Al-Sisi is heading east: Egypt is the third-largest country borrowing from Russia

Egypt has emerged among the largest countries that obtained loans from Russia. Egypt came almost third after Azerbaijan and Kazakhstan. Azerbaijan and Kazakhstan are two neighbors of Russia, and they were also part of the Soviet Union, which means that Egypt is the first in the world outside the territorial scope of Russia. Izvestia Russian newspaper said that the countries that obtained a large amount of loans from Russia are Azerbaijan, Kazakhstan, Egypt, Cuba, India, Iran and Vietnam. The newspaper called these countries the major borrowers. The newspaper did not give a specific number for Egyptian debt, but the Egyptian regime received a huge loan from Russia to build a nuclear plant in the north of the country.
In May 2016, the Egyptian Official newspaper published General Abdel Fattah El-Sisi’s decision to approve a Russian government loan for the construction of the first nuclear power plant in Egypt, at a value of $ 25 billion. The loan term is 13 years during the time period from 2016 to 2028, at an annual interest rate of 3%. But in October 2018, Russian President Vladimir Putin said in a speech to foreign media about the foreign relations of his government that he agreed with “al-Sisi” to increase the Russian loan to Egypt for the construction of a nuclear power plant in the Dabaa region in northwestern Egypt. He added that the loan was increased from $ 25 billion to $ 45 billion, without revealing other details related to the payment or the size of the interest.
Experts say the Russian loan, which has a 3% interest rate, is low compared to commercial loans, while some warn of its large size and the risks of debt concentration in Russia. Experts believe that the reason for Sisi’s move to Russia was not because of the low interest, but also because Western countries dissociated themselves from dealing with the Sisi regime in nuclear agreements.
The Russian loan aims to finance the construction and operation of the nuclear power plant known as the Dabaa plant, which will comprise four reactors with a capacity of 1,200 megawatts each. The Russian loan showed that Egypt is going to rely on huge bilateral loans instead of multinational loans. Economists have warned that “this step is hasty and may be driven by a desire to gain political loyalty.” One of the dangers of focusing on borrowing from one country is that the Russian negotiating position on the conditions for establishing the project will be very strong, given that it is Russia that is financing it.
Then the lender (Russia) will work to lay down all the conditions that benefit its country’s companies, “even if this is against Egyptian interests in many fields such as environmental conditions. The Russian loan is the largest loan in the history of Egypt of this type.
The Egyptian-Russian agreement requires payment of “all amounts in favor of the Russian side in US dollars or any other currency” by agreement between the Egyptian Ministry of Finance and the Egyptian Ministry of International Cooperation, and the Federal Ministry of Finance in Russia, and in accordance with the payment instructions in force with the Russian bank, Vishikonum. Egypt has been suffering from weak foreign exchange flows since the outbreak of the 2011 revolution, which has decreased its foreign currency reserves, prompting it to launch the largest borrowing wave in the country’s history. Economists pointed out the importance of the Egyptian regime being realized and pay attention to “the accumulation of debts that the government will pay its installments in the coming years in dollars.” The Russian loan states that if Egypt fails to pay the 3% Russian loan interest within 10 days of its due date, Cairo will pay arrears of 150% of this interest, according to the agreement published in the Egyptian facts (Official newspaper). Accordingly, if the Egyptian regime fails to pay any payment of the loan, it will sink into a spiral of debt interest.