Notes on the Global Condition: Egypt’s Ongoing Crisis Feb 2017

Egypt: The New Left Review, New Yorker, and the New York Times all started 2017 with substantial reports on the ongoing crisis in Egypt.

It makes sense. Not only are there questions about the stability and future of Sisi’s military dictatorship established in the wake of the Arab Spring, but along with Turkey and Nigeria, Egypt was one of the hardest hit emerging market economies in 2016. They all suffered drastic devaluations. This means surging import prices, painful inflation which in Egypt, in February this year hit 30 %. Combined with the demand of the IMF to end domestic price subsidy regimes, it is an explosive combination. A recipe for social conflict.

The New Left Review piece – – is the most heavy-weight. It is particularly good on the sociology of the Egyptian military. And on this score directly contradicts and corrects the presentation in the New Yorker which retails a lot of cliches about Sisi

The New Yorker piece is also marred by some rather sloppy and cliched remarks about the Egyptian economy, as in “The bloated civil service is one of the few sectors that employ many Egyptians. Not counting the police and the Army, the government has an estimated six million workers, more than twice as many as the United States and the United Kingdom combined. More than a quarter of the Egyptian budget is spent on government salaries. Another quarter is spent on interest payments for loans. Thirty per cent more is spent on subsidies, largely for energy. If this sounds like a shell game, that’s because it is. For decades, Egypt has been propped up by foreign aid ..”.

In fact, the UK public sector employs 5.4 million people in a society with 64 m inhabitants v. 82 m plus in Egypt. I thought the New Yorker was supposed to be scrupulous at fact checking. But I guess there is no need in this case since we know already that the Egyptian economy is a corrupt shell game. I’m not questioning the claim that the Egyptian state is corrupt and inefficient. I am questioning the way that the case is being made and the assumptions that seem to underpin the argument i.e. efficient modern governments are small. One is put in mind of Ferguson’s Anti-Politics Machine.

The New Yorker piece does redeem itself with some pretty remarkable taped exchanges from inside the Sisi administration about Egypt budget-making, which are reminiscent of scenes one might imagine in the Trump White House:

“Sisi: Listen, you tell him that we need ten [billion] to be put in the account of the Army. Those ten, when God makes us successful, will work for the state. And we need from the U.A.E. another ten, and from Kuwait another ten, and a couple of pennies to be put in the central bank, and that would complete the 2014 budget. Kamel: [laughter] Sisi: Why are you laughing? Kamel: He will faint, he will faint . . . Sisi: They have money like rice, man.

Sisi and Kamel make casual calculations, with every number representing a billion dollars. The dialogue reads like a screenplay about Arab leaders on the make—“Glengarry Gulf State”:

Sisi: The Emirates put in four. Kamel: That makes it nine. Sisi: And Saudi Arabia put in four. Kamel: That makes it thirteen. And three more—that makes it sixteen. Sisi: And four from Kuwait. Kamel: That makes it twenty. Sisi: And then? [Voice unclear]: Twenty and add to them 3.6 that comes from, from, from January, yes. And the 1.5 from the U.A.E. Kamel: That makes it twenty-five. Like I was saying to you, sir, and the oil. Sisi: Did I count the oil? Kamel: Yes, sir, you did.

The New Yorker writer goes on: “Nobody in Cairo seems to know who is directing economic policy. After taking office, Sisi reduced some subsidies for fuel and electricity, which economists cheered as a first step toward a more sustainable system. But few other proactive measures were taken. Instead, Sisi mostly focussed on grandiose mega-projects, like the expansion of the Suez Canal, which cost more than eight billion dollars and, in the opinion of most economists, is unlikely to provide much benefit in the near future. A relatively weak attempt to reform the civil service was finally passed by parliament in October. “Sisi thinks, like all military men, that the economy is a collection of projects that the military runs,” Robert Springborg, an expert on the Egyptian military who is currently a visiting scholar at Harvard University, told me. “He hasn’t got a clue.” The military mind-set is also deeply defensive.”

The idea of the military conception of the economy as a collection of projects that ‘they run” is quite interesting.

In the New York Times the grotesque mega projects and Trump are pushed to the forefront :

“The regime insists its curtailing of democratic freedoms is necessary because of a war against radical Islamists, but security lapses continue and the perpetual need to conjure up fresh demons means that some of the most popular figures in the country — most recently the soccer legend Mohamed Aboutrika — end up on the terrorist watch list. The regime attempts to prove to the international community that it is open for business, but then flounders in a morass of conspiracy theories when the body of Giulio Regeni, a young Italian Ph.D. student, is found on the side of a highway, his nails and skin marked with signs of torture. Like Mr. Trump, Mr. Sisi is reigning over the ashes of a broken political order; more so than Mr. Trump, however, he is a creature of that broken order and incapable of articulating the new. Egypt’s younger generation, weaned on television images of barricades and tear gas, and veterans of their own personal battles with patriarchs in the classroom, mosque, factory floor and family dining room, do not accept the status quo as immutable.”

What none of the pieces convey is the urgent sense of crisis that permeates much middle eastern reporting on Egypt since the crisis of October and November. Take for instance this from “Thousands of importers have been caught out by the float in November leaving them with ballooning dollar debts. “We’ve been handcuffed and thrown into the sea,” businessman Mohsen al-Gedamy said in an interview with Egyptian newspaper al-Bawaba last week. Gedamy has an overdraft amounting to $900,000. He had left collateral of around 8 million Egyptian pounds but since the float and rate hike the bank has demanded he pay another 8 million pounds. Gedamy made a three-hour journey to Cairo from his hometown of Minya in Upper Egypt to explain to his bank that he cannot repay his debt at the new rate. But he told al-Bawaba that his bank had already taken legal action and that he could face imprisonment. Gedamy, like many other importers, says his predicament will worsen shortages of essential goods in Egypt.”

Or this account also from Middle East Eye (who are alleged to be sympathetic to the Brotherhood) on the sudden surge in demand for second hand clothes in Cairo amongst formerly prosperous middle class people: “The vendor, 50-year-old Mohamed al-Awny, accepted reluctantly. Though he wanted to make more of a profit off his sales, he understands that his clientele cannot afford to pay more. “These are clothes for the poor and they cannot afford to buy them,” Awny said. “The poor are now [even] poorer.”’These are clothes for the poor and they cannot afford to buy them’ As Awny leaned on the stalls for women’s clothes, with a grey scarf draped around his neck and a heavy dark jacket keeping him warm, he said: “We are now witnessing a shift, as middle-class families come in their cars and buy from us. What a pity for them,” he said. Awny himself has been hit by the economic difficulties, as he cannot afford the steep costs of marriage and has therefore remained single.”

And worse is in the pipeline. The IMF package that has been finalized in the last couple of weeks has truly drastic implications. This from Bloomberg: “Fiscal consolidation coupled with monetary tightening would inevitably constrain growth,” the IMF said, though output is expected to rise 5 percent to 6 percent over the medium term. The documents “suggest that a significant fiscal squeeze is in the pipeline this year, while monetary policy will remain tight,” Jason Tuvey, Middle East economist at London-based Capital Economics, said in a report. “The economy will slow sharply and by much more than the consensus expects. But if reforms are pushed through, Egypt’s medium-term prospects should brighten.” Egyptian officials are this week marketing as much as $2.5 billion in international bonds, hoping to secure favorable rates on the back of the IMF deal. Egypt is planning to raise as much as of $6 billion from overseas markets this year. Gross foreign reserves are expected to reach almost $33 billion in the final year of the program, and Egypt will pay all of its arrears due to international oil companies by the end of June 2019, according to the statements. The government is also planning to keep wage growth for millions of government workers below projected inflation, a measure that will help reduce the budget deficit to 4.7 percent of gross domestic product in the final year of the year of the program. It was 12.1 percent last fiscal year.”

Not surprisingly opposition websites are speculating that there might be another coup but for the fact that no one would be crazy enough to attempt to rule Egypt right now.

And the NLR, New Yorker and New York Times all, inexplicably, miss what is surely the biggest story of the last couple of months, the shifting geopolitical context in which the Sisi regime operates. Above all what is important is the serious estrangement between the Sisi regime and its Saudi sponsors. In 2013 the Saudis cheered the overthrow of the brotherhood. But as Sisi’s regime has looked to consolidate its position it has looked for new contacts further afield, notably in Russia and its has hardened its attitude on Syria, where it is now publicly backing the Assad regime. After Egypt voted the wrong way in the United Nations in October the Saudis punished them by abruptly canceling the $ 32 bn oil contract that was supposed to supply Egypt with 80 % of its imported petroleum needs for the next 15+ years. For this to have happened as OPEC begins tightening oil prices and the Egyptian currency devalues is a catastrophe for Cairo. It implies that a large part of the IMF loan will have to be used to pay for more expensive imported oil. It even drove Egypt to consider importing oil from Iran, which would have been a slap in the face for the Saudis. The most likely source of supply now seems like Iraq.

(In fairness to the Times they got the Saudi oil story in November 2016 but then didnt follow up).

For obvious reasons the Jerusalem Post is paying serious attention and have this summary: ““Our priority is to support national armies, for example in Libya, to exert control over Libyan territory and deal with extremist elements. The same with Syria and Iraq,” Sisi said. Sunni Muslim Saudi Arabia backs the Syrian rebels, also Sunnis, in what it views as a key front of its sectarian battle with Shiite Iran for regional primacy. Iran and the Shiite Lebanese Hezbollah back the Assad regime, whose key figures are drawn heavily from Syria’s Alawite minority. At first glance it might seem puzzling that Sunni Egypt would allow itself to break ranks in such an overt way from the Saudi stance on Syria, especially given that Riyadh is the main prop to Cairo’s struggling economy, having pumped in some $25 billion in financial assistance to Egypt since Sisi took power in a military coup in 2013. Analysts say, however, that its stance can be understood in light of its burgeoning relations with Russia, the main backer of the Assad regime and its antipathy toward the Muslim Brotherhood, an important component of the rebel forces.  “For Saudi Arabia, the principal enemy is Iran, for Egypt it is not Iran but rather the Muslim Brotherhood, that’s where the gap between them appears,” says Ofir Winter, an analyst at the Institute for National Security Studies.”

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