Egypt and the invasion of Ukraine : More than a butterfly effect

In the past three days, I believe the whole world glued in front of the TV as well as the social media to follow the updates of the Russian invasion of Ukraine.

I was more than glued in front of the TV because this war is not only alarming to the West but also alarming to Egypt and it is the usual butterfly effect.

It is not a big secret but Egypt, the world’s largest wheat importer depend on both Ukraine and Russia mainly for its needs.

Ukrainian couple in Egypt once upon time, I hope 
they are fine now for real. Do not know the source though

Egypt imported last year 80% of its wheat needs from Ukraine and Russia together.

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 according to Ahram Online.

This is happening at the same time the Egyptian government states that it will raise the price of subsided bread for the first time in 30 years. 

We are a month away from Ramadan, Egypt’s highest food consuming month of the year.

The government says that we should not be worried as they got plans for the impact of that invasion.

According to officials we still got stock of wheat that is enough for several months and that this year our local production will increase. It also says that it will diversity its sources from importers.

Egypt imports the rest of its needs from 14 countries including the United States, Argentina, Canada, and Paraguay.

Now there are a couple of questions I would like to hint out: The price of wheat will increase and There will be high demand for it, What are going to do?

Already Egypt is not going to suffer alone when it comes to wheat imports in the region. We got a company like in Lebanon, Tunisia and Jordan.

Needless to say, I believe desert reclamation to cultivate wheat is more urgent than any other megaproject in the country at this stage and in this moment of time. "We got doubts about our future Nile share too" 

Updated: It turned out that Egypt imports pesticides and fertilizers from Ukraine too and this means we will have to search for another source too.

Then comes tourism.

Russia and Ukraine are the main tourist markets in Egypt and Putin’s invasion of Ukraine is technically one hell of a blow to the Egyptian tourism industry.

In 2020, Ukraine was the number one exporter of tourists to Egypt. 

I do not need to say that the tourism industry in Egypt is among the sources of foreign currency nor how the whole industry is recovering from the Coronavirus pandemic.

With the economic sanctions on Russia and the losses of the Ukrainians in this invasion, I do not think that anyone will come soon to Egypt.

On Saturday, it was announced that Visa and MasterCard credit cards issued by Russian banks are to be used inside Russia according to Western sanctions.

Then you got all those airlines declaring the cancellation of their flights to Russia. 

That’s a hit for Russians all over the globe especially Russian tourists right now in foreign countries including Egypt.

It is another blow to the Red Sea resorts and this is just the beginning.

Then come the Russian investments and joint the national megaproject.

Russia and Egypt signed an agreement in 2018 to establish the Russian industrial zone “RIZ” in East Port Said aka Suez Canal Economic Zone “SCZone” where Russian resident companies can enjoy simplified taxes.

According to the TASS Newsagency , Russian state investments in the development of the primary infrastructure of the zone are expected to amount to USD 190 million while the total volume of private investments is estimated at USD 7 billion.

The SCZone and Russian government signed an agreement in July to expand that industrial zone over an area of 5 million squares metres.

The construction of the zone should have started in 2020 but it was delayed due to coronavirus in November 2021, Russia unveiled the master plan of the RIZ.

Despite the full implementation of the project can take up to 13 years, it was said that Russian resident companies can start production in RIZ in 2022. I think that date is moved right now.

Now forget about RIZ because I think we have to wonder now about the future of Russia’s big project in Egypt: the Dabaa Nuclear Power Plant

The new crown jewel of the Egyptian-Russian Megaprojects in the 21st century is without doubt Dabaa Nuclear power plant.

Egypt and Russia’s Rosatom signed an agreement to build the country’s first Nuclear power plant on the North Coast in the city of Dabaa in November 2015.

The cost of building this four VVER-1,200 reactor units plant is $28.5 billion. Russia will finance 85% of the project as a state loan of US$25 billion and Egypt will provide the remaining 15% in the form of instalments.

According to Wikipedia, the Russian loan has a repayment period of 22 years, with an annual interest rate of 3%.

In January, Rosatom's CEO announced that the construction of Dabaa Project would kick off in July 2022.

I do not know if this is going to happen or not now or not.

I already wonder if the Western sanctions will include Rosatom this time considering that Rosatom has got several multi-billion projects around the globe including in Egypt, Turkey and UAE.

In December 2021, the Russia Ambassador to Cairo Georgy Borisenko held a press conference to speak about the Egyptian-Russian economic relations.

He stated that the volume of trade exchange between Egypt and Russia hit USD 3.3 billion from January to September 2021.

He also said that Russia’s investments in Egypt reached USD 8 billion by the end of 2020 and that Egypt will be the guest of honour at the St. Petersburg International Economic Forum in June 2022.

I do not know if that forum is going to be held at this rate. 

FYI, the Russian embassy in Cairo’s account on Twitter is very active in its propaganda. Somehow, the Russian narrative is spreading through the mainstream media.

According to Minister of Industry Nevine Gamea, Egypt’s exports to Russia in 2021 reached USD 489 million recording 17.5%. The exports are mainly citrus, potatoes “we had some problem that was resolved recently” and onion aka Vegetables. 

Now Russia is out of SWIFT, I think there will be a problem for Egyptian exporters.

The question now: Can the gas imports help Egypt tolerate the economic losses coming on the way thanks to the Russian invasion? A week has not passed but Putin’s big move will cost us a lot for real more than you think globally.

We have not yet recovered from the Coronavirus and its impact on the global economy.

There are many questions and yet again our Egyptian mainstream media that cheers for Russia’s strongman do not want to ask.