The Russian war on Ukraine will have significant impacts on countries in the Middle East, ranging from strategic realignments to energy security and food supplies. For Egypt, the war is expected to have a major impact on its economy and foreign policy. As the world’s largest importer of wheat with a significant reliance on Russian and Ukrainian supplies, Egypt is bracing for a major food crisis in the coming months. Its good relationship with Russia puts it at odds with its western allies, particularly the United States and the European Union, which provide significant military, economic, security, and political support to Cairo. The ongoing Russian–Ukrainian crisis allows little room for Egypt to maneuver between the conflicting parties.
Confusion and Reluctance
The Russian invasion of Ukraine took Egypt (and the rest of the world) by surprise. In the beginning of the war, it was unclear to Egyptian officials whether Cairo could remain neutral, particularly in light of its relations with Moscow and Kyiv. Egypt thus adopted an ambiguous stance: it called for dialogue between Russia and Ukraine and urged both countries to use diplomacy to find a political solution for the conflict.
Cairo’s position triggered prompt expressions of frustration from its western allies. The G7 and EU ambassadors in Cairo pushed Egypt to express support of Ukraine. In a statement on March 1, they urged Egypt to join with other nations in showing its support for Ukraine because it “upholds the same principles of peace, stability and the integrity of the international rules-based order.” The next day Egypt voted with 140 other members on a United Nations General Assembly resolution that deplored Russia’s invasion and “called for the immediate withdrawal of its forces.”
Egypt’s reluctance to antagonize Russia should come as no surprise. Since seizing power in 2013 and becoming president in 2014, Egypt’s Abdel-Fattah el-Sisi developed a strong relationship with his Russian counterpart Vladimir Putin that resulted in a comprehensive partnership agreement in 2018 between the two countries. The level of military, security, political, and economic collaboration between Cairo and Moscow has grown significantly over the past few years.
Egypt’s reluctance to antagonize Russia should come as no surprise. The level of military, security, political, and economic collaboration between Cairo and Moscow has grown significantly over the past few years.
Since the beginning of the war, Sisi attempted to walk a fine line between Egypt’s western allies, particularly the United States, and Russia. While most countries have imposed sanctions on Russia, Egypt refused to do so. Its permanent representative to the United Nations, Osama Mahmoud Abdel-Khalek, reported his country’s rejection of sanctions. In his speech to the General Assembly on March 2, Abdel-Khalek asserted that “Egypt rejects the approach of employing economic sanctions outside the framework of the mechanisms of the multilateral international system,” adding that “Egypt reiterates its warning against economic and social effects of the current crisis on the entire global economy, which is still suffering from the pandemic’s repercussions.”
Egypt’s reluctance to condemn Russia stirred Ukraine’s anger. Ukrainian Charge d’Affairs in Cairo Ruslan Nechai criticized Egypt’s position on the Russian invasion and called on it to abandon neutrality and take a clearer position. In an interview with Al-Monitor, Nechai stressed Ukraine’s need for Egypt’s support and pointed out that “It is in Egypt’s best interest that the war ends. We need Egypt to offer us humanitarian and medical aid, and help us with weapons, at its own discretion. Egypt’s food security depends on Ukraine to a large extent.” On March 24, Sisi received a phone call from Ukraine’s President Volodymyr Zelenskyy who briefed him on the latest developments of the crisis and expressed his gratitude “for Egyptian efforts to continue hosting Ukrainian tourists in tourist resorts in Egypt, providing them with all means of assistance since the outbreak of the crisis.”
Serious Impacts
The ongoing Russian war on Ukraine profoundly affects the global economy, particularly in the Middle East. The prices of energy, cooking oil, and food commodities have soared over the past few weeks. The International Monetary Fund (IMF) has predicted that the Russian invasion would fundamentally reshape the global economy, which is already suffering from the effects of the COVID-19 pandemic.
The Middle East will be significantly impacted by the war, because of the region’s weak and fragile economies; endemic problems of governance; and its reliance on external imports of basic commodities.
The Middle East will be significantly impacted by the war, because of the region’s weak and fragile economies; endemic problems such as corruption, unemployment, and lack of good governance; and its reliance on external imports of basic commodities such as food, cooking oil, and energy. Russia and Ukraine are major food commodities suppliers, both accounting for “more than 25% of the world’s trade in wheat and for more than 60% of global sunflower oil and 30% of global barley exports.” Several countries in the region—such as Egypt, Tunisia, Lebanon, and Yemen—rely heavily on Russia’s and Ukraine’s wheat supplies; they are now bracing for a severe wheat crisis in the coming months.
The impact of the war on Egypt’s economy is especially significant. Egypt is the world’s top wheat importer; around 80 percent of its wheat imports come from Russia (about 70 percent) and Ukraine (around 11 percent). Since the beginning of the war, food prices have risen significantly. The prices of the basic commodities such as food, sunflower oil, and fuel have soared for the past few weeks. According to official figures, Egypt imported around 12.9 million tons of wheat at a cost of $3.2 billion in 2020. Since the beginning of the war on Ukraine, the price of a ton of wheat has almost doubled from $230 to $450. The government is now searching for other alternative suppliers in order to avoid a catastrophic food crisis over the coming months.
Egypt has been facing an economic and financial crisis due to the impact of COVID-19 and the failure of the economic policies of the Sisi regime. For the first time in Egypt’s history, its external debt stands at around $140 billion. Since the beginning of 2022 until early March, billions of so-called “hot money” left the country. Moreover, Egypt lost some $3 billion in foreign capital between the invasion on February 24 and March 2. Furthermore, on March 15, the credit rating agency Fitch warned that the war on Ukraine would add more challenges to Egypt’s economy. According to a recent Fitch report, “Egypt will suffer reduced tourism inflows, higher food prices and greater financing challenges as a result of Russia’s invasion of Ukraine…The crisis aggravates Egypt’s vulnerability to outflows of non-resident investment from its local-currency bond market.”
To weather the impact of the war on Ukraine, the Egyptian government asked the IMF for financial support; this will inevitably involve imposing more austerity measures and adding more economic difficulties to the average Egyptian. To try to soften the impact, on March 21 the Egyptian government devalued its currency by 14 percent, from 15.70 pounds to the dollar in November 2020 to 18.17–18.27 pounds to the dollar today. The central bank raised interest rates for the first time since 2017 in order to contain inflationary pressures and the growing financial problems. The bank increased the “rate by 100 basis points to reach 9.75%.” Additionally, “the overnight deposit and lending rates were also raised by 100 basis points each to reach 9.25% and 10.25% respectively.”
In addition, Egypt’s tourism sector will be affected badly by the Russian war in Ukraine. In 2018, tourism contributed around 12 percent to the gross domestic product when about 13 million people visited the country. It also provided around 2.9 million jobs. However, these numbers shrank after the COVID-19 pandemic hit Egypt’s tourist sector in 2020. The ongoing war in Ukraine is likely to affect tourism because Egypt is considered to be a main destination for millions of Russians and Ukrainians. Tourists from both countries account for a third of all foreign tourists in peak years. Some 700,000 Russian tourists visited Egypt in 2021 and 125,000 others did so in the first two weeks of 2022. In 2019, 1.6 million Ukrainian tourists visited Egypt, which was an increase of 32 percent from the year before. Given the ongoing war on Ukraine and the global sanctions against Russia, Egypt’s tourist sector is expected to struggle in the coming months, which will add more challenges to Egypt’s reeling economy.
Finally, over the past few years, Egypt signed several military and energy agreements with Russia that will be affected by economic and political sanctions on it and the developments of the war. For example, Russia has become a key arms supplier to Egypt; it has signed several arms contracts in the last few years. Between 2016 and 2020, Russia provided around 41 percent of Egypt’s weapons and became its primary arms supplier. Russia is also financing and building Egypt’s first nuclear power plant at Dabaa. The construction of the plant is planned to start in July 2022 and is mostly financed by a massive Russian loan of $25 billion. With the ongoing war on Ukraine and the current level of sanctions on Russia, these contracts and projects will likely be disrupted.
Limited Room for Maneuver
The growing relationship between Russia and Egypt has put Sisi in a tough position. He is struggling to balance this relationship with his western allies, particularly the United States. Sisi seems keen not to alienate Putin despite the international pressure and isolation the latter has been facing since the beginning of the war in Ukraine. Sisi is one of the few world leaders who remains in contact with Putin to maintain their good relationship. On March 9, he had a phone call with the Russian president to stress the need for dialogue to facilitate a political settlement to end the crisis in the interest of international security and stability.
Sisi seems keen not to alienate Putin despite the international pressure and isolation the latter has been facing since the beginning of the war in Ukraine.
The Egyptian president seems to be exploiting the ongoing crisis in Ukraine for his own benefit. By not taking a clear and tough position regarding Putin or endorsing the western pressure on Russia, Sisi believes that he can have leverage in his relations with the United States and the EU to achieve more political gains, particularly regarding his gruesome record of human rights violations. However, Sisi cannot afford to jeopardize or lose Egypt’s relations with the West. With the Biden Administration’s strong and uncompromising position on Russia and Putin, there is limited room for Sisi (or his Middle Eastern counterparts, for that matter), to maneuver or to seek a middle ground between the warring parties.
