West Sounds the Alarm as Algerian Junta Falters : Mideast: Danger of violent collapse and Islamic rule sparks concerns about repercussions in the region.

Algeria’s military-backed government has failed to consolidate its power and is likely to collapse within 18 months unless it regains control of the streets from Muslim insurgents, according to European intelligence agencies and senior U.S. analysts.

The junta’s failure would open the way for the emergence of a second Islamic republic in a key Middle East state.

Drastic steps taken in recent weeks to strengthen the government--including a massive security clampdown, a secret new judicial system and Draconian new penalties--have instead revealed the junta’s weakness and vulnerability, the sources said.

In contrast, the underground opposition is waging an increasingly sophisticated campaign on regime targets. Many recent incidents appear to have involved intelligence from within Algeria’s security forces, indicating cracks or dissent within.

One senior U.S. analyst called it a “watershed” period for the largest North African state and potentially for the entire region. Western intelligence is deeply concerned that the collapse of Algeria’s government would have an impact particularly on Morocco, Tunisia and Egypt, but also on countries as far away as Jordan and even some of the Muslim former Soviet republics in Central Asia.

“Whatever happens in Algeria will profoundly influence the course of political development in the Middle East,” a European analyst said. “The potential magnitude is even greater than what happened in Iran.”

European governments are also worried about the repercussions on their own large Muslim communities.

Key military officials in Algiers, across the Mediterranean from Europe, are said to believe that they must regain control of the streets within a year or face failure.

The junta seized power last January in a bloodless coup that forced the resignation of President Chadli Bendjedid as he was phasing in democratic reforms.

A new Higher State Council, the junta’s ruling five-man body, also aborted Algeria’s first democratic parliamentary race to prevent a victory by the Islamic Salvation Front (FIS). The Islamic movement took a landslide lead in the first of a two-part election in December and was believed to be on the verge of making it a sweep during a second round in January.

The front was subsequently outlawed. Forced underground, the multifaceted Islamic movement has further fragmented over the intervening 10 months. And after the coup, at least 9,000 suspected Muslim activists or sympathizers were arrested and sent to detention camps in the southern Sahara desert. Front officials claimed that 20,000 were picked up.

Yet the movement would win an even larger share of the vote than it did in December if voters were to go to the polls today, European and U.S. analysts said. In a contest involving more than 50 parties, the front won 188 of the 231 seats decided in December.

“The regime has failed to address any of the problems that led people to vote for FIS in the first place,” an Administration specialist said. As the junta drifted, the Islamists, whose agenda includes conforming Algerian law to Islamic tenets, have been widely seen as the main force pushing for democracy.

Despite promises, the junta has failed to make a dent in deteriorating social and economic conditions. Because of past mismanagement and inefficiency, Algeria will spend 70% of its foreign-exchange earnings this year to service a $27-billion foreign debt, leaving little for domestic development.

Since the coup, production has declined because a shortage of foreign exchange has limited the ability to buy raw materials and spare parts. Delays in paying workers have contributed to a series of crippling strikes.

A chronic housing shortage, often squeezing two or three generations into tiny apartments, is now growing worse. The unemployment rate is at least 30%, and at least half the labor force is underemployed, U.S. sources said. Food subsidies were cut last summer, resulting in serious price increases that make basic commodities beyond the range of large segments of Algeria’s 26 million people.

Prime Minister Belaid Abdesslam, who oversaw Algeria’s Soviet-style industrialization of the 1970s, has turned back to central control of the economy, moving away from the liberal market reforms introduced by Bendjedid.

Algerian officials have toured Europe to appeal for investment and aid, noting that if they fail the former French colony could become Islamic.

But despite a bad case of nerves, particularly in France, Spain and Italy, the junta has not received the Western aid and support that it had counted on to fund development schemes and win back Algerian voters before scheduled presidential elections at the end of 1993.

The Bush Administration has held back from involvement in the Algerian crisis. After the January coup, the White House said only that it regretted the suspension of the boldest experiment with democracy in the Arab world.

The shadow of Iran’s 1979 revolution still so haunts Washington policy-makers that the United States appears prepared to tolerate the junta rather than press for restoration of democracy that would result in an Islamic victory.

European governments, especially that of France, fear that an Islamic victory would unleash a wave of immigration to their own countries at a time when xenophobia is increasingly shaping domestic politics. As a result, there is virtually no serious outside pressure on the junta to share power.

European intelligence sources now seriously doubt that the Algerian regime will follow through on the pledge to hold fully democratic presidential elections next year.

The crisis has escalated steadily since a state of emergency was declared in February. About 200 security force members have been killed in sporadic assaults, while hit-and-run attacks now regularly target government facilities.

The junta has held the Islamic front responsible for the violence, although European intelligence sources and U.S. analysts attribute many of the incidents to extremist cells of Islamists outside the FIS umbrella or on its fringe.

The disarray in Algeria became evident after the June 29 assassination of Mohammed Boudiaf, the head of the Higher State Council, by an army lieutenant. Although the junta blamed FIS militants, a state commission later said there was no evidence of a role by Islamists.

The inquiry instead charged the government with “blameworthy and criminal . . . negligence.” Diplomats and local press reports suggested that the assassination was a government conspiracy tied to Boudiaf’s attempt to root out rampant corruption.

Boudiaf was replaced by Ali Kafi, who pledged to restore the “authority of the state.”

But on Aug. 26, a bomb at Algiers’ international airport killed nine people and injured more than 100 in one of the deadliest single incidents since Algeria’s eight-year war of independence.

No group claimed responsibility, but the junta again accused the Islamic front and made vague allusions to an unnamed foreign power. Last month, Algerian television broadcast the alleged confessions of four prominent front officials, although Western intelligence sources remain skeptical.

Since the airport bombing, the junta decided after extensive debate that the military should take whatever steps necessary to prevent losing control.

Exceptional new powers to combat subversion and sabotage were announced in late September, including new courts presided over by judges whose identities will be secret and whose verdicts will be final, eliminating appeals or legal recourse.

The tough decree also replaced life prison terms with death sentences for terrorism and sabotage, while prison sentences for other crimes were at least doubled.

Although thousands of detainees from the first crackdown were released and some camps were closed last summer, the junta began security sweeps again after the airport bombing.

More than 780 have been arrested since the new decrees, according to Western intelligence. The Algerian Human Rights Defense League charged this month that torture of detainees by security forces has now become routine.

And this month, Algeria’s state-run television has replaced popular entertainment programs with interrogations of detained Islamists, including some in hospital beds and pictures of security force operations in the desert.

A new anti-terrorist unit headed by Gen. Mohammed Lamari, a former army commander, has made some headway in pacifying rural areas, according to U.S. and European analysts. Yet the new law-and-order crackdown has failed to stem growing public discontent, they said.

The Higher State Council has attempted dialogue with some secular parties, most notably the National Liberation Front (FLN), the ruling party since independence in 1962. The FLN came in an embarrassing third in the parliamentary elections.

But Western intelligence sources now believe that any attempt at reconciliation will fail unless it includes the major Islamic groups.

And without a peaceful return to democratic reforms, Algeria faces the growing danger of violent change--either in a civil war or a revolution--and the emergence of hard-line Islamists, they said.

Unlike the period preceding the coup, when pragmatic Islamic front leaders directed the largest Islamic movement in Algeria, the main activists now are radicals and extremists, mainly from smaller cells. “This is not the FIS we saw active in the elections,” said a U.S. analyst.

Western intelligence sources still believe that the main Islamic groups in Algeria are home-grown and largely self-armed and supported. Most arms are stolen from military arsenals or provided by sympathizers.

The junta has tried to implicate Iran. Algiers broke off already-tense diplomatic ties with Tehran this month. Although there have been ties between Islamists in the two countries, Western intelligence sources said these relations have had a limited effect.