US embassy cable - 05ALGIERS2245

C O N F I D E N T I A L SECTION 01 OF 04 ALGIERS 002245 
 
SIPDIS 
 
E.O. 12958: DECL: 11/07/2025 
TAGS: PREL, PGOV, EFIN, MARR, AG, Pol-Mil 
SUBJECT: POTENTIAL NEXT GENERATION ALGERIAN LEADER COMMENTS 
ON CLANS, THE MILITARY, AND POLITICAL DYNAMICS 
 
Classified By: Ambassador Richard W. Erdman, reasons 1.4 (b) and (d) 
 
SUMMARY AND COMMENT 
------------------- 
 
1. (C) Arslan Chikhaoui (strictly protect), a private 
consultant in his late thirties or early forties, has close 
ties to the Algerian military and intelligence communities, 
the business world, and the political leadership.  A strong 
advocate of Algerian reform and modernization, Chikhaoui is a 
thoughtful observer of the local scene, a long-time 
participant in the prestigious Davos Conference, the nephew 
by marriage of MOD Minister-Delegate Guenaizia, a former 
communications adviser to former Armed Forces Chief of Staff 
Lamari, and an informal adviser to both President Bouteflika 
and Prime Minister Ouyahia.  Chikhaoui, a UCLA Berkeley 
graduate, believes he can contribute most to the reform 
process at this stage from outside of government but expects 
to assume a senior position, including even the prime 
ministership, within the next 2-3 years.  Over a one-on-one 
lunch with Ambassador November 5, Chikhaoui shared his 
thinking on:  clans as the key to understanding the balance 
of political forces in Algeria; pro-French "lobbies" imbedded 
through Algerian bureaucracy; key military intelligence 
figures as a force for reform; the role of the military in 
revealing and prosecuting recent corruption cases; resistance 
to bank reforms; interpersonal relationships and tensions 
within the Algerian military; MOD Minister-Delegate 
Guenaizia's support for U.S.-Algerian military cooperation; 
and the potential dangers of not opening up the political 
system in a way that permits real political debate, includes 
the younger, post-Liberation war generation in 
decision-making, and assures peaceful political change.  (End 
Summary and Comment) 
 
CLANS ARE KEY TO UNDERSTANDING 
BALANCE OF POLITICAL FORCES IN ALGERIA 
-------------------------------------- 
 
2. (C) Chikhaoui said there were about 15 major clans in 
Algeria, the elements that made up the balance of forces in 
Algerian society.  The clans played an informal but important 
role in shaping government decisions, implementing decisions, 
and securing financial favors, jobs, party and government 
positions, housing, and other perks.  The important clans had 
a heavy regional cast and most involved a mixture of 
business, military, banking, civil society figures, and a 
least one senior Sonatrach executive, in order to assure 
access to Algeria's cash cow.  Other clans involved 
functional groupings centered around generals, political 
personalities like former President Chadli and Zeroual, and 
francophiles.  The regional and functional clans overlapped 
to some extent and their influence was sometimes 
cross-cutting.  For example, Military Intelligence Chief 
Mediene and former Armed Forces Chief Nezzar were associated 
with the same clan but the former supported Bouteflika and 
the later despised him.   In the reform process, it was the 
second and third tier of these clans imbedded in government 
bureaucracies that were often responsible for delaying or 
blocking reform efforts being pushed by President Bouteflika. 
 
 
3. (C) Among the fifteen clans there were two from the 
Kabilye and an assortment of others from places like Souk 
Ahras and Annaba, Batna, Tlemcen, and Tiaret.  The clans from 
Souk Ahras were very close and often collaborated, as did the 
others when interests meshed.  While the clans from the East 
were spread out among various cities, the clan from "the 
West" was fairly unified and included many close associates 
of President Bouteflika.  Asked for specific examples, he 
said Minister Belkhadem was from the Tiaret clan, which was 
traditionally linked to the zaouias in the region.  He 
commented that Belkhadem had never gotten involved in the 
financial/business side of clan dealings.  Belkheir, probably 
the smartest individual in the leadership, came from the same 
clan initially, though he now had cross-cutting interests, 
remained close to former President Chadli, with whom he 
worked closely in the 1980s, and of course had strong ties 
throughout the military.  Long-serving Education Minister 
Benbouzid had kept his portfolio throughout numerous 
government changes because he was part of the clan associated 
with his brother-in-law, former President Zeroual.  Chikhaoui 
said his own uncle-in-law, MOD Minister-Delegate Guenaizia, 
with whom he has relations both as a relative and a friend, 
was part of a clan involving generals who participated in the 
1967 Six Day war.  This group included Nezzar, Betchine, and 
Belkheir, though the later did not literally serve on the 
front.  He said that while he did not have "proof,"  there 
was a good chance that his uncle was also linked to various 
generals by virtue of his suspected management of their 
financial interests during his fourteen years as Algeria's 
ambassador in Bern, Switzerland. 
PRO-FRENCH LOBBIES PERVASIVE 
WITHIN ALGERIAN BUREAUCRACY 
----------------------------- 
 
4. (C) Chikhaoui commented that pro-French lobbies are found 
throughout the Algerian system, slowing what has been a 
steady evolution out from under the French umbrella.  In this 
context, he said the recently announced $4 million MEPI 
program to strengthen English teaching in Algeria via 
training of teachers, upgrading English curricula, and 
introducing new information technologies, was a particularly 
important step that would send a strong signal to the public 
about Algeria's priorities and direction.  The pro-French 
lobbies had different motivations.  Some were financial, i.e. 
kickbacks, payments, and favors for directing business toward 
French firms.  In the military, the lobby was formed of those 
who had studied at elite French military academies like 
Sancerre, though this was changing as more and more Algerian 
officers concluded that France was a second-tier military 
power and looked to the U.S. for training, equipment, and 
technology. 
 
5. (C) Many entrenched bureaucrats also had a clear 
pro-French bias, shaped by habit, ideological attitudes, and 
a desire to win favors such as visas for their friends and 
family, Chikhaoui commented.  These attitudes, he suggested, 
sometimes blocked or delayed projects that could invite 
increased U.S. presence or influence.  The inability of Fox 
News and the New York Times to get journalists accredited for 
purposes of preparing programs or supplements on 
investment/trade opportunities in Algeria could have been the 
result of such hidden forces.  The Ministries of Culture and 
Communication (which have had responsibility for 
accreditations and have often been joined in the same 
ministry) were particularly notorious for the pro-French 
lobbies imbedded in their ministries.  He recalled his own 
experience representing Business Week where he had 
circumvented MinCulture/Communication stonewalling by working 
directly with the Ministry of Commerce on a commercial 
publicity project (similar to the New York Times supplement), 
on grounds that it was not journalism, but marketing. 
 
SOME KEY MILITARY LEADERS CONVINCED LACK 
OF REFORM THE GREATEST THREAT TO STABILITY 
------------------------------------------- 
 
6. (C) Chikhaoui said the military intelligence leadership 
was actually a progressive force in terms of fighting 
corruption and encouraging economic reform.  Because their 
job was to coldly analyze the real threats to society and the 
system, they understood, as others did not, that failure to 
achieve visible and concrete progress in improving the living 
standards of the average citizen, via increased economic 
development and job creation, was the biggest threat to 
Algerian stability.  In their analysis, it was in the 
military's interest to avoid a repeat of the situation in the 
late 1980s and early 1990s, when instability was mounting, 
the situation risked spinning out of control, and the 
military was faced with the unpalatable choice of chaos or 
intervention. 
 
7. (C) To prevent such a situation from developing, senior 
figures like Military Intelligence Chief Mediene wanted to 
see action for reform and against corruption because they 
were key to unblocking the situation, allowing more rapid 
economic progress, job creation, and modernization of the 
country.  Chikhaoui said that an important factor enabling 
some military circles to press for reform was the tacit deal 
offered by the National Reconciliation Charter.  While the 
latter explicitly spared the military from prosecution for 
security offenses, it also implicitly signaled, in 
Chikhaoui's view, that in return for not blocking needed 
reforms and opening up the system, the military's past 
success in lining its own pockets through various schemes, 
legal, semi-legal, and illegal, would not be challenged. 
 
RECENT BANK SCANDAL REVELATIONS REPORTEDLY 
PART OF MILITARY'S ANTI-CORRUPTION EFFORTS 
------------------------------------------ 
 
8. (C) Chikhaoui claimed that recent revelations concerning 
the diversion of huge sums abroad by the Banque Nationale 
d'Algerie were in fact prompted by Military Intelligence, and 
were just the first of such revelations involving diversion 
of state bank funds. (In a conversation 3-4 months ago, 
Chikhaoui said that a financial/business scandal involving 
Sonatrach employees had also been brought to light, and the 
employees suspended and prosecuted, as a result of a private 
memo Mediene wrote to President Bouteflika recommending such 
action.) In the case of BNA, Chikhaoui said that military 
intelligence  had "convinced" a BNA secretary to rat on her 
bosses and make photo copies of documents proving 
malfeasance.  The secretary had been rewarded and promised 
full protection.  Unsecured loans to well-connected political 
and military officials and even to prominent private sector 
individuals were also a source of corruption.  In a country 
that purchased over 80 percent of its needs from abroad, 
over-invoicing and taking personal commissions on imports 
were also common methods of distributing petroleum "rent," 
lining pockets, and transferring funds abroad. 
 
GREATEST RESISTANCE TO BANKING REFORM 
COMES FROM WITHIN THE STATE BANKS 
-------------------------------------- 
 
9. (C). Modernization and privatization of the banking system 
would go a long way toward preventing or at least greatly 
reducing this kind of illegal activity, Chikhaoui contended. 
That was why some of the staunchest resistance to banking 
reform came from inside the state banks, where there was a 
culture of non-transparency and vested interests.  In this 
regard, he claimed, the Prime Minister's famous banking 
directive (instructing state enterprises to use only state 
banks) was actually drafted by the heads of three state 
banks.  The latter interpreted the President's much more 
general instruction not to allow a repeat of the Khalifa 
scandal -- where over $2 billion public monies were lost due 
to inadequate regulatory supervision and Khalifa's collapse 
-- to their own advantage by drafting a directive that 
brought them the business of private banks.  Chikhaoui noted 
that the subsequent but delayed replacement of the state bank 
directors involved in orchestrating this step backward had 
sent a quiet but clear signal of the direction in which the 
government wanted to move. 
 
DIFFICULT PERSONAL RELATIONS 
IN SENIOR MILITARY RANKS 
---------------------------- 
 
10. (C) Chikhaoui said MOD Minister-Delegate Guenaizia and 
MOD SYG Senhadji had very poor personal relations.  Senhadji 
had asked to retire several months ago but Bouteflika had 
refused permission, leaving Senhadji in an awkward position, 
with diminished authority and purely administrative work.  He 
said Senhadji would likely be going off before long to NATO 
to represent Algeria, which was an honorable exit and an 
orientation of growing importance for Algeria.  According to 
Chikhaoui, Guenaizia also couldn't stand Armed Forces Chief 
Gaid-Salah and had told Bouteflika he "could not continue to 
work this way" (i.e., with Gaid-Salah).  While it had been 
thought Gaid-Salah would retire in October, this has now been 
pushed forward into the new year.  In a previous 
conversation, Chikhaoui said that generals from eastern clans 
were responsible for pressing Bouteflika to create the new 
position of Minister-Delegate for National Defense and to 
name his uncle, an easterner, to the post.  The reason was 
that eastern military clans were upset that so many senior 
positions -- including presidential Chief of Staff Belkheir, 
the current and former Finance Ministers (Medelci and 
Benachenhou), Privatization Minister Temmar, Energy Minister 
Khelil, and MOD Secretary General Senhadji, among others -- 
were filled by "westerners." 
 
GUENAIZIA SEES U.S. 
AS STRATEGIC PARTNER 
-------------------- 
 
11. (C) Asked how Guenaizia felt about cooperation with the 
U.S., Chikhaoui said in the early post-independence days his 
uncle, like many others at the time, opposed what was seen as 
American "imperialism" and wanted to keep distance. He had 
significantly evolved since then, however, and his views had 
been influenced by his 14 years in Switzerland, where he had 
attended Davos conferences and gained a much better and more 
realistic view of the world, modernization, and 
globalization.  During these years, he came to see France as 
essentially a second-rate military power that, with all the 
changes in the world and the end of the Cold War, no longer 
had a viable economic model, a real military mission, or much 
that was useful to teach Algeria.  By contrast, and in the 
context of converging interests with the U.S., he had come to 
see the U.S. as an important strategic partner for Algeria. 
Chikhaoui quoted him as saying that Algeria needed to frankly 
recognize that "the U.S. does not need Algeria; it is Algeria 
that needs the U.S."  In a word, Guenaizia was very 
supportive of current trends toward increased military 
cooperation. 
 
DESPITE OPTIMISM RE FUTURE, LACK 
OF AUTHENTIC POLITICAL LIFE A WEAKNESS 
-------------------------------------- 
12. (C) Chikhaoui overall voiced optimism about the future. 
Prospects for Algerian economic growth and change were 
especially good over time, and steps had been taken that 
would make current trends difficult to reverse.  Bouteflika 
dominated the political scene and was using his authority to 
press for reform, despite resistance from vested interest and 
lower levels of the bureaucracy.  Non-violent fundamentalism 
was a problem, but was manageable in his view.  Politically, 
Algeria basically remained an oligarchy, with youth on the 
sidelines, real power in the hands of older political and 
military elites, a "democracy of clans" at best, and 
political parties weak and not representing the real forces 
in society in a way that allowed real debate, mediated 
political pressures, and promoted peaceful change over time. 
 In Chikhaoui's view, the government was making a mistake by 
not agreeing to give political groupings like Wafa formal 
status as a recognized political party.  By default, 
therefore, the real dividing lines politically were not the 
formal political parties but, more generally, "the 
establishment" and its parties versus Islamic voices not 
allowed a formal political voice.  By not opening up the 
system more quickly and providing expanding opportunities to 
the younger generation, the government risked ceding ground 
to Islamic elements that were skilled in appealing to the 
young, cynical, and disenfranchised.  Despite this 
difference, the establishment and the Islamic forces 
generally shared the same autocratic mindset, Chikhaoui 
commented.  Real change would only come when new blood from 
the younger generation was brought into decision-making in a 
meaningful way. 
 
 
 
 
ERDMAN