2024-03-08 04:00:00
Against the background of the escalation of the war in the Gaza Strip and the worsening of tensions in Rafah – Egypt’s involvement in the deal of the Israeli abductees and the issue of providing humanitarian aid to the residents of the Strip places it at the top of the international agenda. In the meantime, the increased contacts and security coordination with Israel, alongside the promotion of Egyptian tanks and infantry along the border for fear of a mass influx of Gaza and Rafah residents to its territory, increase the scope of the internal and international pressures exerted on it.
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The attacks by the Houthi rebels in the Red Sea area, which caused, among other things, the halting of the passage to the Suez Canal – one of the most important and busiest trade arteries in the world, through which about 30% of the world’s container traffic and about 12% of global trade passes – increase the levels of risk and the intensity of the security threat directed towards Axis This is strategic. They disrupt and lengthen the global supply chains as well as harm the Egyptian economy, which is immersed in heavy external debts (for example, about 12 billion dollars to the International Monetary Fund).
A closer look even shows that its revenues from the canal, which contribute 2% to the Egyptian GDP and which reached a peak of approximately 9.4 billion dollars between 2022-2023, have dropped by 40% since the beginning of the year. and the strategic importance of Egypt, the International Monetary Fund (IMF) agreed, with the encouragement of the US, to discuss with the Cairo government about providing a loan in the amount of 5 billion dollars. All this alongside a huge economic agreement that was signed last week between it and the United Arab Emirates, under which Abu Dhabi will flow about 35 billion dollars into the Egyptian economy already in the coming weeks.
The solemn statement by Dr. Mustafa Madbouly, the Prime Minister of Egypt, on the signing of a “historic agreement” with the Abu Dhabi Government’s Development Fund (ADQ) evoked many echoes in the country. The agreement, under which the United Arab Emirates will invest approximately 24 billion dollars in a huge and prestigious development project in the city Ras al-Hakhma, located about 350 km northwest of Cairo, on the coast of the Mediterranean Sea, holds quite a few strategic dividends.
From a financial point of view, it already appears that despite the massive investment of the Gulf principalities, led by Saudi Arabia, the United Arab Emirates, Kuwait and Qatar, over 110 billion dollars in Egypt since 2013, the largest deal in Egypt’s history this time is a lifeline.
That is, critical emergency aid, designed to rescue Egypt’s economy from a deep debt crisis, from a severe shortage of foreign exchange and a prolonged economic hardship, which includes, among other things, inflation of about 40%, a devaluation of 50% in the value of the Egyptian pound alongside the poverty of about 60% of the population. This is a material hardship that is deepening and spreading in Egypt especially recently, in view of the worsening of the war in the Gaza Strip and the Red Sea crisis as well as against the background of the food crisis and the increase in grain prices following the war in Ukraine.
An economic turning point
Moreover, the establishment of the huge project, and more precisely these days – despite the security escalation, the public criticism and the logistical challenges involved – is expected to provide Egypt with 35% of the profits of the future projects that will be established on the site, in an estimated amount of about 150 billion dollars. According to various economists in Egypt and from a pragmatic realist point of view, this is a necessary strategic move, the future will significantly change the economic direction in which the country is moving.
Its establishment over a vast area of approximately 170 million square meters – including the development of free economic zones, investment in the fields of infrastructure, tourism and technology alongside the establishment of commercial areas, airports and various tourist attractions – may be a critical turning point.
One that will help diversify the sources of income and employment in Egypt, will reduce its dependence on traditional sources such as oil and remittances, and will also encourage additional foreign investments that will, in turn, lead to the recovery of the Egyptian economy and economic growth. All this in addition to extensive areas that Saudi Arabia is expected to purchase soon at the Al-Gamila site near the Sanfir and Tiran islands in the Sharm el-Sheikh area, to the extent of tens of billions of dollars.
Residents of Rafah flee their homes (Photo: Arab Networks)
Be that as it may, these sums – even if they will be poured in soon, including the 11 billion dollars expected to arrive next week from Abu Dhabi – are only a temporary relief and still do not solve the structural failures, the immediate hardships and the huge debt crisis that Egypt has found itself in. A debt that quadrupled during President al-Sisi’s ten years in office and reached 164 billion dollars.
These economic investments arouse severe public criticism attributed to the failed policy of the Egyptian president and his excessive focus, in their view, on establishing international ventures instead of establishing social safety nets, while carrying out the privatization of government companies with an emphasis on those under the control of the military.
Against this background, the many voices are growing in the public, among the military establishment and government officials in the opposition who condemn the deal, which they consider a national disaster that endangers the stability of Egypt, the status and power of the regime in Cairo. All of this, among other things, in view of the intensification of security tensions and the perceived threat associated with the entry of approximately 1.4 million refugees from Gaza into its territory and the establishment of a buffer zone surrounded by a wall near the Rafah border, which is doubtless intended to protect them or provide any solution to the conflict with Israel.
Refreshing the status quo
It is not for nothing that the Cairo government hastened to reject the above criticism and refute these claims, despite its enormous influence on the future of the Israeli-Palestinian conflict and the fate of the entire region. The deepening of its economic ties with the United Arab Emirates alongside its pro-Palestinian stance and the fragile balance in its relations with Israel provide a glimpse into the variety of challenges and enormous dilemmas that al-Sisi faces, alongside his many ambitions and the expansive foreign policy he is pursuing.
It is an economic partnership that is expected to redefine the regional status quo as well as the maneuverability of Cairo’s diplomatic efforts. All this alongside and in addition to the interests of the Abu Dhabi government, for which this is an important opportunity to project its economic strength, to tighten and expand the ties between the countries and between the leaders.
Also, beyond the trust it places in Essi and his actions, the establishment of the project is intended to promote political and economic stability in Egypt, which is a critical key factor, essential to maintaining overall stability in the Middle East. In addition, he may encourage the Cairo government to increase its mediation efforts in the Israeli conflict against Hamas and the Palestinians, in part while promoting a solution to the Rafah issue.
Furthermore, the establishment of the project is expected to tighten the UAE’s grip on the Egyptian market, while increasing Egypt’s dependence on it, as well as increasing Abu Dhabi’s involvement in economic development and investment in future projects for the reconstruction of the Strip after the end of the war. Meanwhile, it is expected to establish the regional geopolitical position of the two countries, and strengthen the position and strategic role of Cairo and Doha in the Middle East.
The aggregate effect of all of these may reflect on the relations of each of them with Israel and the agreements with it (“the cold peace” with Egypt and the “Abraham agreements” with the United Emirates). It is also expected to affect the regional political-economic-security balance of power, and to reshape the map of relations, agreements and threats that currently characterizes one of the most strategic and conflicted regions in the world.
A mix of crises and challenges
In a broad systemic view, without a doubt, Egypt under the leadership of President al-Sisi is currently facing one of the most important and decisive turning points, while facing a deadly mix of crises and challenges, which requires it to make fateful strategic decisions. Courageous decisions that avoiding them will only worsen the uncertainty and economic instability, especially against the background of the increase in the area of security risks and threats to all their meanings and consequences.
On the other hand, the implementation of those decisions, with an emphasis on the establishment of the project with the United Arab Emirates, may indeed rescue Egypt from an impasse that only worsens its deteriorating economic situation, but at the same time, on the other hand, may further damage the public’s trust and support for the Egyptian president.
All of these political, economic and security factors and circumstances reflect the situation of Egypt, including that of the entire Middle East, which is now at a strategic crossroads and whose future depends to a large extent on al-Sisi’s actions. Moves that can improve Egypt’s strength and image as a strategic, stabilizing and influential center of power in the Middle East.
The author is an expert on geopolitics, international crises and global terrorism
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