It was learnt at the end of May that Sonatrach is being even more secretive and opaque than ever over the contracts it signs with foreign companies.

According to media reports and our sources in Algeria (as reported in Algeria Politics & Security - 24 June 2016), the government has given Sonatrach CEO Amine Mazouzi the freedom to sign contracts with foreign service companies without having to make them public, either in-house or in the media. As a stateowned company there is no longer any way of keeping tabs on its procurements. In this new ‘climate’ Sonatrach is able to return to the old ways of under-the-counter deals. (The reasons for this is explained in more detail in the 1 July issue of Algeria Politics & Security)

Quite when this came into force and from what level of authority, is unclear.

Sonatrach, as well as Sonelgaz, has been prone to corruption, some would say awash with it, since former energy minister Chakib Khelil agreed to return to Algeria and work for President Abdelaziz Bouteflika. While the president encouraged such practices, it should be noted that such corruption, at the highest level of the state, predates the Bouteflika presidency.

However, in the current international political environment — when more and more transparency is being demanded, and when the Sonatrach corruption scandals might have served as a warning to the regime — it is worrying that Algeria, which has one of the world’s worst track records for corruption, should now be advocating that its national oil company revert to greater secrecy over contracts.

The fact that Sonatrach is keeping such contracts secret does not necessarily mean that they are corrupt. Indeed, such secrecy may enable Mazouzi, Sonatrach’s CEO, to find new ways of driving costs down. However, given both the company’s and the presidency’s track records, the inevitable questions will be asked. Indeed, the obvious question is whether this policy, if it is in fact new, is in any way linked to either Khelil’s return or Noureddine Bouterfa’s appointment as energy minister (see above).

Questions over Sonatrach’s IT contract with NETAS

Sonatrach’s apparent new secrecy over its contracts with foreign companies raises questions about its US$51 million contract with NETAS Telekomunikasyon, the Turkish telecommunication equipment provider, which was reportedly awarded on 19 June. NETAS will be helping Sonatrach with the planned harmonisation of its IT system in a major project known within Sonatrach as the Common Operating Environment (COE).

The question that many foreign companies want answered concerns the circumstances under which the contract — which was reported in April to have been awarded by Sonatrach’s central IT department to IBM’s Tunisian subsidiary for US$55.5 million — was apparently cancelled and then re-awarded to NETAS two months later.

The answer may be very simple. IBM may have pulled out of the deal and Sonatrach was lucky in being able to re-award it for US$4.5 million less. There might also have been sensitive commercial reasons, which none of the parties wish to have disclosed.

NETAS, Turkey’s leading telecom infrastructure provider, is a major international company. It was established in 1967 as a joint venture company between the Turkish PTT and Canada’s Nortel Networks Corporation, with the aim of supplying Turkey with locally manufactured telecommunications equipment.

In the past couple of years, it has undertaken considerable work in Algeria. For example, in May 2014 it signed a US$64 million equipment supply contract with the government. NETAS is also reported to have been awarded a contract in 2015 by the Defence Ministry to modernise its internet protocol (IP) network. Also, in 2015, the company was reportedly used by Algérie Telecom’s Mobilis to optimise its 2G and 3G infrastructure.

The concern about the contract really stems from Sonatrach’s secrecy about it. The fact that the Turkish Armed Forces Foundation (TAFF) has a 15% stake in NETAS is unsurprising because the Turkish army is one of its main clients. Indeed, according to one source, it was the links between NETAS and the Turkish army that won the confidence of the Algerian Defence Ministry.

The problem is that links between Sonatrach and the Defence Ministry carry the risk of raising memories of the huge 2006 corruption scandal surrounding Brown & Root Condor (BRC) and the government’s abuse of public procurement and tendering procedures. If Sonatrach is to avoid such memories being revisited — and if it wants to reassure its foreign clients that its current secrecy is not an abuse of public procurement laws, or worse — it would be wise to be more transparent over why this particular contract was rewarded.