US President Joe Biden, the EU and the sheikhs of the Middle East are currently helping Egypt wherever they can. In the economic struggle against Russia, the African country will tip the scales. It is on the verge of collapse.
The sun is shining on Damietta these days. An arm of the Nile flows right through the city on the Egyptian coast into the Mediterranean Sea. For centuries it was the only one that European ships could navigate. But since the Suez Canal was built around 60 kilometers to the east, its importance has diminished. Instead, the approximately 300,000 inhabitants of Damietta live mainly from making furniture. 80 percent of all armchairs, sofas and cupboards in the country are made here. On the coast there is also a huge industrial plant that was orphaned for a long time – and now suddenly become important again.
The Spanish Egyptian Gas Company (SEGAS), a conglomerate of Spanish, Italian and Egyptian energy companies, built an LNG terminal here in 2005. In this, natural gas delivered via pipeline can be liquefied and filled into tankers. It can be transported to other countries by ship. But the plan didn’t work out. After completion of the plant, it turned out that the Egyptian gas reserves in the southern Mediterranean were smaller than expected. The country also wanted to use its own gas. The SEGAS terminal was shut down in 2013.
Now it’s working again. Deliveries of new natural gas began in February last year. It comes from fields that Israel has developed off its coast in recent years. The quantities are manageable. Last year only 4.25 billion cubic meters were shipped from Damiette. For comparison: in March of this year alone, Germany imported 6.69 billion cubic meters.
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But: Damietta can deliver up to 13.8 billion cubic meters per year. Together with a second, smaller LNG terminal in Idku, 150 kilometers further west, where another branch of the Nile flows into the sea, the country would have 17.25 billion cubic meters. From a global perspective, Egypt would be in the top ten, although other countries are also currently expanding their capacities. In practice, according to calculations by the financial news agency Bloomberg, Egypt will export 11 billion cubic meters this year.
Most of the natural gas will end up in Europe, since the route across the Mediterranean to Greece or Italy is short. This is a blessing for the price-stricken EU countries, as Egypt offers a quick alternative to natural gas from Russia, which most countries would prefer not to buy anymore. Sure, the African country won’t be able to replace the raw materials giant from the East, but it will at least ease the situation a bit.
But it is questionable how long liquid natural gas can be delivered from Egypt to Europe. It’s rumbling in the land of the pyramids. A look at Damiette is enough for this too. Large grain silos show Egypt’s problem here. Hardly any other country has to import so much grain from abroad to feed its population. And so far most grains have come from Russia and Ukraine. 22.6 percent of Egypt’s food imports come from the two warring nations. Only China and Turkey import even more in relative terms. In the case of wheat, the dependency is even greater: 55 percent of Egypt’s imports here have so far come from Russia.
The grain is missing because exports from Ukraine and Russia have almost come to a standstill. This drives up prices and makes the Egyptians grumble twice over – once out of hunger and once out of dissatisfaction. The government in Cairo can only help to a limited extent. At the end of March, it capped the prices of staple foods such as flour and bread. In the long term, however, this does not help against ever higher world market prices. Wheat, for example, has risen in price by 41 percent since the outbreak of war.
Internationally, there is great fear that the high food prices in Egypt could endanger internal peace, and in the worst case lead to another government overthrow, as last seen in 2011. As with the Arab Spring, this could continue in other countries in the region. Hunger is also increasing in Sudan, Lebanon and 24 other African countries because supplies from Russia and Ukraine are missing.
“Egypt is too big to fail for Europe and the Gulf region,” Riccardo Fabiani told Bloomberg. He is Director for North Africa at the Crisis Group, a Brussels-based political organization that monitors and analyzes international crises. “No one wants instability in a country of 100 million that is becoming a major gas exporter for Europe.”
Accordingly, international politicians step in. US National Security Advisor Jake Sullivan met with Egyptian President Abdel-Fattah el-Sisi in early May. EU Vice President Frans Timmermanns had already spoken to Egypt’s Prime Minister Mustafa Madbuli in April. And in March there was a memorable meeting in the Israeli desert, where the foreign ministers of the Arab countries discussed the situation with US Secretary of State Antony Blinken and the Egyptian government.
In essence, all meetings were not just about securing gas supplies, but also about helping Egypt financially. 70 million people in the country depend on state subsidies for cheap bread. For the majority of the population this is a Holy Grail. When Egypt’s government wanted to abolish subsidies in the late 1970s, bloody unrest broke out. So that it doesn’t come to that, foreign countries spend a lot of money. The EU wants to deliver grain at lower prices, while Saudi Arabia, Qatar and Abu Dhabi have committed to investing the equivalent of almost 20 billion euros to support the Egyptian economy.
In addition to the price cap, Egypt itself has launched an agricultural program with the aim of increasing domestic grain cultivation. It will be years before this takes effect. At the same time, Egyptian politicians are therefore negotiating ways in Kyiv to ship Ukrainian wheat to Egypt.
In the long term, Egypt could therefore become an important gas supplier outside of Russia for Europe. But that will only happen if a coup in the country can be prevented in the short term. And for this, in turn, it is necessary to feed the Egyptian population.
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