Sonatrach’s skeletons coming out of the closet

The type of management by Khelil and Ould Kaddour forced hundreds of excellent Algerian technicians to flee their country for jobs abroad where their skills are much appreciated.
Sunday 05/05/2019
False pretenses. Former Sonatrach CEO Abdelmoumen Ould Kaddour (L) during a meeting with executives and employees at Hassi R’mel gas field, last October. (Reuters)
False pretenses. Former Sonatrach CEO Abdelmoumen Ould Kaddour (L) during a meeting with executives and employees at Hassi R’mel gas field, last October. (Reuters)

The sacking of Algerian state oil company Sonatrach CEO Abdelmoumen Ould Kaddour could usher in major reforms in the key sector the country’s economy.

Sonatrach employs 120,000 people and accounts for 95% of Algeria’s export income. Until the advent of Abdelaziz Bouteflika to the presidency 20 years ago, it was run by skilled and honest people. So was the Ministry of Energy. That changed in 1999 with the appointment of Chakib Khelil to the energy portfolio, which he held for more than a decade.

Although the powers he wielded were unprecedented since independence, he was sacked in 2010 after a critical report by the Algerian Department of Intelligence and Security (DRS) forced Bouteflika to sacrifice one of his liegemen, who allowed the clan of shady businessmen around the head of state to get their snouts in the oil and gas trough.

Khelil worked at the World Bank from 1980-99 and built close links with Dick Cheney, who would later serve as US vice-president, and his oil and gas services company, Halliburton.

The style of management of Ould Kaddour, who was recently sacked by the army Chief-of-Staff General Ahmed Gaid Salah, is suspected of corrupt practices that became the hallmark of a company that had been the proud symbol of Algerian know-how.

He was a protege of Khelil, who put him in charge of Brown, Root & Condor (BRC) in the mid-2000s. This joint venture specialised in engineering work for Algerian companies (Sonatrach and the Nuclear Centre at Draria) and the British subsidiary (KRB) of Halliburton.

BRC was alleged to have received large kickbacks from Sonatrach and the Ministry of Defence for work carried out at their behest in Algeria during the boom years induced by higher oil prices. The DRS pressed charges of spying for a foreign power (the United States) and Ould Kaddour was sentenced to prison by the military court in Blida.

Ould Kaddour’s appointment in 2017 signalled a strong return of US oil interests in Algeria. The companies had not appreciated the agreement about a major solar energy contract with Italian giant ENI. The Italian company’s founder, Enrico Mattei, had advised the Algerians during their negotiations during the Treaty of Evian which, in 1962, led to the independence of Algeria. The company has retained very strong links with Algeria over 60 years.

Ould Kaddour’s appointment came as a bolt from the blue but he wasted no time in showing his pro-American credentials. In November, he bought a 70-year-old oil refinery in Sicily from ExxonMobil, which had failed to find a buyer for years. The price of nearly $1 billion seemed to Sonatrach insiders exorbitant. Algeria needs to import nearly $2 billion worth of refined products annually because it lacks refining capacity but this could have been done at a fraction of the money spent on buying the Augusta refinery by refining Algerian crude abroad.

Senior Sonatrach officials and the Ministry of Energy said they suspect this only one of many questionable deals.

Ould Kaddour also promoted out-of-court settlements in disputes with foreign partners over and above the traditional recourse to arbitration. Sonatrach has, over the decades, won most of these cases so why change tack and resort to out-of-court agreements whose terms remain confidential?

More broadly, Ould Kaddour’s desperate attempts to interest ExxonMobil in investing in Algeria raised many questions. The US giant had never shown interest in investing in the country. The key question remains: How could a man convicted of espionage be entrusted with the future of the key company in Algeria?

After Khelil was sacked, all vice-presidents of Sonatrach — bar one — were taken to court on charges of corruption. The sentences left a bitter aftertaste among employees of the company, the feeling that minor fry were paying for the corruption of senior members of the Bouteflika clan. Four corruption charges filed against Khelil, and then dropped, have been reopened by the Supreme Court in Algiers.

Fish rots from the head downward. Nothing illustrates this adage better than the Ould Kaddour saga. The type of management by Khelil and Ould Kaddour forced hundreds of excellent Algerian technicians to flee their country for jobs abroad where their skills are much appreciated. Ould Kaddour’s demise was greeted with undiluted joy by many in Sonatrach.

However, the manner Gaid Salah fired Ould Kaddour poses many questions. It comes amid Algerian courts calling on senior businessmen and officials to testify about alleged corruption. Some have been arrested. Not all of them were close to Bouteflika.

Leaving Sonatrach rudderless is extremely dangerous. The company risks losing the trust of some of its key foreign partners. Today, it faces three challenges: over its future strategy, at home and abroad; over the cleaning out of the Augean stables of corruption that characterise Algeria; over the loss of thousands of engineers.

Due process of law is essential. It not up to the army, even less to its chief, who was well acquainted over more than a decade with how Sonatrach was managed, to get involved in a sector in which he has no competence.

Beyond Sonatrach, Gaid Salah’s behaviour is increasingly controversial. Backed by Interim President Abdelkader Bensalah, the interim leader of the second chamber of parliament Salah Goudjil and Mouad Bouchareb, acting secretary-general of the former single ruling National Liberation Party — all of whom were fervent supporters of Bouteflika, the chief of staff is legalising some parties but not others, some religious organisations but not others and adamantly refusing to legalise the independent League of Human Rights.

This arbitrary behaviour is aimed at maintaining as much of the deep state as possible ahead of presidential elections planned for early July.

Not one Algerian is duped of this game of bluff and millions clamour their opposition every Friday. They deserve to have a convincing interim administration composed of politicians of standing and repute, young and old who can manage the country’s affairs until elections take place. There is no shortage of competent practitioners, be it in the field of energy or beyond. The millions of demonstrators to whom Salah is throwing red meat remain unconvinced of his honesty or good intentions.