The Next Crisis
The Plague of Darkness
Then the Lord said to Moses, “Stretch out your hand toward the sky so that darkness spreads over Egypt—darkness that can be felt.” So, Moses stretched out his hand toward the sky, and total darkness covered all Egypt for three days. (Exodus 10:21-22)
In October Egypt extended daily power cuts to the nation amidst high temperature loads, 35C or 95F degrees, this sort of power rationing has become a norm in Egypt since the summer of 20231. One might conclude that the issue is simply a lack of generation capacity much like it is in California during the peaks of summer nights as the grid struggles to cope with the infamous duck curve dilemma. But in Egypt’s the choice of putting the nation into the dark in the middle of heat wave was one of deliberate government policy.
Rather than burn gas coming out of the Zohr gas field and meet the countries power needs. Egypt’s government has opted to sell the gas to Europe for desperately needed foreign exchange. This desperate need for FX comes amidst a rampant increase in the country’s foreign denominated debt which has more than tripled since El- Sisi took power in 2014.
What did Egypt get in exchange for this massive increase in its foreign debt?
A 58-billion-dollar new administrative capital to adorn the desert - the envy of any pharaoh.2
At least 30 billion spent in a series of arms purchases with France, Germany, Italy, United States and Russia that made Egypt the third largest importer of arms between 2016-2020. Including 30 Rafale fighter jets from France to add to 54 already owned by Egypt, enough to make Egypt’s fleet second only to France itself.3
These purchases come not out of a profound sense of insecurity; Egypt is today the 10th largest military and absent a war with Ethiopia over the Grand renaissance Dam that threatens Egypt’s water supply, these jets will likely never see action. But rather out a realpolitik calculation of shoring up internal and external centers of power that are the true sources of insecurity for El Sisi with cash payouts. Generals in public service do always seem to have a habit of always getting wealthier, spare parts always have a habit of going missing and foreign politicians like Bob Mendez just happen to collect gold bars.4
On the more Useful end of Egypt’s spending Spree a 30 billion dollar for the El Dabaa nuclear power plant built and largely financed by Russia’s Rosatom is set to generate 10% of the country’s electricity. The benefit to Egypt who does not after all need the generating capacity will be to further displace natural gas in generation and thus increase the flow of LNG out and FX in. Never mind that the plant will also serve sanctioned Moscow much the same purpose, with the terms of the deal outlining their right to take repayment in dollars. - The shell game of sanctioned energy continues. 5
Lastly on the more useful end a mere 8 billion dollars (practically a steal) spent expanding the Suez Canal to accommodate not only larger ships but parallel travel in both directions. The project was expected to double annual Egyptian tolls from ships traveling the canal (the single largest source of dollars to the country), from 5.5 billion to 13 billion.6 But then of course there was a war in Gaza, a humanitarian disaster for the Palestinians, a shame to the Israelis and massive source of frustration for the Egyptians.
Avoiding the wider impact of that conflict on Israeli - Islamic relations and social political tensions that the conflict will likely spur within Egypt itself, among those for whom Israel and the Egyptian government were already regarded with hostility. To just focus on the Economic impact of this conflict on Egypt, the war is already doing direct harm to Egypt, in terms of a drop in tourism down 25% since the wars start. A collapse in Israeli gas imports to Egypt with the halting of operations in the Tamar gas field - gas that normally would have been re-exported using Egypt liquification terminal. And lastly with the expansion of the conflict to Yemen and Israeli associated shipping traveling the Red Sea, Egypt has seen a 50% drop in revenue from Suez. 7 All of this is to say that I would fallow Egypt’s talks with the IMF with grave anticipation, just let Biden know it won’t be on Telemundo.
As always, I appreciate the read and feedback - I am by no means a professional writer and this is meant in large part to be something to help me improve my writing and research skills, as well as just work out what I’m seeing in the world.
I stumbled on your blog quite by accident, looking for someone else's. Thank you for a very interesting post.