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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00556R000300010004-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: January 12, 2017
• Document Release Date: June 22, 2011
• Sequence Number: 4
• Publication Date: July 1, 1983
• Content Type: REPORT

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Directorate of
Intelligence
Algeria and the
United States:
A Changing Relationship
An Intelligence Assessment
See
NESA 83-10146
July 1983
copy 3 7 8
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Directorate of Secret
Intelligence
Algeria and the
United States:
A Changing Relationship
This paper was prepared by
It was coordinated with the
National Intelligence Council and the Directorate
of Operations. Comments and queries are welcome
and may be directed to the Chief, Arab-Israeli
Division, NESA
Secret
NESA 83-10146
July 1983
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Secret
Algeria and the
United States:
A Changing Relationship
Key Judgments Under President Chadli Bendjedid, Algeria has significantly adjusted its
Information available foreign policy to include a more open and positive approach to relations
as of 30 June 1983 with the United States. Bendjedid's purpose is to reap economic benefits,
was used in this report.
balance Algeria's dependence on the Soviet Union for arms, and encourage
the United States to take a more evenhanded position on North African is-
sues. Broader changes in Algeria's foreign policy have created a confluence
of interest with the United States that allows for more lasting cooperation.
Bendjedid's more moderate approach reflects what appears to be a
maturing of the revolutionary Algerian regime and society and demon-
strates more understanding on the part of the Algerian leaders of events
beyond the country's borders
Bendjedid's election in 1979 ended the radical era dividing the United
States and Algeria. Bendjedid has weeded out radical holdovers from the
previous regime and replaced them with leaders who share his own
pragmatism. There is still some jockeying for power among his closest
advisers, but we are unable to identify any senior officials who favor a re-
turn to the heavily pro-Soviet socialism of the previous regime. The only le-
gal political party, the National Liberation Front, used to preserve the
country's revolutionary credentials, often holds a more radical position
toward the United States than the government does.
The Algerian leadership has been trying to introduce a measure of tactical
flexibility into its ideological framework. In practical terms, Bendjedid:
? Has muted Algeria's anti-Western rhetoric.
? Is gradually seeking to diversify Algeria's arms procurement.
? Is expressing a deeper commitment to regional stability.
Bendjedid's pragmatic style is also reflected in the reorientation of
Algeria's development strategy toward agriculture, housing, irrigation, and
light industry and away from heavy industry. Algeria's ambitious develop-
ment plans will probably continue to offer a good market for US products
over the long term. The government has indicated it is willing to increase
US imports, particularly in high-technology items and agricultural prod-
ucts, to reduce a trade imbalance that has always been in Algeria's favor.
Despite the leadership's interest in closer ties with the United States, the
performance of the Algerian economy will limit the level of realized
investment and subsequent trade opportunities.
Secret
NESA 83-10146
July 1983
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Despite a variety of common interests, closer relations with the United
States will be constrained by the following divergent political perspectives:
? Algiers has expressed growing dissatisfaction over what it perceives to be
excessive US-Moroccan military cooperation.
? The conflict in the Western Sahara is likely to remain the most
contentious issue between Algiers and Washington.
? Algeria's dependence on the Soviet Union for military supplies will
restrain efforts to diversify arms procurement significantly.
? Algeria's reputation as a radical revolutionary state continues to be
perpetuated by the Algerian press, its former association with radical
Arab regimes, and the symbolic "fraternal" support that it provides to a
wide variety of Third World progressive movements and Communist,
socialist, and leftist parties in Western Europe, Latin America, and
Algiers will be cautious and pragmatic in its efforts to strengthen ties with
Washington. Bendjedid's success in moving Algeria into the Arab main-
stream will determine to what extent Algeria supports US policy in the
Middle East. Although political differences will not preclude closer
economic and military cooperation with the United States, they will be a
Secret iv
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Algeria, and the
United States:
A Changing Relationship
Algeria until a few years ago took a relatively con-
stant negative view of the United States. It was
regarded as an imperialist power exploiting less devel-
oped nations economically and politically. Algerians
have been deeply suspicious of the close ties between
the United States and Israel and have interpreted
many US actions as anti-Arab, anti-Islamic, and
incapable of producing a just settlement in the Middle
East. The United States has been perceived as insensi-
tive and even hostile toward the Nonaligned Move-
ment and glued to the East-West perspective on
global issues. On matters closer to home, it has been
seen as favoring Morocco, to Algeria's detriment,
particularly in the Western Sahara dispute.
Only since President Bendjedid came to power in
1979 has this negative image begun to change. Alge-
ria's involvement in mediating the US-Iranian hos-
tage crisis fostered greater familiarity between US
and Algerian officials and an appreciation of the
sentiments of the US public. The relief assistance the
United States sent to victims of the El Asnam earth-
quake in October 1980 also helped elevate the United
States in the eyes of many Algerians, particularly as it
contrasted with the somewhat lethargic Soviet re-
sponse.
The death in December 1978 of President Boume-
diene-a man of personal ideological rigidity-was
probably a natural time for significant adjustments in
foreign policy to emerge, including a more open,
positive approach to relations with the United States.
Although the succession involved intense maneuvering
among individuals and schools of political thought, it
was completed without violence and followed the legal
prescriptions for leadership change, demonstrating to
all Algerians a coming of age in the postindependence
era. In our view, the characterization of Chadli
Bendjedid as a "compromise" candidate-although
certainly an accurate description at one level-
obscures the likelihood that his pragmatism and less
ideological orientation reflect a change in national
outlook, not just the persuasion of one man.F_~
Secret
The shift in Algeria's attitude seems to reflect a slow
and steady maturing of a revolutionary regime that
has gained the confidence to consider national goals in
a broad context and has moved away from the self-
conscious ideology and trauma of the struggle for
independence. These legacies still critically influence 25X1
Algerian foreign policy, but room for other consider-
ations and principles seems to have grown substantial-
ly. Moreover, the transformation over the past decade
of struggling Third World independence movements
into national entities has reduced the importance of
the revolutionary standard Algeria most prizes-
patron of liberation movements. Leaders of the re-
maining liberation movements ritually pass through
Algiers, to be sure, but there is little evidence that any
save the Polisario Front and the Palestine Liberation
Organization continue to elicit much sympathy
among Algerians.
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Changes in the Arab-Israeli equation have had an
important effect on Algeria's foreign policy outlook
and its understanding of the role of the United States
in the region. The counterproductiveness of terrorism
as a tool for the PLO-at least in Algeria's view-the
polarization of the Arab world into competing camps
populated on the radical side by Libya and South
Yemen, and the diminished image of the Soviet Union
as an advocate of Arab interests have, we believe, led
Algeria to reconsider its place in the Arab and
international lineup.
Algeria's concentration on the economy also has
brought it to view the United States as the repository
of technology and expertise that Algeria needs and an
important market for its hydrocarbon exports. The
close working relationship that developed between the
Algerian bureaucracy and US gas companies has, in
our view, also helped to modify Algerian attitudes
about the United States and Americans. Close to
2,000 Americans involved in gas-related projects have
lived in Algeria during the past 20 years. The exploi-
tation of energy resources and the need for advanced
technology probably have led the Algerians to reeval-
uate some of their moralistic postures on "colonial
powers" and Western imperialism and introduced
shades of gray into political thinking that was once
black and white.
A New Perspective From New Leaders
The death of President Houari Boumediene marked
the end of the radical era that divided the United
States and Algeria. Bendjedid's election in 1979, after
an intense struggle behind the scenes over the succes-
sion, signaled a decision on the part of the military to
chart a course for Algerian policies more moderate
than it had been. Bendjedid has won considerable
allegiance from those military leaders who placed him
in power.
During his four-year tenure he has weeded out many
of the radical holdovers from the Boumediene era who
resisted closer ties with the United States. Hardcore
radical revolutionary leaders like Mohamed Salah
Yahiaoui and former Foreign Minister Abdelaziz
Bouteflika-once considered serious political chal-
lengers-have been politically neutralized or expelled.
The accidental death in an air crash in April 1982 of
Foreign Minister Ben Yahia, probably the last influ-
ential adviser with a strong leftist orientation, brought
in a moderate, pro-Western Foreign Minister, Ahmed
Taleb Ibrahimi. He has been highly visible in direct-
ing Algerian foreign policy initiatives, particularly
those involving the United States and Middle East
matters.
Although disagreement still exists within the leader-
ship and there is almost certainly jockeying for power
among those around Bendjedid, we have been unable
to identify any senior Algerian who seriously favors a
return to the strongly pro-Soviet socialism that pre-
vailed under Boumediene.
Bendjedid and his advisers are not entirely free to
discard the more radical policies of the past. The
underpinnings of the regime are the revolution and its
ideology, and they are still the basis for the leader-
ship's legitimacy. We believe that even though Bend-
jedid has no serious political competition, neither he
nor his colleagues believe in tampering with the core
elements of Algeria's revolutionary heritage. The
country's sole political party, the National Liberation
Front (FLN), is a symbol to the Algerian people and a
useful way for powerful government officials to mobi-
lize grass-roots support. The government uses the
party to preserve the country's revolutionary creden-
tials, particularly on issues involving nationalism,
anticolonialism, and self-determination. Thus, the
party's position toward the United States is often
more radical than the government's.
We believe that at lower levels of the party, bureauc-
racy, and military there are people whose viewpoint
and loyalty remain with the previous leadership. They
will be critical of Bendjedid for seeking closer ties to
the United States and may agitate within their own
spheres of influence against his policies. Concerns
recently articulated by Algerian officials over the
growing appeal of Islamic fundamentalism indicate
that a new kind of opposition to a friendly relationship
with the United States and to Bendjedid's more
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modern, pragmatic posture could develop. In our view,
however, Bendjedid and his colleagues are in suffi-
cient control and have enough popular support to
pursue their course.
The reorientation of the Algerian economy also re-
flects Bendjedid's pragmatic style. According to Em-
bassy reporting, Boumediene's successors realized
shortly after his death in 1978 that certain socialist
precepts introduced earlier had failed. The growing
industrial sector had run into trouble. Modern busi-
ness techniques such as inventory control, production
scheduling, and distribution were poorly managed.
The level of technology insisted on was often beyond
the capability of the local work force, fostering
dependence on foreign technicians and reliance on
France as an outlet for Algeria's surplus labor. Cen-
tral planning proved ineffective in matching produc-
tion with demand. As a result, the output of the
country's expensive industrial plant did not meet the
demands of the people.
Although Bendjedid has not implemented new pro-
grams as fast as some Algerians would have liked, the
policies now in effect have slowly begun to improve
productivity and efficiency and given a more realistic
cast to Algeria's development strategy. Algeria con-
tinues to be strongly committed to socialism, but
development strategy nonetheless is beginning to
change direction under a $104 billion, five-year devel-
opment plan (1980-84). The plan demonstrates a
willingness to break away from the old system of
centralized control favored by Boumediene. It also
encourages private-sector participation, loosens for-
eign investment restrictions, and decentralizes the
mammoth bureaucracy that runs state companies.
Emphasis has shifted from heavy to light industry.
The 1983 annual investment plan stresses the comple-
tion of projects already started and the launching of
new projects in high-priority sectors such as infra-
structure, housing, and agriculture.
New Foreign Policy Directions
Broad changes in foreign policy have begun to cast
Algeria in a less radical and confrontational light and
have uncovered possible areas of mutual interest with
the United States. The most significant shift under
Bendjedid has been to a more active and cooperative
posture in promoting stability in the Middle East.
Algeria has come to realize that regional tensions,
particularly the Arab-Israeli dispute, have been a
destructive force that saps the energies and largess of 25X1
many Arab countries. In the broad Arab context,
Bendjedid has taken a number of steps toward reduc-
ing tensions. He has:
? Abandoned the radical Steadfastness Front-made
up of Syria, Libya, South Yemen, and the PLO-
which was formed to resist Egyptian President
Anwar Sadat's peace initiative in 1977.
? Joined the more moderate Arab states in support of
the Fez summit peace proposals and acknowledged
positive elements in President Reagan's initiative
last fall.
? Accepted about 2,000 Palestinian fighters last sum-
mer to help defuse the Lebanese-Israeli crisis. As-
surances of more assistance and the decision to host 25X1
the Palestinian National Council meeting illustrate
Algeria's willingness to assume a significant role in
dealing with the Palestinian issue.
? Taken steps to mediate the Iran-Iraq war, enhanc-
ing Algiers's role as an evenhanded peacemaker.
? Decided to no longer condone terrorism as a legiti-
mate political tool nor to permit hijacked aircraft to
land, except by request of an international organiza-
tion.
Although Algeria has not moved completely into the
moderate Arab camp or given unqualified support to
US negotiation efforts, the change in its posture is
dramatic as compared with only a few years ago. A
host of factors have made for change. Disappointment
over the results of the strict application of social,
economic, and political radicalism and a desire to
rechannel national energies and resources have proba- 25X1
bly been most important. Algeria has been a distant
and relatively ineffectual influence in the Arab world
and yet has been buffeted by many of the negative
effects of regional turmoil. The prospect of more
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productive economic cooperation with its neighbors, of
less concern over outside intervention in the region,
and of dampening the political ferment that produces
religious radicalism and political subversion seem to
be pushing Algeria to assume a moderate and more
active role in the region
The clearest evidence of changed policy has been the
steps Algeria has taken over the past year to normal-
ize relations with its North African neighbors. Bend-
jedid's efforts have resulted in a limited opening of the
border with Morocco, settlement of a longstanding
border dispute with Tunisia, and resumption of the
dialogue with Libya. Bendjedid has met with Moroc-
can King Hassan, Tunisian President Bourguiba, and
Libya's Jallud and with each has made a strong pitch
for greater Maghreb cooperation and political unity.
Normalizing relations with Morocco is the linchpin of
Bendjedid's broader plan. Success will require the two
sides to reach an accommodation in the Western
Sahara dispute.
Efforts toward rapprochement with Morocco come
more from Bendjedid's economic and political needs
than from a shift in either Algeria's or Morocco's
position in the dispute in Western Sahara. The two
countries broke diplomatic relations in 1976 over the
Western Sahara issue. Whether Bendjedid and Has-
san resolve the dispute or will simply set it aside
depends largely on the willingness to compromise on
who will have sovereignty over what territory in the
Sahara. So far, neither appears to be considering
major concessions, although new negotiating formulas
for achieving a settlement are under active consider-
ation
The initiatives Bendjedid has taken suggest that he
does not want to allow Western Sahara to stand in the
way of regional cooperation. We believe a settlement
of the dispute is not yet in the offing. A renewal of
serious fighting is always possible but is unlikely at
this point. Bendjedid and Hassan seem to have
reached a tacit understanding that the status quo-
minimal skirmishes with both Morocco and the Poli-
sario controlling the territory-is acceptable and that
renewed talks might uncover areas for compromise. If
compromise does not emerge, the process of negotia-
tion at least allows the two countries to go forward
In our view, Bendjedid's good neighbor policy appears
to have a variety of other objectives, which include:
? Providing support and asserting influence with Tu-
nisia in anticipation of what may be a turbulent
succession once President Bourguiba leaves the
scene. The Algerians seem particularly concerned
that Libyan meddling in Tunisian politics will esca-
late when Bourguiba's hold on power falters.
? Reestablishing a closer relationship with Qadhafi
and the Libyans with the aim of trying to contain
their troublemaking and to develop knowledge of
the current Libyan scene to work toward a more
reasonable replacement for Qadhafi.
? Orchestrating bilateral and multilateral cooperation
in the area to preclude chances of superpower
intervention. Morocco's increasingly close ties to the
United States and Libya's growing reliance on
assistance from the USSR and its allies are of great
concern to the Algerians, who would like to main-
tain North Africa's relative noninvolvement in East-
West tensions.
with bilateral relations.
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? Building tangible economic and political accom-
plishments that would enable Algeria to assert
leadership in the region-a goal that failed to
materialize under the leadership of Boumediene.
incorporation of the Sahara. In our view, it is unlikely
that Algeria will soon change its position on this
fundamental point. Algeria's support for an OAU-
sponsored referendum, its encouragement of other
negotiating efforts such as a confederated state, and 25X1
Bendjedid's promotion of greater Maghreb coopera-
tion are, in our view, based on the assumption that
Morocco will ultimately be forced to reach an accom-
Political Constraints
Ideological and regional policy differences will contin-
ue to constrain relations between Algiers and Wash-
ington. Algerian foreign policy is riddled with contra-
dictions that may make it difficult for the leadership
to pursue a consistent or coherent policy toward the
United States. Algeria is still struggling 20 years after
independence to develop its identity and to reconcile
traditional, Islamic, and Arab values with those that
are modern, Western, and pragmatic. Moderation and
pragmatism coexist uneasily with a revolutionary
past. In our view, developing a foreign policy that
encompasses these competing forces is of primary
concern to the Algerians and has often resulted in a
policy that appears inconsistent and erratic.
Of the issues that are likely to inhibit better relations,
concern over US "favoritism" toward Morocco is
likely to be paramount. Morocco is Algeria's historic
rival in the region and its primary strategic threat.
According to Algerian officials, the Bendjedid govern-
ment is especially sensitive to what it regards as
"excessive" US-Moroccan military cooperation.
Moreover, Algeria regards US backing for Morocco
as unwanted involvement by a superpower in regional
issues and as encouraging Moroccan intransigence
over the Western Sahara conflict. Algiers has been
unwilling to urge restraint and compromise on the
Polisario if Washington does not ur e the same on
Rabat.
The war in the Western Sahara will remain the most
contentious problem between Algiers and Washing-
ton. Algeria is committed to the Polisario for reasons
that are more important than mere support of a
revolution as a matter of principle. As the Polisario's
main backer, Algeria is interested in maintaining its
control over the guerrillas. Any shift in its support
would make it more difficult than it already is to
control assistance from Libya and other external
sources like Cuba and the Soviet Union. Moreover, we
do not believe Bendjedid is prepared to see Morocco
enhance its size, resources, and prestige by the full
modation on the Sahara.
Algeria's relationship with the Soviet Union is not
likely to hinder improved ties with the United States.
Indeed, Algeria's desire to reduce its dependence on
Soviet military equipment has helped stimulate inter-
est in closer cooperation with the United States.
Much of Algeria's advanced equipment is relatively
new, however, and Algiers will continue to deal
closely with Moscow to keep its inventory operational.
This dependence, in our view, is likely to restrain
criticism of Moscow and thus perpetuate whatever
impression there is that Algeria is a client of Mos- 25X1
cow's. In fact, Algeria has occasionally collaborated
with the Soviets but has never been a surrogate and is
putting distance between itself and Moscow on a
variety of issues:
? The Algerians departed drastically from their previ-
ous position when they abstained on the UN resolu-
tion condemning the Soviet invasion of Afghanistan
and registered private disapproval.
? Algeria has worked hard to check Cuba's attempts
to define the Nonaligned Movement in pro-Soviet
terms.
? The Algerian leadership has disapproved of Cuban
and Soviet activities in Africa and has been disap-
pointed with Moscow's refusal to recognize the
Polisario's government
In searching for new military suppliers, Algeria thinks 25X1
Western Europe looks more attractive than the Unit-
ed States for practical and ideological reasons. A
closer military and economic relationship with West-
ern Europe looks as if it would be less complicated
and have fewer political repercussions than one with
the United States. The fact that there are new
socialist governments in France, Greece, and Spain
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has led to a sense of common purpose and encouraged
Algeria to promote the notion of a cohesive and
unified socialist Mediterranean "lake." In Western
Europe, Algeria can deal with nationalized firms
similar to its own, whereas in the United States
Algeria must deal with private firms whose contracts
are not guaranteed by the US Government. For the
time being, therefore, the Algerians are more likely to
conclude major deals with the British, French, Ital-
ians, and Belgians than with the United States.
Algerian support for a variety of Third World pro-
gressive movements, parties, and "fronts" has often
strained relations between Algiers and Washington.
The United States protested strongly against alleged
Algerian involvement in the transshipment of Soviet
weapons to Nicaragua via Algiers last spring, particu-
larly after a transshipment that occurred following
assurances from the Algerians that such activity
would cease.
We believe that tangible support from Algiers to these
groups will remain small and in most cases symbolic.
Many liberation groups are allowed to maintain of-
fices in Algiers under the sponsorship of the FLN's
Commission for International Relations. Algeria has
provided some financial support to Communist, so-
cialist, and leftist parties in Western Europe, Latin
America, and Africa and,
has assisted,in the organization and training
of military and security forces in some African coun-
tries. Algiers, however, judiciously avoids involvement
in subversive activities by these groups
Improved ties between Algiers and Washington will
also depend on US tolerance of Algeria's vitriolic
press, which has consistently criticized US foreign
policy and the US presence in the region. The local
press carried strong objections to the recent US-
Moroccan military exercises off the coast of North
Africa and claimed that there was US involvement in
the Israeli invasion of Lebanon. US officials have
often complained to the Algerian Government about
this anti-US tone, but the government has been slow
about reining in the leftists, who have been allowed to
dominate the government-controlled media. We can
expect the Algerian press to continue to reflect a
sharper anti-US position than policymakers do and to
distort issues on which the United States and Algeria
Figure 1
Algeria: Hydrocarbon Export Mix
Economic Obstacles
Despite the government's interest in developing eco-
nomic ties with the United States, the performance of
the economy will limit opportunities for investment
and trade. This consideration is especially significant
in Algeria because the economy is heavily dependent
on a single industry-hydrocarbons-in which the
world market has not shown strength recently
Thus far Algeria has been able to weather the oil glut.
Although crude output averaged only 700,000 b/d in
1982-about half former levels-expanded sales of
petroleum products and natural gas lessened the
revenue shortfall. Production of condensates increased
30 percent in 1982, while marketed natural gas
increased by about 50 percent. Algeria was able to
sustain export revenues in 1982 of $12 billion and,
consequently, maintained its trade surplus as well.
differ.
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2 A11
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LDAI
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Algeria: Current Account a
Trade balance
1.2
-0.7
0
-1.6
-1.6
1.3
5.6
2.4
2.2
1.9
Exports (f.o.b.)
5.3
4.9
5.3
5.9
6.6
9.5
15.9
13.4
12.0
11.4
Oil
4.7
4.2
4.8
5.7
6.1
8.8
14.9
12.2
10.3
8.6
0.5
0.7
1.0
1.2
1.7
2.8
8.2
8.2
10.3
11.0
9.8
9.5
Net services and private
transfers
-0.5
-0.8
-1.6
-2.4
-2.8
-3.3
-3.9
-4.2
-4.8
-4.9
Investment income receipts
0.1
0.1
0.1
0.2
0.2
0.4
0.7
0.9
0.6
0.5
Other
-0.2
-0.3
-1.1
-1.7
-2.0
-2.8
-3.3
-3.7
-4.2
-4.2
Grants
-0.1
0
0
0
0
-0.1
-0.1
-0.1
-0.1
-0.1
Because of rounding, components may not add to the totals shown.
b Projected assuming average oil, refined products, and NGL
production of 900,000 b/d and average price of $31.20 per barrel.
Gas exports of 16 billion cubic meters at $4.25 per million Btu are
assumed for 1983.
Algeria would face far more serious economic prob-
lems if oil prices were to fall sharply. A price of $25
per barrel of oil would push the 1983 projected
current account deficit to $4.9 billion at 1982 hydro-
carbon production levels. The Algerian Government
has told foreign financial, commercial, and govern-
ment officials that imports will be cut in 1983 by
whatever percentage is necessary to balance a decline
in hydrocarbon export revenues. This would mean
delaying investment in development projects and
making fewer consumer goods available. Algeria can
also resort to borrowing money internationally, but it
has been loath to do this in recent years.
Algeria has been able to limit borrowing in the
international capital market since 1979 by relying on
unused credit lines and drawdowns in foreign ex-
change reserves. This three-and-a-half-year hiatus
ended in April 1983 when Algeria began seeking a
$500 million Eurocurrency loan to help finance capi-
tal projects for the state petroleum company. The loan
received a very positive response from international
banks, and the favorable terms offered-0.5 percent-
age point above LIBOR initially-reflect Algeria's
cautious financial management. As of March 1983,
Algeria had foreign exchange reserves (excluding
gold) of $2.1 billion-enough to cover approximately
two and a half months of imports. These reserves are
supplemented by gold holdings worth $2.3 billion as of
the end of March. 25X1
As long as the oil market does not drop drastically,
the United States has an opportunity to expand its
market share and increase exports to Algeria. The
Algerian Government has expressed interest in in- 25X1
creasing US imports and equalizing the trade balance,
which has always been heavily in Algeria's favor. The
United States has such a small share of the Algerian
market that there is plenty of room to expand sales
before overdependence on the United States would
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Figure 2
Algeria: Merchandise Trade With
the United States
become an issue. Currently, the United States holds
52 percent of the world market for grain sales but
supplies only about 30 percent of Algeria's grain
imports. Embassy reporting suggests that US unwill-
ingness to enter into long-term grain agreements has
resulted in a decline in its grain market share in
Algeria. The Algerian Government seeks US partici-
pation in cooperative programs that will develop
human resources and result in a true transfer of
technology and does not want to be simply a market
for grain sales
Despite the weakness in the oil market, Algerian
contacts with US firms have increased in the last
year, particularly since a trade investment mission
headed by the US Secretary of Commerce visited
Algiers last December. Algeria has been granted US
foreign military sales eligibility for purchase of de-
fense services, and a US/Algerian Joint Economic
Commission is now being considered. Both develop-
ments should enhance US trade prospects. Oil and gas
market conditions and competitive financing, as well
Exports f.o.b.
[] Imports f.o.b.
u Balance
as the outcome of negotiations on existing US/Alger-
ian natural gas contracts will determine whether this
interest in increased economic cooperation produces
new contracts and a greater US market share in
Algeria.
Outlook
There is little chance that Algeria's foreign policy
under Bendjedid will return to the radical posture of
the Boumediene era. Like some other Arab states,
Algeria would probably like to reap the benefits that
often accompany closer relations with the United
States, such as training and educational opportunities
and favorable financial terms. Bendjedid probably
realizes that Algeria's nonaligned or Arab credentials
would not be severely damaged by cultivating stron-
ger and more open ties with the United States.
Despite the advantages Algiers may see in closer ties
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Figure 3
World Grain Sales, 1981-828
Million metric tons
Total World Grain Sales: 206.0
World Grain Sales to Algeria: 3.4
Italy
1%
a Market year July through June; grain includes
wheat and coarse grains.
with Washington, we believe the Algerian Govern-
ment will continue its cautious approach toward
developing those ties and may at times be quite
outspoken in its criticism of US policies.
A number of common interests have brought Algerian
goals into closer alignment with those of the United
States and have fostered cooperation. Chief among
these are Algeria's growing desire for regional stabil-
ity-in the broadest context and in North Africa-
concern over the potential dangers of unchecked
Islamic fundamentalism, and an appreciation of the
interconnections in the world economy and a desire to
see it stabilized. Although Algeria's strategies for
pursuing these interests are not necessarily compatible
with those of the United States, the confluence of
interests is unique in the history of the two countries'
relations and appears durable for the foreseeable
future. Divergent strategies and lingering suspicions
will remain obstacles to the rapid improvement of
bilateral ties, and, in conjunction with adverse devel-
opments in the region, they could inhibit the current
dialogue.
Algerian support for US policies in the Middle East
will come slowly and will hinge to a large degree on
Algeria's ability to bring itself into the Arab main-
stream. Bendjedid's interest in promoting Algeria as 25X1
an important contributor to regional stability will
probably encourage the Algerians to seek a modus
vivendi with their radical and moderate Arab broth-
ers. Algeria's efforts will be aimed primarily at
curbing what it views as debilitating or divisive forces
within the Arab world.
Algeria is a nation more concerned with economic
development, regional affairs, and nonalignment than
with East-West issues. Bendjedid is more likely to
prefer the role of "impartial" mediator in Arab issues
to that of taking sides along East-West lines. Algeria's
role as an effective negotiator between the moderate
and radical Arab states was lent credibility by Saudi
King Fahd's unprecedented visit to Algeria late last
year to discuss regional problems.
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We believe the current soft oil market will limit
Algeria's revenues and, therefore, its demand for
imported goods and services through at least 1983.
Algeria's considerable energy resources and its ambi-
tious development plans, however, probably continue
to make it a good market for US products over the
long term. Although US firms must compete with
European firms geographically much closer, warmer
political relations between Algeria and the United
States, coupled with Algeria's desire to remain inde-
pendent of any one supplier for any commodity and
Algeria's respect for US technical expertise, could
lead to an increase in US sales to Algeria. Agricul-
ture, construction, and natural gas development are
particularly good prospects because of the emphasis
given these areas by the current regime. Since last
December, several US firms have been meeting with
Algerian officials regarding possible contracts in these
areas. Political differences will not preclude increased
commercial ties but will be a disincentive.
In Algeria's view, the supply of US materiel and
training assistance would lend better balance not only
to its own relations with the superpowers but also to
Washington's relations with Algeria and Morocco.
For political and economic reasons, however, Alge-
ria's military purchases from the United States over
the next several years will probably be limited to
small military vehicles and other small-scale equip-
ment.
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