Research Group on 'the Middle East and Africa' FY2021-#2
"Research Reports" are compiled by participants in research groups set up at the Japan Institute of International Affairs, and are designed to disseminate, in a timely fashion, the content of presentations made at research group meetings or analyses of current affairs. The "Research Reports" represent their authors' views. In addition to these "Research Reports", individual research groups will publish "Research Bulletins" covering the full range of the group's research themes.
Changes in Egypt's Circumstances
The situation surrounding Egypt has changed in recent years. Firstly, a huge natural gas field was found in Zuhr on the Mediterranean coast in northern Egypt, followed by the establishment of the Eastern Mediterranean Gas Forum (EMGF). The forum is an international framework for the development of natural gas utilizing Egypt as a liquefied natural gas hub, and consists of Israel, Jordan, Palestine, Cyprus, Greece and Italy in addition to Egypt. It is not yet clear how the forum would actually function. But under certain circumstances, it could affect international relations in the Eastern Mediterranean region.
Secondly, Russia and China have been increasing their presence in the Middle East. While maintaining good relations with Western countries and following the policies of successive administrations in, for example, complying with the IMF's fiscal reconstruction policy, President 'Abd al-Fattāḥ al-Sīsī has been rapidly drawing Egypt closer to Russia and China.
One current concern is the depletion of the Nile River due to the construction of the Al-Nahda Dam, or Grand Ethiopian Renaissance Dam (GERD), in Ethiopia. As Egypt and Sudan oppose the filling of the dam's reservoir to the level proposed by Ethiopia, negotiations are stalled at this point. It remains to be observed what measures President Al-Sisi will take in this regard. The following sections present an overview of Egypt's relationships with Russia and China in view of the notable changes that have taken place in Egypt in recent years.
Relations with Russia
The Al-Sisi administration has been strengthening its relations with Russia, mainly in the military sector. Egypt's approach to Russia in this area is aimed at reducing its excessive dependence on the United States. On the other hand, Russia has positioned Egypt in the context of its effort to recapture the sphere of influence it had in the Middle East during the Soviet era, and it seems also intent on using Egypt as a gateway to Middle Eastern and African markets. The following three points should be noted.
The first is the formation of Russian footholds in the Mediterranean region in northern Egypt. These include the construction of a nuclear power plant in Al Dabaa (per a 2017 agreement) for which Rosatom was awarded the order, the construction of an industrial park for Russian companies on the east coast of Port Said (per a 2018 agreement), and the use of an air base in Sidi Barrani near the Libyan border by a Russian military contractor (around 2018). The Russian military also has bases in the Mediterranean cities of Hmeimim and Tartus in Syria. In other words, under the Al-Sisi regime, the Russian army's foothold has been extended to the northern part of Egypt. At the moment, the Russian foothold is a "point" and does not encompass the entire eastern Mediterranean as a "plane". However, if and when the conflict in Libya ends, Russia's foothold as a "point" will likely expand to include Libya as well.
The second is the purchase of Russian military equipment by the Al-Sisi regime. Egypt expelled Soviet military advisers and other officials in 1972 during the Sadat era, and has received about $1.3 billion worth of military aid annually from the United States since 1979. As a result, the major Egyptian military equipment is currently dominated by the US. However, President Al-Sisi approached Russia immediately after he overthrew the Morsi regime and purchased Russian military equipment. So far, it is assumed that the monetary amount of equipment purchased by Egypt from Russia exceeds the total monetary amount of equipment purchased during the Sadat and Mubarak periods. Notably, despite warnings from the Trump and Biden administrations after the Countering America's Adversaries Through Sanctions Act (CAATSA) went into effect in the US, Egypt signed an agreement with Russia to purchase 24 Su-35 aircraft to be delivered beginning in 2021.
The third is the use of veteran-run "private" companies to broadly strengthen relationships to an extent not fully visible. One example is the nation's largest security firm run by Sharif Khalid, a retired general and intelligence officer. The company has introduced Russian-made equipment to guard domestic airports such as Sharm el-Sheikh International Airport, major public institutions, diplomatic missions in Egyp and national universities. In this way, Russian products are being used in the security sector in Egypt through "private" companies linked to the military.
Of the three items mentioned above, the most notable is the purchase of the Su-35s. It should be noted that President Al-Sisi was more interested in buying Russian fighters than he was concerned about the risk of worsening relations with the United States.
Relations with China
China's presence in Egypt has become prominent since Al-Sisi took office. In fact, Egypt's relations with China were being strengthened even before Al-Sisi; President Mursi, who was in office from 2012 to 2013 with the support of the Muslim Brotherhood, also indicated his regard for China by making it the first country he visited outside the Middle East. Regardless of political orientation, many in Egypt have been calling for an end to dependence on the United States since the Mubarak era. The Al-Sisi administration has little alternative but to turn for assistance to China not only as an influential member of the international community but also as an economic power that does not use human rights as a pretext for political pressure.
Since China agreed to a comprehensive strategic partnership with Egypt in December 2014, China's investment in Egypt has picked up momentum, with its direct investment increasing by 4.6% year-on-year in the first half of 2019. However, in terms of trade value, China's trade with Egypt in 2019 accounted for only 0.5% of its total exports and less than 0.1% of its total imports. Egypt's trade with China, on the other hand, accounted for 2% of the country's total exports but 15% of its total imports, making China its largest importer. This relationship is reflected in the mutual visits of the two leaders. President Al-Sisi has visited China six times in total as of June 2021, while President Xi Jinping visited Egypt only once in 2016. In other words, for China, Egypt's importance lies not in its trading potential but in its geopolitical location.
Currently, the principal means of strengthening bilateral relations is the implementation of several mega-projects by Chinese companies. A prime example is the new administrative capital to be built 40 kilometers east of Cairo. Initially, construction was to be consigned mainly to construction companies in Persian Gulf countries such as Dubai but, due to the fall of the Egyptian pound following the introduction of floating exchange rates in 2016, several companies withdrew. The plan was subsequently changed, and Chinese companies are now playing a central role in the construction of facilities for the new administrative capital in cooperation with local companies under the Egyptian military. Chinese companies will also be taking on a leading role in the construction of a high-speed railway. The railway will connect to the Mediterranean coast from the Egypt-China Suez Economic and Trade Cooperation Zone along the Gulf of Suez by way of the new administrative capital and Cairo. The construction of the high-speed railway is expected to further increase China's presence in Egypt.
What bears watching in Egypt's relations with China is whether China will remain politically uninvolved in the future. At the very least, there have been some situations that have provoked the US government. For example, joint military exercises have been carried out since 2015 with the PLA Navy in the Mediterranean Sea, and Chinese port operating companies are involved in the operation of major ports in the Mediterranean, namely the ports of Alexandria, Abu Qir, and Dekheila. In addition, a joint venture between Chinese optical cable manufacturer Hengtong and an Egyptian company was established in 2018 in the city of Badr in northeastern Cairo, even as the US government asked Egypt to keep Chinese companies out of its 5G market.
As mentioned above, the approaches of the Al-Sisi administration to Russia and China go beyond merely eliminating its dependence on the United States. Good relations with the United States and other Western countries are essential for the Egyptian government to resolve the Al-Nahda Dam filling issue and get the Eastern Mediterranean Gas Forum on track. Depending on how Western countries respond to not only the dam issue but also other issues that the Egyptian government considers important, however, there is a growing possibility that Egypt will make further approaches to the Russia-China camp.
(This is an English translation of a paper originally published in Japanese on June 25, 2021.)