VZCZCXRO3188
OO RUEHROV RUEHTRO
DE RUEHAS #0970/01 3020851
ZNY CCCCC ZZH
O 290851Z OCT 09
FM AMEMBASSY ALGIERS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8042
INFO RUEHXK/ARAB ISRAELI COLLECTIVE
RUCNMGH/MAGHREB COLLECTIVE
RUEHTRO/AMEMBASSY TRIPOLI
RUCPDOC/DEPT OF COMMERCE WASHDC

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 
 
ALGIERS 00000970  001.2 OF 003 
 
 
Classified By: Ambassador David D. Pearce.  Reason:  1.4 (b), (d). 
 
Summary 
------- 
¶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 
------------------------ 
 
¶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 
 
ALGIERS 00000970  002.2 OF 003 
 
 
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 
----------------- 
 
¶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 
----------- 
 
¶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. 
 
 
ALGIERS 00000970  003.2 OF 003 
 
 
Morocco-Western Sahara 
---------------------- 
 
¶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