Publicité

Scandale de Sonatrach

ID:247810
Date:2010-02-08 16:58:00
Origin:10ALGIERS111
Source:Embassy Algiers
Classification:CONFIDENTIAL//NOFORN
Dunno:
Destination:VZCZCXYZ0000
PP RUEHWEB

DE RUEHAS #0111/01 0391658
ZNY CCCCC ZZH
P 081658Z FEB 10
FM AMEMBASSY ALGIERS
TO RUEHC/SECSTATE WASHDC PRIORITY 8404
INFO RUCNMGH/MAGHREB COLLECTIVE
RUEHHH/OPEC COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

C O N F I D E N T I A L ALGIERS 000111

NOFORN
SIPDIS

DEPT FOR NEA/MAG - NARDI

E.O. 12958: DECL: 02/08/2020
TAGS: PGOV, ENRG, ECON, ETRD, KCRM, PINS, AG
SUBJECT: ALGERIA: DIRECTORS OF NATIONAL OIL COMPANY
INVESTIGATED FOR CORRUPTION

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

Summary
-------

1. (C/NF) Eight directors, including the CEO, of Algeria's
national oil company Sonatrach are under investigation for
corruption and have been fired and replaced. Industry
insiders fear company operations will soon be affected.
Algeria's intelligence services are leading the
investigation. This scandal is the latest in a dramatically
escalating series of investigations and prosecutions that we
have seen since last year involving Algerian government
ministries and public enterprises. Significantly, many of
the ministries affected are headed by ministers considered
close to Algerian President Bouteflika, including
Energy/Mines Minister Chekib Khelil. Speculation is rife
that political infighting between civilian and military
leadership lies behind the case, but we have no hard
evidence. Bouteflika's determined silence is only fueling
the uncertainty. End summary.

Eight Senior Officials Implicated
---------------------------------

2. (U) A corruption scandal has broken involving Algeria's
largest company, the state oil and gas monopoly Sonatrach.
The press first reported on January 14 that an examining
magistrate ordered Sonatrach's CEO Mohamed Meziane, VP for
pipelines Benamar Zenasni, VP for upstream activity
Boumediene Belkacem, and five other company executives to
answer questions concerning allegations of irregularities in
the awarding of contracts to two consulting firms owned by
Meziane's sons and a supplier of security equipment. They
were questioned for twenty hours.

3. (U) All eight Sonatrach officials were then placed under
formal investigation ("judicial control") which requires a
person to report periodically to police and not leave the
country). Some were detained. Meziane himself was placed
under judicial control; the two Sonatrach VPs were detained
in Serkadji prison. An additional Sonatrach senior official,
VP for commercialization Chawki Rahal, was placed under
judicial control. Four Sonatrach directors (for social
affairs, exploration, pipelines and transport, and
commercialization) were placed under judicial control.
Meziane's two sons were detained -- some stories say, for
being major shareholders in companies to which the Sonatrach
contracts were awarded. All efforts by defense lawyers to
lift the detentions and judicial control have been rejected.
Outside Sonatrach, former CEO of the bank Credit Populaire
d'Algerie Hachemi Meghaoui and his son were ordered detained.


4. (U) Abdelhafid Feghouli, VP for downstream operations, was
immediately appointed acting Sonatrach CEO. The three other
VPs under suspicion have been replaced. Energy/Mines
Minister Dr. Chakib Khelil, whose ministry has responsibility
for Sonatrach, claimed in a January 17 press conference that
the investigation had caught him unawares and that all he
knew was what had been reported in the press. He has since
refused to discuss the allegations or take responsibility for
the affair, saying February 2 that he had no details of the
charges and that he would not resign. Khelil pleaded that he
was responsible for the entire energy sector but not for
managing Sonatrach or any of the some 50 other state energy
companies under his ministry's purview. He assured the press
soon after the affair broke that Sonatrach's production would
not be affected and that the company would continue to carry
out all projects underway. The week of January 24, the press
reported that Sonatrach lawyers would not defend the
suspects, since Sonatrach was a victim of the fraud they are
suspected of committing.

Foreign Producers Worried
-------------------------

5. (C/NF) Ambassador on January 27 met XXXXXXXXXXXX

Meziane. XXXXXXXXXXXX sources tell him the issue under
investigation is Sonatrach's granting of sole-source
contracts. Sonatrach's regulations specify strict conditions
for this type of contract ("procedure R-115"). Only CEO
Meziane would have had authority to authorize and approve
them.

6. (C/NF) XXXXXXXXXXXX had heard that 1,600 such contracts were
under investigation. Some of these contracts reportedly went
through Meziane's sons. A few years earlier, Sonatrach had
pressed Anadarko to enter into one such contract jointly with
the U.S.-Algerian joint venture BRC (Brown and Root-Condor)
to develop the el-Merk oilfield. XXXXXXXXXXXX, the contract was never
carried out, BRC was liquidated, and Sonatrach in 2008
awarded the el-Merk contract to Anadarko. XXXXXXXXXXXX stated that
this contract was not/not one of those under investigation.
(Comment: BRC, nonetheless, figures in the list of ongoing
investigations cited in the press. End comment)

7. (C/NF) XXXXXXXXXXXX noted that Abdelhafid Ferghouli, former VP
for downstream operations now appointed interim CEO, is the
one (now former) Sonatrach VP with whom Anadarko was not
acquainted. XXXXXXXXXXXX doubted he would last long or be
effective in the top position. No one expects the Sonatrach
executives under investigation to return to their previous
positions.

Continuity of Sonatrach Operations
----------------------------------

8. (C/NF) Energy/Mines Minister Khelil's Jan. 17 assurances
that company operations would be unaffected have not gone
unchallenged. Several press reports sourced to industry
insiders and experts say that fear has paralyzed Sonatrach
upper ranks, who are all afraid to make a decision. XXXXXXXXXXXX
view paralleled this assessment, and we have heard similar
views from French -- quite concerned about Sonatrach because
of the French oil company Total's exposure here -- and other
diplomats. He said that all senior executives, at least in
the upstream end of operations he is familiar with, are
looking over their shoulders and afraid to make decisions or
sign anything. The company would not sign amendments to
XXXXXXXXXXXX insurance contracts on oil production necessitated
by the 2009 budget amendments (Complementary Finance Law) --
contracts for which former VP for Upstream Operations
Belkacem was responsible. Sonatrach had contracted foreign
insurance companies to provide this insurance. Now these
companies were not getting paid. Before long, they would
cease insuring XXXXXXXXXXXX production operations. If that
happened, work would stop. XXXXXXXXXXXX said XXXXXXXXXXXX fields are
the largest upstream project with foreign participation in
Algeria.

Leading Role of Algeria's Intelligence Services
--------------------------------------------- --

9. (C) All papers report that Algeria's equivalent to the
DNI, the Departement du Renseignement et de la Securite
(DRS), which is no longer under the Ministry of National
Defense, carried out the investigation. Although DRS' move
out of the shadows and into the limelight has been
unprecedented, its special investigative service for internal
corruption has been active for years (i.e., even as far back
as the Boumedienne era). The magazine "Jeune Afrique"
recently claimed, for example, that DRS had investigated 1650
elected Algerian local officials (or about one out of ten)
since 2002 for corruption. XXXXXXXXXXXX was well aware of DRS'
involvement in the Sonatrach case and related that former VP
Belkacem, in many meetings with XXXXXXXXXXXX, had been extremely
careful in what he said when others, even company waiters,
were present. He was very guarded over the telephone.
XXXXXXXXXXXX imputed this behavior to concern over DRS
surveillance. XXXXXXXXXXXX confided that DRS has interviewed many
of XXXXXXXXXXXX company's local staff.

Political Ramifications
-----------------------

10. (C/NF) XXXXXXXXXXXX noted that no one believed Energy/Mines
Minister Khelil's claims to know nothing of the
investigation. Most believe Khelil exercised a guiding hand
over Sonatrach operations. XXXXXXXXXXXX noted that his
conversations with industry insiders had pointed to a cousin

of the minister known only as Hemche who was a close adviser
to former CEO Meziane. His sources believed Hemche was a key
decision-maker, although Meziane did the signing. Early last
December, Hemche reportedly abruptly retired and took up
residence in Lugano, Switzerland.

11. (C) Ambassador noted that Algiers is swirling with
speculation about the political background of this and other
scandals affecting several government ministries and public
enterprises. Some believed it was a logical outcome of
President Bouteflika's oft-stated commitment to attack
corruption. Most, however, interpret the DRS move against
high-level Sonatrach officials -- who all owed their jobs to
Bouteflika-confidant Khelil -- as the military's retaliation
via the DRS against the civilian control over it that
Bouteflika had imposed since his reelection to a second term
in 2004.

Comment
-------

12. (C) The investigation against the leadership of the
company that finances over half the country's budget and
produces 98 percent of its export revenue has shocked the
country and generated rampant speculation about the political
motivations behind it. In a country where power
relationships and processes are opaque, speculation is as
rife as hard evidence is scarce. A visiting analyst of a
leading U.S. risk analysis firm told Poloff the week of
January 31, for example, that all his contacts believe the
DRS shaped the investigation to send a message to Bouteflika,
either that he should allow relatives of leading generals a
greater slice of the economic pie, or that Bouteflika's
western Algerian "clan" should cede power back to the
military (which many regard as dominated by eastern
Algerians), or simply that the civilian-dominated authority
should restore more behind-the-scenes influence to the
military. Despite this theory and others we have heard, we
see no hard evidence for any particular political
interpretation. What is certain is that the alleged
infraction and sums involved in this corruption case may only
represent the tip of an iceberg -- which was precisely the
point of an open letter to the DRS published by a former
Sonatrach VP January 30 in the French language daily "El
Watan." That article urged the DRS to look into a long list
of much larger Sonatrach operations, including spot market
sales to a handful of select customers connected to senior
members of the power structure. The U.S. risk analyst's
sources were certain the DRS planted this article as a
further warning to civilian authority.

13. (C) This case is the latest in a series of corruption
investigations that started to surface with increasing
frequency since last spring and which are now competing with
indignation over TSA measures and Algeria's failed bid to win
the African Cup of Nations football tournament for the main
headlines in the daily press. Two of the larger cases
already underway are alleged wrongdoing in the construction
of the East-West Highway and in the awarding of fishing
licenses to Turkish companies. Others involve
state-controlled telephone operator Algerie Telecom, BRC
(mentioned previously), and the National Bank of Algeria.
Few cases have yet produced a trial or conviction, helping
harden the widespread view that leading public officials
continue to enrich themselves with impunity at public
expense. With DRS "commissars" believed present in virtually
every public company or ministry front office, senior
officials are said to be worried that every visitor,
especially non-Algerians, is duly noted and reported. DRS
files, already swollen with decades of political and personal
financial dirt on practically all notable Algerians, are said
to be growing fatter with information on suspicious business
dealings or allegations of special favors. The big question
no one can answer definitively is whether Bouteflika is
orchestrating this anti-corruption blitz, as PM Ouyahia has
publicly claimed and as would be consistent with Bouteflika's
longstanding intention, or is its ultimate target. His
silence, noted by the press, has only fueled the speculation.
PEARCE

http://www.elpais.com/articulo/internacional/Cable/destituciones/Sonatrach/elpepuint/20101216elpepuint_13/Tes

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