Suez Canal Fund: Opening the door for offering Suez Canal to the Gulf

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Two weeks ago, the IMF Executive Board approved a 46-month $3 billion loan to Egypt under Extended Fund Facility arrangement. Along with the loan, the IMF promised to catalyze another $14 billion in financing to the distressed Egyptian economy through international and regional partners, particularly the GCC countries, through credits and “the ongoing divestment of state-owned assets.”

2022 was a year of Gulf acquisitions in Egypt. Pressured by the dollar shortage and increasing debt dues, the Egyptian government opted to abandon profiting state-owned enterprises claiming the promotion of the private sector. CIB bank, Abu Qir Fertilizers, and Fawry for e-payment, among others, were enterprises transferred to Saudi and Emirati sovereign funds, and the chain is still open. No one, however, thought Suez Canal was to be the next episode. A week ago, the Egyptian parliament amended the Suez Canal Authority law of 1975 to establish a fund to control the canal’s revenues. Before passing the legislation, Abdel Fattah al-Sisi talked explicitly during the economic conference in October about the fund, saying it has already been working for two years, seizing about EGP 80 billion and is expected to grow to EGP 200-300 billion within a few years.

Egypt has had a tradition of establishing funds for revenues of state-owned economic bodies since 1973. Funds evade parliamentary oversight because they are not inserted within the public budget, so the dissident minority in Egypt’s parliaments under Mohamed Hosni Mubarak used to attack them as a tool for systematic corruption under the auspices of the president himself who enjoys absolute power over those funds. While they were aimed to be a tool to support services to alleviate a burdened public budget, they turned out to be a cause of the budget deficit, taking over the revenues of the most profiting state-owned assets such as the National Telecom Regulatory Authority and the Egyptian General Petroleum Corporation.

As for the Suez Canal Fund, the most severe fear was not corruption but selling. The new legislation provides in article 15b that the fund is authorized to invest its assets through purchasing, selling, renting and investing. The article propped concerns that establishing the fund is a preliminary step towards abandoning the canal to one of the Gulf allies of Sisi, particularly the Emirates. The most significant Egyptian dissident movement, Muslim Brotherhood, scathed the legislation accusing the authorities of the military coup in Egypt of committing a crime against the country’s national security. Likewise, the Civil Democratic Movement, a political umbrella of dissident secular parties and movements, considered the legislation a direct threat to Egypt’s sovereignty over its resources.

Although the government denied the dissidence accusations, senior officials’ statements seemed ambivalent. The former head of the Suez Canal Authority and ex-admiral of the Egyptian fleet, General Mohab Mamish, said to Al Masry Al Youm, “No need to change the current canal system that achieves great successes making Suez Canal the world’s most successful maritime administration.” Mamish refused investor engagement in Suez Canal works, “Investors’ engagement will terrify the people as the canal is emotionally connected to the souls of the Egyptians.” Hours later, Mamish’s statements were deleted from the newspaper’s website, and Al-Ahram reported Mamish stating, “It is impossible to abandon a grain of sand from the canal, and this is a clear and absolute decision of President Abdel Fattah al-Sisi.” Instead of reassuring, the deletion and change of Mamish’s statements doubled concerns.

Remembering the concession of two Egyptian islands, Tiran and Sanafir, to Saudi Arabia, it will not be surprising if Sisi abandoned the canal to his close ally and political supporter, Emirates. Emirates has infiltrated the Egyptian economy for years controlling Egyptian seaports, hospitals, banks and, recently, fertilizers factories. Days ago, Al-Mawkef Al-Masry, a social media platform for information and solutions journalism, reported that an Emirati company, National Marine Dredging Company, owned by Tahnoun Bin Zayed, the brother of the powerful Emirati president and the head of the Emirati economic empire, acquired billions of dollars from governmental contracts with Egypt. Noticing all contracts were directly assigned to the company, it is apparent that Emirates’ influence is so deep in the Egyptian state, whether politically or economically.

Emirates and Saudi Arabia’s investments in Egypt are common but target the enterprises competing for their business. The two Gulf countries have targeted the Egyptian fertilizers industry this year, considering the GCC countries are the world’s main producers of fertilizers. In 2020, Emirates’ Med-Red Land Bridge Ltd agreed on a pipeline between the Red Sea’s Eilat and the Mediterranean’s Ashkelon with Israeli EAPC to transport Emirate’s oil products to Europe away from the Suez Canal. The project was reported to be cancelled in 2022 because of legal and ecological issues in Israel, but the idea is still valid for Emirates. Another conspicuous Emirati interest is to control the region’s seaports through DP World, which manages Egypt’s Sokhna seaport and contracts the Suez Canal Authority to construct a logistic service shipyard in the canal. For Emirates, controlling the canal itself will be as to hit the jackpot.

By the way, the new legislation goes against article 43 of the Egyptian constitution that provides the state is committed to protecting and developing the Suez Canal and preserving it as a state-owned international waterway. Nevertheless, the Egyptian authorities used to breach the constitutional provisions since the military coup against democracy and President Mohamed Morsi in 2013. So, protests against such a movement will remain the last barrier to protecting the Suez Canal and other state assets from Sisi’s regime manipulation.