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The Gulf War over Egypt’s Economy

Having once been the regal heart of the Middle East, Egypt now finds itself relegated to the position of a mere jewel being fought over to adorn other countries’ crowns.
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Old buildings in Downtown Cairo. In the centre is the statue of Talaat Pasha Harb, the father of the modern Egyptian economy. Photograph by Abe World.

Ever since Hosni Mubarak was overthrown in a popular uprising in 2011, governments around the globe have been keeping a close eye on Egypt. After the revolution, some would no doubt have been delighted that the dictator had fallen, others distraught at the loss of an ally, but all were anxious at what might follow and what this new era of Egyptian politics could mean for their own national and geopolitical interests.

Nevertheless, with the ground still unsettled, they had to work out where to best place their loyalties and decide who to back. These decisions were not made any easier by the rise of the Muslim Brotherhood and election of Mohammed Morsi as president before their sudden toppling in the summer of 2013.

As the world’s most populous Arab state and as a crucial geopolitical actor in the region, many countries across the world have vested interests in how things pan out in Egypt – not least its neighbours in the Middle East. And as uncertainty has increased over the direction Egypt is taking, various Middle Eastern governments have been taking out their wallets in a bid to make sure the actors they are backing enjoy a slight advantage.

Qatar and the Brotherhood

Using money to influence Egyptian politics makes plenty of sense given the country’s well-documented economic woes: for example, rising costs of public salaries, heavy interest payments, and a gaping budget deficit alone absorb a staggering 80% of public spending. Egypt therefore needs to borrow money from abroad just to survive, and especially given the fact that the 2011 uprising was in large part driven by popular economic grievances, any new government’s longevity will be closely tied to its ability to keep the economy running.

It was with these calculations in mind that Qatar decided to get involved in the Egyptian economy for the first time following the overthrow of Mubarak. Qatar has typically pursued a “soft diplomacy” brand of foreign policy whereby it seeks to influence other governments with investments and more cultural power, such as through its flagship television network Al-Jazeera. With the rapid toppling of autocrats during 2011 and 2012, however, the Qataris saw an opportunity to expand their influence by supporting fledging democracies, which were often dominated by Islamist parties. Qatar saw the new freely-elected Islamists as potential allies and figured that through them the Gulf state could amplify its status and leverage on a global scale.

Qatari investments in Egypt prior to the revolution amounted to a paltry $260 million, but soon after it the Qatari prime minister pledged that his country would not allow Egypt to go bankrupt. This was followed up with actions: Qatar pledged larger and larger sums of financial aid to Egypt, eventually amounting to $8 billion by the spring of 2013, and in 2012 it announced that $18 billion in investments would be made in Egypt over a five-year period. The Muslim Brotherhood government responded gratefully in a number of ways, including by excluding Qatari investments from certain laws governing foreign investments.

But while Qatar’s financial involvement helped support a cash-strapped Egypt, its growing role in the economy also provoked anger within some of Egypt’s media as well as in certain activist and intellectual circles. The main fear was that an over-reliance on Qatari handouts would allow the Gulf state undue political leverage.

As with many other criticisms levelled at Morsi’s rule, however, much of the response was hyperbolic and some even claimed that the Brotherhood intended to sell the Suez Canal to Qatar. In his penultimate speech, Morsi joked about the rumours, remarking, “Oh, and that reminds me: has it been sold-off yet or not?”

UAE, Saudi Arabia and the new, old regime

Qatar’s open support for the Muslim Brotherhood put them at odds with many of their Gulf neighbours. Indeed, while Qatar had seen the Arab Spring as an opportunity, the regimes in the United Arab Emirates (UAE) and Saudi Arabia saw the uprisings as a potential threat to their own rule. Both these governments oppose democracy in general, but also share a particular fear of political Islam and the Muslim Brotherhood in particular.

This enmity has a long history. After the Nasser-era persecution of the Brotherhood in 1950s and 1960s Egypt, for example, many sought refuge in the Gulf states where they set up similarly reformist Islamist movements. Their hosts saw these as a threat to their own authority and to their native doctrine of autocratic Wahabbi salafism; since then, Saudi Arabia has openly declared its enmity towards the Brotherhood, while the UAE has been known to routinely round up Islamist activists and famously hosted members of Mubarak's former regime who fled Morsi’s rule, leading many activists inside Egypt to deride it as the “hub” of the counter-revolution.

For Saudi Arabia and the UAE, the rise of the Muslim Brotherhood in Egypt was therefore highly undesirable. Thus, they wanted to see Egypt’s fledging experiment with both electoral democracy and political Islam fail, so when Morsi was overthrown, the two states jumped on the opportunity. They pledged lavish financial assistance to the new regime, and soon the military-led government, which was cracking down on the Brotherhood, found itself with the promise of an impressive $12 billion in loans, grants and fuel shipments from Saudi Arabia, UAE and Kuwait.

Egypt’s government also returned $2 billion that Qatar had deposited in Egypt’s central bank, though considering the UAE’s recent statement that its aid would “not continue for too long”, the new regime may come to regret that decision.

Foreign dependency

One of the main driving factors behind Morsi’s unpopularity was the impression that the Egyptian government was “begging” foreign countries and the International Monetary Fund for money and that this was demeaning Egypt’s status in the world.

The famed (and now banned) liberal comedian, Bassem Youssef, even went as far as to make a cover of the popular Nasser-era song ‘My Beloved Homeland’ rebranded as ‘My Beloved Qatar’. After the performance, which went viral, he asked: “What is the problem exactly? That we are taking money from Qatar, or that we are taking money to begin with? Nobody is going to give us money unless they want something in return.”

This tapped into a popular sentiment, but it completely elides the dire state of Egypt’s economy and its need for foreign input. Furthermore a similar degree of outrage has not followed news of Saudi Arabia and the UAE’s financial assistance – in fact, some who had decried Morsi’s acceptance of Qatari aid are now singing praises of their newfound allies in the Arabian Peninsula.

The sad truth is that Egypt is a shell of its former self. Having once been the regal heart of the Middle East, it now finds itself relegated to the position of a mere jewel being fought over to adorn other countries’ crowns. The Egyptian revolution nobly placed dignity and national independence at its heart, but the dire economic circumstances it faces, and concurrent inevitable reliance on foreign powers to bankroll it, is frustrating this vision. 

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