difficult 1990s, the U.S. had sometimes supported Algeria
and at other times shown "positive neutrality."

It's the Economy, Stupid
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3. (C) Ouyahia outlined his country's recent economic
history and his government's goal of diversifying the
economy beyond hydrocarbons, which now accounted for 95
percent of Algeria's exports and 40 percent of GDP. The
country had a young population for whom the government had to
build an economic future. That would require economic and
social stability that would survive the end of AlgeriaQ,s oil
and gas production forty years hence. Algeria's
post-independence Soviet economic model had worked for a
while, but Algeria then opened the economy in the late 1980s
only to lose time during the 10-year domestic conflict of the
1990s.


4. (C) Algeria had achieved political stability following
that conflict and now sought to create "legal" stability that
business needed Q) an area where he admitted Algeria had made
steps forward and backward. He defended recent measures to
regulate foreign transfers by the fact that foreign companies
had made "huge profits in a not entirely honest manner." A
Spanish company had repatriated USD 600 million without
informing Algerian authorities. The 51-percent Algerian
partnership requirement for foreign direct investment (FDI)
would leave the investor with majority control because the
Algerian share would be split among two or more entities.
Ouyahia said FDI should use Algerian credit, since the Bank
of Algeria was sitting on a huge amount of funds. He also
said the U.S. and Algeria should meet under our Trade and
Investment Framework Agreement (TIFA). We had not done so
since 2005. Algeria wanted more U.S. investment. He
believed that U.S. firms should use Algeria as a strategic
platform to supply Algerian, European, and African markets.


5. (C) A/S Feltman expressed appreciation for the recent GOA
decision to authorize Air Algerie to buy Boeing aircraft.
The U.S. and Algeria were close to concluding a customs
agreement and a Mutual Legal Assistance Treaty. When signed,
these agreements and the Boeing sale would give a good signal

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to U.S. businesses about Algeria. He urged the PM to follow
up on an Open Skies agreement.


6. (C) A/S Feltman observed that U.S. businesses had no doubt
about Algeria's political stability but did have
reservations about legal stability. The sudden imposition of
a 51-percent Algerian majority partnership requirement for
all foreign investment, and a letter of credit as the only
means to finance imports, were departures from international
investment and trade practices. We should revive the TIFA
Council to discuss bilateral trade and investment issues and
also discuss the state of Algeria's WTO accession efforts.



7. (C) Ouyahia conceded that some of the recently-adopted
economic measures were "brutal." (Note: he was referring to
parts of the July 2009 Complementary Finance Law and certain
earlier decrees. End note) The GOA adopted them in response
to the international financial crisis, a sudden rise in
AlgeriaQ,s imports, and "parasitic" practices in foreign
transfers. Algeria also needed time before it could finish
an Open Skies agreement with the U.S. The GOA would ask for
time to resolve certain WTO accession issues. It had already
taken some WTO problems "to the political level" with the EU
and China and one day would come "knocking at the door" of
the U.S. as well.


8. (C) Ouyahia declared that Algeria needed a market economy,
but it also needed time to adapt to competition. It sought
integration with the world economy, not a "tsunami" of
foreign products that would overrun domestic production. He
pledged that Algeria would negotiate frankly on WTO, with all
its cards on the table.

Regional Security
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9. (C) Prime Minister Ouyahia said that Algerian and U.S.
policies in Africa were consonant and aimed at stability,
ending conflicts, and promoting development. Following a
1999 African Union resolution not to recognize regimes that
came to power by force, Algeria had encouraged all sides in
Mauritania to return to the path of elections. Algeria had
helped Mali address its Tuareg problem. Algeria was using
its modest means to help Sahel countries develop including
through the "New Partnership for African's Development"
(NEPAD). Ouyahia said that Algeria contributed to regional
good governance efforts.


10. (C) A/S Feltman stated that U.S. and Algerian views on
Africa overlapped. We saw that Algeria enjoyed large
credibility in the region and should exert a certain regional
leadership role. We had noticed Algeria's constructive role
following the Mauritanian coup, in obtaining Ethiopia-Eritrea
agreement, and its role in Somalia and the AU. We wanted the
Bamako summit of trans-Saharan leaders to succeed.

Terrorism
--------------


11. (C) Ouyahia opined that jihad in Afghanistan in the 1980s
had helped lay the ground for terrorism in this region.
Algerians had gone to fight there, and those that returned
were the most "barbarian" of all Algeria's terrorists.
Algeria had ended its 1990s war with terrorism and
implemented a reconciliation program that, in 1999, had
induced 6,000 terrorists to lay down their arms. The
Salafist Group for Preaching and Combat (GSPC) had proclaimed
allegiance to al-QaQ,ida and had recruited a few Algerians to
fight in Iraq. Many had been indoctrinated in the Kabylie
region just outside Algiers.

Middle East
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12. (C) Ouyahia warned that failure to advance peace
negotiations in the Middle East will create desperation and
give birth to something worse than Hamas. The weakening of
Palestinian leadership through internecine conflicts was
worrisome. Ouyahia emphasized that the Palestinian issue was
deeply embedded in Algerian public opinion. Algeria would
not take steps to normalize with Israel prior to a resolution
of the conflict, but neither would it do anything to "disturb
anyone." A/S Feltman promised we would remain transparent in
our policies concerning Middle East Peace.


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Morocco-Western Sahara
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13. (C) Ouyahia expressed regret at the downward evolution of
Algeria's relations with Morocco following Morocco's
support for Algeria's liberation struggle and their
bilateral 1972 treaty of friendship. Algeria had taken the
Western Sahara issue to the UN immediately after it emerged.
Algeria's hard-and-fast position (he called it part of
Algeria's "religion" was self-determination and the
prohibition of change of borders by force. There must be a
referendum. Today, Algeria fully supported UNSYG Personal
Envoy Chris Ross. The Baker plan "five years of autonomy for
the Western Sahara, followed by a referendum" was a sound
idea, but Morocco had rejected it.


14. (C) A/S Feltman said the U.S. fully backed the UN-led
process. We did not presume to weight the eventual outcome
of this process one way or another, as evidenced in the USG's
explanation of vote in association with MINURSO's April 2009
renewal. He encouraged Ouyahia to look at the latest Ross
proposals, which are meant to create an atmosphere conducive
to progress. He also strongly encouraged Ouyahia to pursue
better relations with Morocco separately from the Western
Sahara issue. He stressed that we have made the same point
to Morocco concerning its relations with Algeria.


15. (C) Foreign Minister Medelci interjected that Algeria was
fully disposed to cooperate with Morocco. Algeria was open
to a Maghreb summit even if held in Rabat. Algeria kept
publicly silent on the ultimate solution for Western Sahara.
It had never called Morocco's actions an "occupation." Ross
would have Algeria's support, including for cross-berm
visits.


16. (U) A/S Feltman cleared this message.


17. (U) Tripoli minimize considered.

PEARCE