Egypt Loves China’s Deep Pockets

Cairo is an old hand at playing the East and West off each other—for its own profit.

Egyptian President Abdel Fattah al-Sisi and Chinese President Xi Jinping during their visit to Luxor, Egypt, on Jan. 21, 2016. (AFP/Getty Images)
Egyptian President Abdel Fattah al-Sisi and Chinese President Xi Jinping during their visit to Luxor, Egypt, on Jan. 21, 2016. (AFP/Getty Images)

Gamal Abdel Nasser, former president of Egypt and Cold War schemer, was not averse to playing hardball with powerful countries. In 1955, Nasser grew tired of dallying from Washington on a long-stalled arms deal. He shocked the West by approaching the Soviet Union, buying military equipment through Czechoslovakia, and igniting fears of a Middle Eastern arms race.

Six decades later, Cairo is looking for the best political bargain it can get once again, making diplomatic overtures to Moscow and Beijing while maintaining its crucial U.S. and Persian Gulf backers

As under Nasser, the Egyptian leadership has become frustrated with the United States. The relationship grew frosty during the presidency of Barack Obama, who refused to invite President Abdel Fattah al-Sisi to Washington amid accusations of human rights violations. Sisi has since made a state visit to Donald Trump’s White House, but the administration’s long-term Egypt strategy remains unclear.

Congress has complained about a perceived lack of benefit for the United States from the billions it has provided to Cairo over decades. It denied almost $100 million in military aid last August, citing concerns about a repressive new law restricting nongovernmental organizations’ work.

These tensions have created new openings for both Russia and China. Moscow responded to the Sisi-Obama impasse by entering into eyebrow-raising military cooperation accords and large-scale arms deals with Cairo. With less fanfare, Chinese money is increasingly pouring into the Egyptian economy, suggesting that the “comprehensive strategic partnership” agreed between the countries in 2014 could now develop some real teeth.

Egyptian-Russian relations have developed a stronger military tint under Sisi, the former field marshal who led the July 2013 overthrow of Egypt’s first democratically elected president, Mohamed Morsi. The two started holding joint naval and military exercises in June 2015. Reports circulated in late 2017 that the two countries were negotiating an agreement for reciprocal use of each other’s air force bases.

Sisi has also lent a welcome source of Arab support to some of Putin’s dicier foreign-policy exploits in the Middle East. Cairo has given diplomatic cover to Russia’s backing of the beleaguered dictator Bashar al-Assad in Syria and allegedly provided a base for Russian troops to reinforce the maverick, anti-Islamist commander Khalifa Haftar in Libya.

At times, the Sisi regime has actively snubbed its long-standing allies in pursuing closer ties with the Russian military establishment. Egypt infuriated Saudi Arabia in October 2016 by voting in favor of draft United Nations Security Council resolution on Syria that was drafted by Moscow and opposed by Riyadh. This May, Russian Foreign Minister Sergei Lavrov praised Egypt for rebuffing a U.S. request to deploy soldiers to Syria.

Egypt’s reward has been the series of Russian arms sales, which Mordechai Chaziza, a political science specialist at Israel’s Ashkelon Academic College, argues have become crucial to Cairo’s Moscow strategy. As the United States has shown a greater reluctance to provide military aid, the Kremlin has stepped into the void. Russia signed a $3.5 billion weapons deal with Egypt back in 2014, and it delivered more than $1 billion worth of military equipment last year alone.

Economic ties have also grown. Russia and Egypt pledged to develop a “Russian industrial zone” at the Suez Canal, where the plan is for a glut of investment from Russia on favorable terms. During Putin’s state visit to Cairo last year, Russia agreed to finance and oversee the construction of a $21 billion nuclear power plant near El Alamein. The project remains at a very early stage, but the Egyptian government predicts that the facility will begin operating from 2026.

Despite these grand designs, Russia’s strained finances limit its ability to wield decisive economic influence in Egypt. Timothy Kaldas, a nonresident fellow at the Tahrir Institute for Middle East Policy, argues that any attempt to chasten the United States by reaching out to Putin has failed.

“The Egyptians wildly overestimated how irritating that might seem,” he said. “The Americans know that Russia cannot replace them or the Gulf … because [Russia] is [effectively] broke.”

One nation that is far from broke is China, whose economic importance to Egypt far outweighs Russia’s. Beijing has been Cairo’s largest trade partner since 2012, with China providing 13 percent of total import value last year alone—almost double that of Germany, the next highest exporter to Egypt.

The Sisi administration has capitalized on Egypt’s strategic location as a key incentive for closer Chinese relations. “The Suez Canal is what makes Egypt exceptional [to China],” said John Chen, an expert in Sino-Middle Eastern relations at Columbia University.

The waterway lies at the heart of the Maritime Silk Road—a pillar of Chinese President Xi Jinping’s increasingly all-encompassing Belt and Road Initiative. The initiative originally started as a Eurasian connectivity project before broadening into a blanket term for virtually all of China’s foreign policy. The original Maritime Silk Road idea, however, focused specifically on Europe-China shipping routes. An Egyptian official told Chinese state news agency Xinhua last year that China is the largest current investor in the Suez Canal, while Chinese conglomerate TEDA is developing a special economic zone in the region.

According to Chen, Egypt has tried to prove its political usefulness to China in other ways. In May 2017, Xi’s government demanded the return from overseas of all Uighur students, members of the Muslim ethnic minority in the far western region of Xinjiang. The Sisi administration heeded the call enthusiastically, rounding up hundreds of Uighurs studying at Cairo’s Al-Azhar University for deportation. Those students were almost certainly sent en masse to China’s massive detention camps for Uighurs upon arriving back in the country.

In return, China has started pumping foreign currency into Egypt’s battered economy. In 2016, Egyptian state figures ranked China as only the country’s 23rd most significant source of foreign direct investment since 1970. This trend has changed abruptly, with Chinese money now fueling a broad range of state-led mega-projects in Egypt.

Chief among these initiatives is the New Administrative Capital, the Sisi administration’s ambitious plan to move the nation’s political center east of Cairo. The enormous construction project faced a humbling lack of interest from foreign investors following its 2015 announcement, but Chinese funds have now been promised. Chinese banks agreed to lend the vast majority of the $3 billion required for building the capital’s Central Business District. Shanghai-listed developer China Fortune Land Development is poised to invest a further $20 billion in the city. Outside the new capital, China has committed billions to various Egyptian state projects, including revamping the textile industry and building a light rail system for Cairo.

Financial clout notwithstanding, China is unlikely to become a dominant power in Egypt anytime soon. The United States retains extensive leverage over crucial Egyptian decision-makers. Cairo is also still beholden to its wealthy Gulf backers, particularly Saudi Arabia and the United Arab Emirates. Estimates suggest that Saudi money alone accounted for $25 billion worth of aid and investment in Egypt between 2014 and 2017. When Egypt purchased weapons from Russia, it relied on Saudi and Emirati funding to do so.

For now, the Sisi administration is maintaining the U.S. relationship simply by a commitment to fight terrorism. This July, the United States unfroze $195 million in military aid to Egypt despite ongoing human rights concerns. A State Department source told Reuters that upholding bilateral security ties helped motivate the reversal.

But Cairo’s established allies may no longer acquiesce to the Egyptian-Chinese relationship if it moves too far beyond its current, economic-oriented nature. In 2016, Egypt announced a meeting with Chinese officials about promoting military cooperation between the countries. To date, nothing significant has flowed from those discussions. If that changed, however, Kaldas believes that Cairo could face diplomatic intervention not just from the United States, but even from Japan—another important source of foreign direct investment.

“If China [became] more aggressive in East Asia and more ambitious in Egypt, then maybe Japan would be more inclined to leverage its influence [over Egypt],” Kaldas said.

Egypt’s leaders are eminently qualified to perform these kinds of diplomatic tightrope acts, carefully balancing their allies’ often-competing interests for maximum gain. Just as Nasser played off the two Cold War superpowers against each other, Sisi has described his overall foreign-policy objective as “cementing ties between Cairo and world powers while maintaining [Egypt’s] independent decision-making process.”

This latest outreach to Russia and China suggests that the current regime has inherited at least some of Nasser’s intuition for just how far Egypt can push regional and global heavyweights. “The Egyptians have been doing this forever,” Kaldas said, “and getting away with it.”


David Wood is a journalist and economic researcher.

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