Iran and Saudi Arabia both regard Egypt as central to their respective prospects of enhancing their regional power, a fact that Egypt can use to its advantage, writes Nahla Mahmoud
August 16, 2012
Seeking the position of superpower in the Middle East, competition has increased among the main poles of the region. Saudi Arabia and Iran, in particular, have sought to take advantage of the effects of the Arab Spring revolutions and the temporary withdrawal of some actors as competitors. Saudi Arabia and Iran aren't only competing powers in the Middle East. They have contradicting interests that make them similar to enemies. Egypt, for both countries, is a crucial ally in becoming the regional superpower, especially after the decline of Egypt's role in the region. Saudi Arabia for a long time supported the Mubarak regime, and Iranian attempts to improve relations with Egypt under Mubarak continued, though without any real success.
After the 25 January Revolution, Saudi Arabia not only lost its guarantees of having Egypt as an ally, but tensions arose between the two countries for different reasons, including by reason of the revolution itself. Iran, on the other hand, found in the Egyptian revolution means to break the ice and start anew with Egypt on the economic level, with the aim to improve political relations. Saudi Arabia and Iran have used the same tools to achieve their objectives. Among these tools, the economy has been the most important, used by both to put pressure on Egypt or open the door for positive political relations. Saudi Arabia used its extensive economic relations with Egypt as a way of pressure, to stop the Egyptian revolution's domino effect on the kingdom. On the other hand, Iran perceives economic cooperation as the best route to enhance political and diplomatic relations with Egypt and increase its power in the region overall.
THE SAUDI CONNECTION: Although Saudi Arabia did not praise the Egyptian revolution at the beginning, it declared that it respected the choice of Egyptians in changing the system. Foreign Minister Saud Al-Faisal announced that his country would provide Egypt with $3.75 billion to support its economy that was negatively affected after the revolution, and it already transferred $500 million by mid-May 2011 to the Central Bank of Egypt. The Egyptian government expected to receive the rest of the promised grant later in 2011, but that didn't happen. Kamal El-Ganzouri, interim prime minister of Egypt, said on more than one occasion that Egypt didn't receive the grants promised by Arab countries. He mainly meant Saudi Arabia. This announcement created tensions between the two countries, with the Saudi foreign minister declaring that the kingdom would keep its promises, but that when was a matter of time.
The economic relationship between Egypt and Saudi Arabia used to be very strong. For example, Egyptian exports of fruits and vegetables to Saudi Arabia annually amounted to LE4 billion, the chemicals exported to more than LE5 billion. Moreover, there are more than two million Egyptians working in Saudi Arabia and their remittances in only three months (from September to December 2011) were more than LE6 billion and constitute 50 per cent of Egyptians' remittances.
As the Egyptian revolution wasn't the only one in the Arab world, Saudi Arabia found many countries in the region in need of its support, and some of these related directly to the national security of the kingdom. For example, Yemen and Tunisia are important countries that, as in the case of Egypt, received funds from the kingdom. Yemen is the playground of Saudi Arabia and it is an important determinant in Saudi national security, while Zein Al-Abidine bin Ali, the ex-Tunisian president, is taking refuge in Saudi Arabia after the revolution in Tunisia. Meanwhile, domestic challenges and demonstrations in some places in Saudi Arabia, and the government's reaction of giving grants to citizens to contain the protests, decreased Saudi interest for some time in other regional and international matters. The Gizawi crisis (an Egyptian lawyer accused of drug smuggling) also had an impact, leading a popular Egyptian delegation to visit the kingdom in May. Since then, Saudi Arabia put $1 billion as a deposit in the Egyptian Central Bank for eight years. Furthermore, it provided Egypt with $500 million to support the Egyptian economy.
In analysing the fluctuating policies of Saudi Arabia in using the economy as a pressure tool on the Egyptian government, some informal aspects should be taken into account. For example, Walid Ibn Talal's problems with Egyptian authorities concern the Toshka project lands, where he lost more than 75 per cent of the land he bought owing to corruption in how these lands were sold to him. Rumour about attempts of Saudi Arabia to pay Egypt $4 billion to send former president Hosni Mubarak to Saudi as a refugee also increased tensions between the two countries. Some of the tensions were reflected in small crises. For example, Egyptian pilgrims in Gada Airport were treated badly for several days. Meanwhile, many Saudis who used to visit Egypt for the purpose of tourism have been warned against doing so after the 25 January Revolution.
Saudi tourists are among the main resources of the Egyptian national economy in certain months of the year. It is not only a matter of economics, since political instability affects both current Saudi investment and new investment. Many disputes are related to corruption cases under the Mubarak regime. For example, the cases of Omar Effendi, Tanta, Al-Khorafi, Damak and Al-Fotam, that all received Gulf investment and are directly affected by the change in the investment climate following the 2011 revolution.
LOOKING TOWARDS IRAN: As for Egyptian-Iranian economic relations, such were the only ties between the two countries under Mubarak, since there was no diplomatic relations between the two since 1980. The evolution of these relations was measured by the increase in the number of Egypt-Iran Bank branches in Egypt, as commercial exchanges between them didn't exceed $76 million in 2009. A treaty had been signed to establish a direct airline connection between Egypt and Iran in October 2010. It has not been implemented until now for political reasons. According to this treaty, there are supposed to be 28 flights between the two countries weekly.
After the 25 January Revolution, Iran has been among the first countries praising the Egyptian uprising and expecting it to lead to improved relations with Egypt. Moreover, it perceives the new system in Egypt after the revolution as an opportunity to be exploited, to open new markets for Iranian goods, and to face down the economic sanctions imposed on it. In Egypt it seeks a new and crucial ally in the Middle East that can increase its power vis-├-vis others in the region. To this end, the visit of an Egyptian delegation of 45 public figures to Iran was welcomed by high officers in the Iranian government as a way to enhance relations between the two countries, on the political as well as economic fronts.
Business delegations visited Iran in April to improve trade relations between Egypt and Iran, hoping to reach $5 billion levels soon through joint economic projects and encouraging investment between the two countries. Iranian religious tourism to Egypt alone could provide the Egyptian economy with $2 billion extra yearly.
In the same month, the Iranian Foreign Minister Ali Akbar Salehi declared that Iran is ready to provide Egypt with the nuclear know how and technology it needs for developing its energy production capabilities without conditions because the two countries. The two countries are not enemies, he said, and should be friends, especially after the revolution. Meanwhile, Iranian investors have declared following the results of parliamentary elections and the success of Islamist parties that they are ready to invest in Egypt and that their investments would focus the petrochemicals, carpets and cars sectors, among others.
EGYPT AS KEY: The two countries, then, Saudi Arabia and Iran, strongly understand that having a dominant role in the Middle East is conditioned by good relations with Egypt, especially after the 2011 revolution. Both are trying to make the best use of the economic tools at their disposal vis-Ó-vis Egypt. In my view, both succeeded in using these tools successfully, as pressure or for securing gains in improved relations.
The nature of the economic relations between Egypt and the two countries in the short and long runs will highly depend on the type of political system emerging in Egypt, the new constitution, results of fresh elections, and the way the new president perceives Egypt's role in the Middle East and its relations with other powers in the region.
Egypt can profit by the ambitions of the two countries and gain new investment and grants for economic projects that could help it achieve progress and development and add new resources to the national economy in this transitional period.
The writer is teaching assistant in the Faculty of Economics and Political Science at Cairo University.