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RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 02 ALGIERS 000287 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ENRG EPET ETRD AG
SUBJECT: ALGERIA ECONOMIC HIGHLIGHTS FEBRUARY 2008 
 
 
ALGIERS 00000287  001.2 OF 002 
 
 
¶1.  This cable summarizes key economic developments in 
Algeria during February 2008, and includes: 
 
-- Motorola to Open Office in Algiers 
-- Bouteflika-Putin Meetings Stoke Fears of Gas Cartel 
-- U.S.-financed Desalination Plant Inaugurated in Algiers 
-- Bahraini Bank to Invest USD 3 billion in Algeria 
-- UAE Firm Announces USD 150 Investment in Algerian Dairy 
 
 
HELLO MOTO 
---------- 
 
¶2.  Motorola representatives told us that the company will 
open an office in Algiers by the end of March.  The office 
will coordinate the marketing of the company's products and 
services in Algeria.  Currently, Motorola products are 
marketed by individual country representatives and 
distributors.  The opening of an office in Algiers, which has 
been discussed for several years, marks an important 
commitment by the company to the Algerian market. 
 
GAS CARTEL: YES OR NYET? 
------------------------ 
 
¶3.  President Bouteflika's trip to Moscow in mid-February 
stoked concerns that Algeria and Russia are leading a charge 
to create a "gas OPEC," even as both Bouteflika and Russian 
President Vladmir Putin avoided speaking directly about such 
a cartel publicly.  Bouteflika did say publicly that it was 
important for the two gas producers to maintain a dialogue on 
energy issues, and that major suppliers of gas should 
coordinate their energy policies and work together to fight 
restrictive import laws in European markets.  In December 
2007, Sonatrach President Mohamed Meziane told the Wall 
Street Journal that the 2006 gas cooperation agreement 
between Sonatrach and Gazprom had lapsed in mid-2007, and had 
resulted in "nothing concrete."  Russia provides the EU with 
45 percent of its gas imports, and Algeria provides 21 
percent.  Meziane's comments helped ease European fears of 
gas supply restrictions or price manipulation.  Relations 
between Algeria and Russia also seemed to cool when Algeria 
announced that it wanted to return defective military 
aircraft purchased from Russia.  But Bouteflika's trip to 
Moscow, along with Energy Minister Chekib Khelil's subsequent 
comments that a gas cartel might be in Algeria's interest, 
rekindled speculation that major gas suppliers like Algeria, 
Russia and Qatar may try to elevate the position of the Gas 
Exporting Countries Forum (GECF). 
 
(DESALINATED) WATER FOR EVERYONE 
-------------------------------- 
 
¶4.  On February 24, in a ceremony attended by the Ambassador 
and OPIC President and CEO Robert Mosbacher, President 
Bouteflika inaugurated the Hamma Seawater Desalination Plant 
in Algiers.  The plant, touted as Africa's largest, 
represents a USD 248 million investment and will produce up 
to 200,000 cubic meters of drinkable water per day.  The 
project is a joint venture between General Electric Ionics, 
which holds a 70 percent stake in the plant, and state-owned 
Algerian Energy Company (AEC), which owns the remaining 30 
percent.  OPIC provided a USD 200-million loan guarantee for 
the project. 
 
¶5. The plant is the first large-scale joint venture reverse 
osmosis plant in North Africa, and is the first of a total of 
14 desalination plants planned by the Algerians.  The 
desalination plants are an effort by Algeria to address 
significant shortages of potable water.  Two additional 
plants are expected to be completed in 2008: one in Beni Saf, 
in western Algeria, that will produce 200,000 cubic meters 
per day and one in Skikda, in eastern Algeria, that will 
produce 100,000 cubic meters per day.  At the inauguration, 
Energy Minister Khelil announced a target of 2.3 million 
cubic meters of potable water per day from seawater by 2011. 
 
BAHRAINI INVESTMENT IN ALGERIA 
 
ALGIERS 00000287  002.2 OF 002 
 
 
------------------------------ 
 
¶6. On February 19, the Bahrain Gulf Finance House (GFH) 
announced plans to invest USD 3 billion to create an economic 
development zone in Bouinan, Algeria.  GFH plans to target 
companies in the energy, finance, telecommunications and 
tourism sectors to locate in the zone.  The  announcement 
followed the signing in January of a framework agreement 
between the Algerian and Bahraini governments during an 
international tourism meeting in Algeria.  If the project 
moves forward, it would represent the largest Bahraini 
investment in Algeria to date. 
 
EMIRATIS INVESTING IN COWS AND CONDOS 
------------------------------------- 
 
¶7. On February 13, the Emirates International Investment 
Company (EIIC) announced plans to invest USD 150 million in 
the Algerian dairy sector.  The investment in the western 
Algerian region of Tiaret would create the largest dairy 
operation in Africa.  EIIC intends to raise 10,000 cows for 
the production of 90 million liters of milk and 3,000 tons of 
meat annually.  Algeria's milk production relies heavily on 
imported milk powder, the price for which has increased from 
USD 1800 to 3500 per ton in recent years.  The EIIC 
initiative would not only reduce Algerian milk imports, which 
totaled USD 1.06 billion in 2007, but it also would reduce 
the cost of milk subsidies by the government.  In addition to 
the dairy project, EIIC also announced a plan to build a 
residential and commercial park in Algiers worth USD 5 
billion. 
FORD