A year of war

Gamal Essam El-Din , Saturday 25 Feb 2023

When the conflict in Ukraine began on 24 February 2022, it was unclear how much it would impact Egypt’s foreign policy and economy. A year later, the stresses are clear to all.

A year of war
Seventy per cent of Egypt s wheat imports are sourced from Russia, 10 per cent from Ukraine (photo: AP)


Since the beginning of the war in Ukraine, Egypt has walked a fine line between its Western allies, particularly the United States, and Russia.

“While many countries imposed sanctions on Russia, Egypt and the majority of Arab states refused to do so on the grounds that economic sanctions should not be employed outside the framework of the multilateral international system,” says Al-Ahram political analyst Amr Al-Chobaky.

“Egypt nonetheless voted with 140 other UN members in favour of the United Nations General Assembly resolution deploring Russia’s invasion and calling for the immediate withdrawal of its forces.”

“Egypt has been able to strike a balance in its relations with the West and Russia. Egyptian officials have remained neutral and have repeatedly called for a political solution to the crisis based on dialogue.”

Egypt joined other Arab countries in forming a liaison group to tackle the impact of the war on the Arab region. The group held talks with Russia’s Foreign Minister Sergey Lavrov in Moscow and his Ukrainian counterpart Dmytro Kuleba in Warsaw in an attempt to forge a diplomatic solution to the crisis.

On the opening day of the COP27 conference on climate change, held in Sharm El-Sheikh in November, President Abdel-Fattah Al-Sisi appealed for an end to the Russia-Ukraine war. “Countries without a strong economy have suffered a great deal from the ramifications of the coronavirus crisis, and now we are suffering again, this time because of the Russia-Ukraine war,” he said, before calling for an end to the destruction and killing.

“At the beginning of the war, many thought Egypt would be unable to balance its growing relations with Russia and its strategic ties with Western allies, particularly the US, and that it would have limited room to manoeuvre or seek middle ground between the warring parties,” said Gamal Zahran, a professor of political science at Suez Canal University. “This proved wrong. Three weeks ago, President Al-Sisi and Foreign Minister Sameh Shoukri received US Secretary of State Antony Blinken in Cairo. The next day Shoukri left for Moscow to hold talks with Sergey Lavrov.”

During his visit to Moscow, Shoukri made no secret of Egypt’s keenness to reinforce its strong political and economic relations with Russia.

Shoukri delivered a message to Lavrov from Blinken. Lavrov, in turn, described Egypt’s position on the war in Ukraine as “responsible” and “balanced”.

“Russia will continue to engage with Egypt on Ukraine and I trust that this will be in the interest of the friendship between the two countries,” he said.

“US officials are aware of the growing political and economic relations between Egypt and Russia and so some bet that the US might force Egypt to take sides. This never happened,” notes analyst Hassan Abu Taleb. Instead, President Al-Sisi was able to develop friendly relations with US President Joe Biden.

“The two leaders have met three times, first in Jeddah in Saudi Arabia last July, in Sharm El-Sheikh in November, and in Washington in December. Over the course of the meetings the two leaders have developed a relationship based on mutual respect.”

That Egypt was the only Arab country Blinken visited during his Middle East tour last month, the visit is testimony to the strategic partnership between Cairo and Washington. “Those who thought the war in Ukraine would put Egypt in a tough position should now admit they were wrong and that Egypt’s balanced relations with the parties to the conflict have helped serve its interests,” argues Abu Taleb.

The impact of the war in Ukraine on Egypt’s economy has nonetheless placed the country in a difficult position. Egypt is the world’s top wheat importer: 70 per cent of its wheat imports are sourced from Russia and 10 per cent from Ukraine. In 2020, Egypt imported 12.9 million tons of wheat from Russia and Ukraine at a cost of $3.2 billion. Since the beginning of the war, wheat prices have almost doubled, from $230 a ton to $450, placing pressure on Egypt’s limited foreign exchange reserves. Russia and Ukraine also accounted for the majority of Egypt’s sunflower oil imports.

Egypt’s tourism sector has been badly affected by the war. It is estimated that some 2-3 million Russian and Ukrainian tourists visited Egypt in 2021, and the number was expected to double in 2022. The two countries accounted for a third of all foreign tourists coming to Egypt, but the market has dried up in the wake of the war.

Commodity price hikes spurred by the war in Ukraine led central banks around the world to intervene to raise interest rates in a bid to control inflation. Egypt was no exception. The Central Bank (CBE) not only raised interest rates but was also forced to devalue the Egyptian pound twice in 2022. According to CBE figures, inflation jumped from 18.6 per cent in November 2022 to 26.8 per cent in January 2023, and some expect it to hit 33 per cent by the end of March.

The adoption of a flexible exchange rate came after Egypt and the IMF reached a new $3 billion loan agreement at the end of October 2022. With the war in Ukraine not expected to end any time soon, some analysts expect Egypt will continue to face inflationary pressures, a weaker pound and low economic growth rates. Others, however, see light at the end of the tunnel. Finance Minister Mohamed Maait told the Euromoney Egypt Conference last December that “though the war in Ukraine has cost the country a great deal in the form of an expensive import bill and inflationary pressures, it has also boosted Egypt’s foreign exchange receipts from the Suez Canal and oil and non-oil exports.”

“The Suez Canal generated more than $8 billion in revenues in 2022 and oil exports hit a record of $18.2 billion, up from $12.9 billion in 2021 and $7 billion in 2020. LNG exports in November hit $600 and are expected to rise to $1 billion a month this year.”

Egypt’s non-oil exports hit a record of $35.2 billion in 2022 “despite the Ukraine war which has caused financial headwinds all over the world”, noted Cabinet Spokeperson Nader Saad.

There are also upbeat figures from the tourism sector. Minister of Tourism Ahmed Issa told the Senate this month that the number of tourists visiting Egypt in 2022 reached more than 12 million, a 50 per cent increase on 2021. “This is despite the war which has prevented tourists from Russia and Ukraine from visiting Egypt. Egypt is now on track to generate $30 billion from tourist traffic within five years,” he said.

During a visit to the Military Academy last January, President Al-Sisi conceded that while the war in Ukraine had triggered a cost of living crisis “the most difficult time is now over and the state is approaching a point of equilibrium between dollar needs and receipts.”

“We are still suffering from this war and will continue to suffer but the Egyptian people have overcome problems in the past. We will emerge from the current crisis. All we need is patience, determination, and understanding,” he said.

* A version of this article appears in print in the 23 February, 2023 edition of Al-Ahram Weekly

Short link: