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Cairo beset by regional geopolitical storm

7 February 2024

This package on Egypt also includes:

> More pain for more gain for Egypt
> UK and Egypt sign infrastructure agreement
> Familiar realities threaten Egypt’s energy hub ambitions
> Egypt nears fresh loan agreement with IMF
> ADQ and Adnec invest in Egypt hospitality group
> Egypt’s President El Sisi secures third term
> Egypt 2024 country profile and databank 

 

Egypt is surrounded on all sides by geopolitical crises, from the Gaza conflict to the northeast and the related Houthi attacks on Red Sea shipping to the southeast, to civil strife in Libya and Sudan to the west and south.

Further up the Nile, Egypt is also engaged in a diplomatic tussle with Addis Ababa over the Grand Ethiopian Renaissance Dam (Gerd), which Cairo has unsuccessfully tried to derail for years over fears of the impact it will have on water flows down the Nile.

Domestically, things are more straightforward, at least on the surface. President Abdel Fattah El Sisi won another six-year term in December, with just under 90% of the vote.

But the turmoil beyond the country’s borders could yet cause domestic problems for El Sisi, given the impact on the already fragile Egyptian economy – all of which is creating new political pressures that could eventually force the government’s hand.

The attacks on Red Sea shipping have, according to IMF Portwatch, led to a halving of traffic through the Suez Canal, an important source of hard currency earnings for Egypt. The risk of large numbers of Gazans moving south into the already-troubled Sinai region – whether willingly or not – is another potential source of instability.

Given these risks, it is little wonder that Cairo has, along with Qatar, been the most prominent Arab country trying to resolve the Hamas-Israel war.

Soon after Hamas’ assault on Israel on 7 October, El-Sisi convened the Cairo Peace Summit on 21 October. Diplomatic activity has continued since then, with Egyptian General Intelligence Service head Abbas Kamel holding talks with Hamas leaders Khaled Mashal and Ismail Haniyeh and Israel’s lead negotiator David Barnea.

As yet, this activity has not delivered peace, but one security analyst said Cairo’s involvement was essential to any potential deal, more so than Qatar or other interlocutors. “A peace agreement can only come through Egypt,” they said.

In the meantime, Egypt has also been a vital hub for humanitarian aid, receiving numerous flights to El Arish International airport in northern Sinai, an hour’s drive from the Rafah crossing into Gaza. However, the delivery of aid from there into the Palestinian territory itself has been sporadic and limited.

President El Sisi has also had to fend off accusations against Egyptian state officials of systematic bribery both in the facilitation of moving aid into Gaza and for Palestinians seeking permits to exit the strip.

For all of these reasons, it is in Egypt’s interests to help bring about a swift resolution to the Gaza conflict, which should resolve the Red Sea shipping crisis too, but the republic’s problems to the south may be more intractable, with Cairo’s efforts to dictate events to date having been singularly unsuccessful.

Southern strife

In September, reacting to an Ethiopian statement that the final filling of the Gerd dam had been completed, Egypt’s Ministry of Foreign Affairs said the filling showed “a disregard for the interests and rights of the downstream countries and their water security” and was a “breach of legality”.

In March, Foreign Minister Sameh Shoukry appeared to leave open the possibility of a more muscular response from Cairo, when he said: “All options are open and alternatives remain available.” However, Egypt does not appear to have the appetite to turn such hard words into tough action.

A brutal proxy war between the two powers is currently being fought in Sudan between the Rapid Support Forces (RSF) led by Mohamed Hamdan Dagalo (known as Hemedti), who is close to Ethiopia, and the Sudanese Armed Forces (SAF) of President General Abdel-Fattah Burhan, who is close to Egypt.

A critical factor for Egypt in both the Sudan and Ethiopian situation is the role of the UAE, which has backed the RSF and has supported Ethiopia’s Prime Minister Abiy Ahmed. Abu Dhabi’s regional activism has caused tensions between Cairo and Abu Dhabi, but El Sisi knows he cannot afford to risk his financial relationship with Abu Dhabi being placed in doubt.

“Cairo is furious about this, but they are dependent on the UAE for funding,” said one regional political analyst.

That was evident in comments from Planning and Economic Development Minister Hala Helmy el-Said at the Asian Financial Forum in Hong Kong in late January, when she spoke about the cooperation between Egypt and the UAE in areas such as investment, capacity building and government performance. She pointed in particular to collaborations between the Sovereign Fund of Egypt and the Abu Dhabi government’s ADQ investment fund.

Financial aid

The economic and the political are interwoven in the domestic political arena too, but a fresh package of financial support from the Washington-based IMF may help El Sisi’s government.

An IMF team led by Middle East and Central Asia division chief Ivanna Vladkova Hollar was in Cairo in late January and early February and agreed the main policy elements of a further economic reform programme and finance package that could amount to $10bn or more.

The reforms could also bring further short-term shocks to the economy and its 109 million people – something both sides say they are aware of.

“The IMF team and the Egyptian authorities also agreed on the critical importance of strengthening social spending to protect vulnerable groups. This is important to ensure adequate living conditions for low and middle-income households that have been hit particularly hard by rising prices,” said Hollar in a statement at the end of the IMF visit.

However, any sign of protest is liable to be swiftly answered by Interior Ministry police and National Security agents, who are well-versed in curtailing the space for political debate.

The lack of room for critical voices was clear in the December presidential election. Leading opposition figure Ahmed Tantawy pulled out of the poll in December, claiming intimidation by the regime. Elections in Egypt are “neither free nor fair”, according to Washington-based Freedom House.

Nonetheless, a successor to El Sisi will have to emerge at some point. His recent electoral win means he will be in power until 2030. At that point, though, he will have to make way for someone else unless he engineers another change to the constitution that allows him to run again.

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Dominic Dudley

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