Identifier
Created
Classification
Origin
10ALGIERS123
2010-02-11 16:11:00
CONFIDENTIAL
Embassy Algiers
Cable title:  

CHINA'S IMPACT AND RISKS IN ALGERIA

Tags:  PREL PGOV PTER ASEC ELAB ECON ETRD CH AG 
pdf how-to read a cable
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C O N F I D E N T I A L ALGIERS 000123 

SIPDIS

DEPT FOR AF/RSA LMAZEL, NEA/RA, NEA/MAG

E.O. 12958: DECL: 02/11/2020
TAGS: PREL PGOV PTER ASEC ELAB ECON ETRD CH AG
SUBJECT: CHINA'S IMPACT AND RISKS IN ALGERIA

REF: STATE 10152

Classified By: Ambassador David D. Pearce; reasons 1.4 (b) and (d).

C O N F I D E N T I A L ALGIERS 000123

SIPDIS

DEPT FOR AF/RSA LMAZEL, NEA/RA, NEA/MAG

E.O. 12958: DECL: 02/11/2020
TAGS: PREL PGOV PTER ASEC ELAB ECON ETRD CH AG
SUBJECT: CHINA'S IMPACT AND RISKS IN ALGERIA

REF: STATE 10152

Classified By: Ambassador David D. Pearce; reasons 1.4 (b) and (d).


1. (C) SUMMARY: China's footprint in Algeria is primarily
commercial and focused on construction contracts for major
infrastructure projects. China provides no development or
other forms of assistance. There are more than 40,000
Chinese nationals living in Algeria. Chinese firms have a
stake in billions of dollars worth of infrastructure
projects, as well as small but growing interests in the
hydrocarbons sector. This has raised the profile of the
Chinese community in Algeria and exposed it to terrorist
threats and social friction. Publicly, Algerian officials
praise their cooperation with China, but a leading Algerian
diplomat privately voiced concern to USG officials that China
views Africa primarily as an export market for Chinese goods
and as a source for raw materials. There is no significant
U.S.-China collaboration in Algeria, and Embassy sees no
potential areas for such cooperation beyond informal
exchanges of views, primarily on security. END SUMMARY.

China's Commercial Footprint in Algeria
--------------


2. (U) China's engagement with Algeria is primarily
commercial and focused on securing contracts for Chinese
firms for Algeria's increasingly large and numerous
infrastructure projects. Chinese commercial ties with
Algeria have expanded steadily since 2001. An influx of
Chinese workers began in 2004 as part of a partnership
agreement between the two governments for China to provide
labor for large infrastructure projects carried out by
Chinese firms. Local press accounts indicate that China has
received approximately USD 15 billion in construction
contracts since 2000.


3. (U) Chinese companies have the reputation of submitting
very low bids (made possible because of inexpensive imported
Chinese labor) and of completing projects on time. Chinese

firms supply the majority of workers for Algeria's massive
East-West highway project, a USD 11.4-billion dollar contract
awarded jointly in October 2006 to the China International
Trust and Investment Company (CICTC),the China Railway
Construction Company (CRCC) and the Japanese contractor
Cojaal. The China Civil Engineering and Construction
Corporation (CCEC) has three contracts valued at USD 2.1
billion to build rail networks in western Algeria. Chinese
crews are also building a 750-kilometer water pipeline from
In Salah to Tamanrasset, a USD 2-billion dollar project
slated for completion in 2010. In 2009, China was the
largest exhibitor at Algeria's 42nd annual Trade Fair with
141 firms represented, marking the first time France did not
provide the most exhibitors. China's strong showing fueled
editorials in the local press claiming that China was the
dominant force in Algeria's economy as other foreign
investors were withdrawing over concerns about restrictive
investment rules introduced last July. In August 2009,
Arabic-language daily "El Khabar" estimated that 567
Chinese-owned companies now operate in Algeria, including 220
import/export firms.

Investment Still Modest
--------------


4. (U) Chinese investment in Algeria, by contrast, amounts to
a modest USD 850 million, mostly in the hydrocarbon sector.
The China National Petroleum Corporation (CNPC) has invested
USD 350 million in contracts dating from July 2005, including
a stake in the natural gas condensate refinery in Skikda. In
October 2009, Sinopec was among four bidders considered for
designing a new oil refinery in Tiaret. In December 2009, a
consortium that includes the China National Offshore Oil
Corporation (CNOCC) won a bid to develop the Hassi Bir Rekaiz
field located in the Berkine basin. Production potential is
estimated at 130 million cubic meters of oil. Meanwhile,
Sinopec also has a USD 500-million investment in the
Zazaitine oil field in Algeria's deep south.

Some Growing Pains
--------------


5. (C) China's commercial activities in Algeria have raised
the profile of the Chinese community at large. Visiting
Chinese MFA officials told us in August 2009 that more than
40,000 Chinese nationals reside in Algeria, mostly temporary
laborers. We hear anecdotally there are Chinese shop owners
in Algiers, some of whom have learned Arabic in order to
speak with their customers. Algerian officials privately
state similar figures. In December 2009, Labor Minister
Tayeb Louh said Chinese workers accounted for 45 percent of
all foreigners working in Algeria. There have also been
complaints from labor unions that Chinese projects employ far
more imported Chinese workers than Algerians. However, there
have also been complaints of unfair labor practices against
Algerians that Chinese companies do employ.

Security Threats
--------------


6. (C) Chinese workers have been exposed to acts of violence
arising from the threat of terrorism in Algeria. Chinese
workers were caught in a June 2009 ambush 100 miles southeast
of Algiers by al-Qa'ida in the Islamic Maghreb (AQIM) that
killed 24 gendarmes and at least one civilian as they
escorted the workers to a job site. RSO sources told us that
approximately 40 Chinese workers were treated in a nearby
hospital for burns sustained during the attack. Shortly
after the ambush, press reports speculated that AQIM might
target Chinese interests in Algeria in response to China's
July 2009 crackdown on the Uighur Muslim community in
Xinjiang province. However, Embassy believes that the
attacks on convoys of Chinese workers occurred because their
movements were predictable and always accompanied by security
forces, which are the main target of AQIM.


7. (U) A somewhat negative profile of China has risen among
the Algerian public as well. Two Islamist parties, the
Movement for Society and Peace (MSP - part of the governing
coalition) and Ennahda, last year sent delegations to the
Chinese embassy to voice their concern over the treatment of
the Muslim Uighur community in China. This was followed by
Algeria's Higher Islamic Council publicly denouncing the 2009
crackdown. These political moves provoked little reaction
from the Algerian public, but tensions between Algerians and
Chinese escalated several weeks later after a string of
clashes between the two communities in the Algiers
neighborhood of Chenaoua, which translates to "Chinese
people" in Algerian dialect.


8. (C) Following the June 17 AQIM attack, a delegation from
China's Ministry of Foreign Affairs arrived in Algiers in
late July 2009 to discuss the security threat for Chinese
nationals in Algeria and, we believe, to smooth over social
tensions that flared up in Algiers. Algerian and Chinese
officials gave little comment on the substance of these
meetings, using public statements to underscore the
cooperative nature of Algerian-Chinese relations and China's
"confidence" in the Algerian government's response to
security matters. During an August 10, 2009, meeting at the
Embassy, Chinese officials asserted that AQIM has not
directly targeted Chinese interests in North Africa, but
there was rising concern about collateral damage and the risk
to China's growing commercial presence.

Algeria's Perspective on China in Africa
--------------


9. (U) China and Algeria regularly exchange diplomatic
visits. Most recently, Chinese Foreign Minister Yiang Jiechi
was in Algiers January 10 - 11, 2010 to conclude an economic
cooperation agreement and a judicial assistance agreement,
according to press reports.


10. (C) Algerian Minister of State for African and Maghreb
affairs Abdelkader Messahel commented on China's unique
relationship with Africa during a briefing for a visiting
Capstone delegation in August 2009. Messahel explained that
China's history with Africa was generally positive. China
has no colonial past in Africa and assisted many African
nations during their liberation movements, he said. China,
he continued, also offered African partners access to vast
resources and has agreed to finance many cultural and social
development projects. Furthermore, Messahel stressed, China
approached its cooperation with African nations without
political preconditions. They do not interfere in internal
matters, he said.


11. (C) However, Messahel indicated that Africans recently
have realized that there may be limits to their openness with
China, and that unfettered commercial access could strain
cooperation. China, he said, viewed Africa primarily as a
market for Chinese goods and a source for raw materials.
African countries, including Algeria, want more
industrialization and knowledge transfer to accompany foreign
investment activities. With this goal in mind, Messahel
stated, Algeria needed to consider carefully the value-added
of all its foreign partners, including China. Embassy notes,
however, that Algeria has taken the same line with foreign
investment in general.

Potential for U.S.-China Collaboration
--------------


12. (C) China's overwhelmingly commercial approach to
Algeria, which puts it in competition with U.S. firms, leaves
little area for the U.S. and China to coordinate action here.
China provided some development assistance to Algeria
decades ago -- mainly health sector assistance following
Algerian independence. A primarily political relationship
dominated by Non-Aligned Movement solidarity long since gave
way to a relationship based on China's interest in commercial
contracts. Algeria's energy exports to China are a small
fraction of the amounts sent to Europe and the United States.
Chinese investment remains low compared to U.S. and European
investment. U.S.-China collaboration in Algeria has been
limited to informal sharing of views on security matters.
For now, Embassy sees opportunities for collaboration as
limited to informal exchanges, primarily on security.
Competition between U.S. and Chinese firms will continue to
dominate the U.S.-China relationship toward Algeria.

Comment
--------------


13. (C) Algerian government and society regard China's
presence with ambivalence. On the one hand, the government
has hitched the success of many high profile infrastructure
projects to Chinese firms that offer low cost contracts and a
supply of experienced and low-cost labor willing to work
around the clock to meet completion deadlines other
contractors are unable to promise. Although some Algerian
business contacts complain that corruption and poor
craftsmanship often go hand in hand with China's business
approach, Algerian authorities would be hard pressed to limit
the inflow of Chinese workers for fear of driving up costs
and causing delays on key government projects. Ordinary
Algerians appreciate low-cost products but resent Chinese
influence over their economy and the competition for scarce
jobs posed by cheaper Chinese laborers. Algerian sociologist
Nacer Djabi told an Embassy LES that Algerians admire the
work ethic and expertise Chinese workers demonstrate, but are
suspicious of the Chinese community's reclusiveness, leading
him to conclude that, "In the end, it's hard to say whether
the Chinese are totally welcome in Algeria."
PEARCE