Egypt reviews plans to cope with Ukraine crisis’ impact on wheat imports, tourism, petroleum prices

Amr Kandil , Thursday 24 Feb 2022

Egypt has reviewed plans to deal with the economic impacts of the Russia-Ukraine crisis that the country will possibly face, including on wheat imports, the flow of tourism, and petroleum prices.

Egyptian Prime Minister Mostafa Madbouly chairs a Cabinet meeting to discuss the impact of the Russia-Ukraine crisis on Egypt, 23 February 2022. Egyptian Cabinet

This comes as Ukraine anticipates a possible Russian invasion, with reports that Russia has already moved almost 100 percent of the troops needed to fully invade the neighbouring country.

Egyptian Prime Minister Mostafa Madbouly said in a Cabinet meeting on Wednesday that the Egyptian government has been studying the possible effects of the Russia-Ukraine crisis on the prices of commodities, especially wheat.

Such crises significantly impact the prices of a number of basic commodities worldwide, Madbouly said, affirming that Egypt is closely following up on the economic and political repercussions of the crisis.

The Cabinet meeting was attended by Minister of Petroleum Tarek El-Molla, Minister of Tourism and Antiquities Khaled El-Enany, Minister of Supply and Internal Trade Ali El-Moselhy, Minister of Finance Mohamed Maait, Minister of Trade Nevine Gamea, and Ambassador Ihab Nasr, the assistant foreign minister for European affairs.

Kyiv has urged nationals to leave Russia and imposed sanctions on hundreds of Russians in response to Russian President Vladimir Putin's recent decision to recognise the independence of two separatist regions in Ukraine, a step that has drawn international condemnation.

Diversifying importing sources

Egypt has reserves of wheat that are sufficient for more than four months, Madbouly said, adding that the government seeks to diversify its wheat importing sources and obtain wheat from other countries.

Russia and Ukraine together account for 29 percent of the world’s wheat exports, according to February’s Wheat Outlook 2022 issued by the US Department of Agriculture (USDA).

The two countries are also the largest wheat exporters to Egypt, Cabinet spokesman Nader Saad told the media on Wednesday. Egypt, the world’s largest wheat importer, imported 80 percent of its wheat last year from Russia, Saad said.

While Egypt has 14 other countries from which it can import wheat, including countries outside Europe, such as the United States, Argentina, Canada, and Paraguay, it is not certain these 14 other countries can fill the wheat shortage in Egypt during this crisis, Saad said.

In 2021, Egypt imported 5.5 million tonnes of wheat, on top of the 3.5 million tonnes produced locally, according to data released by the supply ministry in December.

The ministry forecast Egypt’s wheat imports in 2022 to drop to 5.3 million tonnes due to an increase in local production.

Last week, Supply Minister Moselhy said that his ministry had taken measures to secure its stocks of wheat, noting that the local wheat supply season will start in mid-April and the strategic reserve will increase to last until next November.

Moselhy said Egypt has diversified its wheat import sources including from the US, France, Romania, as well as Ukraine and Russia, warning that “skirmishes between the world's largest exporters of wheat and grain raise a state of uncertainty in the market.”

Saad warned that the Russia-Ukraine crisis can raise wheat prices and can also disrupt wheat supply to Egypt, urging citizens to rationalise the consumption of bread loaves.

Last week, the Egyptian government confirmed that it will raise the price of subsidised bread loaves – sold at 5 piastres for over 30 years – but will make sure that the neediest and most marginalised citizens are not affected.

Impact on petroleum

The Cabinet meeting on Wednesday also reviewed the crisis’s possible impact on petroleum prices, especially in light of their rise amid the economic circumstances the world is witnessing while recovering from the coronavirus pandemic’s repercussions.

Saad said that if petroleum prices are affected by the crisis, this can put pressure on the Egyptian state’s budget.

Saad noted that gasoline prices are determined based on the international price of oil, the cost of production, and the exchange rate of the Egyptian pound against the US dollar.

In recent years, Egypt has raised gasoline prices several times, the last of which was by 25 piastres earlier this month, as per recommendations of Egypt’s Fuel Automatic Pricing Committee held every three months.

This comes while the government presses ahead with plans to convert petrol-powered vehicles to run on natural gas, a step that should contribute to reducing the cost of subsidised petroleum products in the state budget.

Russia, the world's leading gas exporter, exported more than 40 billion cubic meters of liquefied natural gas (LNG) and over 197 billion cubic meters of pipeline gas in 2020, according to Statista.

With 40 percent of Europe’s natural gas needs reportedly coming from Russia, the Russia-Ukraine crisis poses a direct threat to natural gas supply to European countries.

Egypt, which has achieved self-sufficiency in natural gas in 2018, is planning to use its position on Europe’s doorstep to become a major supplier of liquified natural gas (LNG) to the continent, which is transitioning away from other fossil fuels.

Egypt has the infrastructure for the transport and handling of natural gas, with a main network of 7,000km of pipelines, as well as a distribution network of 31,000km, and 29 gas-treatment plants in addition to the two LNG facilities, Idku and Damietta plants.

In December, Petroleum Minister Tarek El-Molla told Reuters that natural gas exports are at full capacity of about 1.6 billion cubic feet per day (bcf/d) from its two terminals.

Finding other tourism markets

The Egyptian Cabinet meeting also discussed the possible impact of the Russia-Ukraine crisis on the tourism sector in Egypt.

The government said it will exert greater efforts to search for alternative tourism markets in case the crisis worsens.

Egypt relies on tourism revenues as a vital source of foreign currency, and the industry used to account for up to 15 percent of the gross domestic product (GDP) before the pandemic.

Egypt has witnessed a gradual recovery in the tourism sector over the past year, with the country hoping to achieve full recovery this year.

With Russia and Ukraine being main exporters of tourists to Egypt, the Russia-Ukraine crisis can represent a serious blow to the Egyptian tourism sector.

More than 700,000 Russians visited Egypt last year, Russian Ambassador to Egypt Georgy Borisenko told Sputnik news agency earlier in February.

The Egyptian Red Sea resort cities of Sharm El-Sheikh and Hurghada received in August their first direct flights coming from Moscow after a hiatus since 2015 over a Russian plane crash over Sinai.

Ukrainians make up the majority of foreign tourists in Egypt, Ambassador of Ukraine to Egypt Yevhen Mykytenko told Al-Ahram last November, noting that Ukraine ranks first in terms of the number of tourists who visit Egyptian resorts.

From July 2020 to July 2021, 1.2 million citizens of Ukraine visited Egypt, Vice Minister for Tourism at the Ministry of Tourism and Antiquities of Egypt Ghada Shalaby said.

While the number of tourist arrivals from all over the world to Egypt amounted to about 13 million in 2019 before the pandemic, the Ukrainian Embassy to Cairo said around 1.5 million Ukrainians spent their vacations in Egypt.

This means that around 11.5 percent of tourists to Egypt in 2019 came from Ukraine.

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