A year after the violent dispersion of protesters at Rabaa and Nahda squares in Cairo Egyptian President Abdel Fattah Sisi has reason to be pleased with the state of the world. The early mutters of disapproval in Washington have died down and even a recent report by Human Rights Watch asserting that the government crackdown on supporters of former President Muhammad Morsi comprised a series of crimes against humanity will probably be ignored. That Egypt today, with an authoritarian regime underwritten by the armed forces, is far less torn by conflict than Libya, Syria, or Iraq may be one reason for feeling self-satisfied. Another, and one of the most surprising reasons for such feelings, besides the usual cynicism of international politics and foreign policy, is due to the remarkably accommodating policies of Egypt’s neighbor to the northeast, Israel.
While the most common optic used to view events in the region remains that of the Israeli-Palestinian conflict, it has also become increasingly fashionable to think in terms of a struggle for influence between the Kingdom of Saudi Arabia (aided by its friends in the United Arab Emirates) and the Islamic Republic of Iran (with an occasional assist from Qatar). Through these lenses Egypt is no longer an independent player in the Arab world but merely a dependent supplicant for favor in a conflict between far more powerful forces. While this may be true to some degree, it ignores how rapidly Egyptian diplomacy has used the assets—meager as they may be—at its disposal to reverse the negative impact of the criminal violence through which the current regime came to power. Whether this is due to remarkable skill or dumb luck remains to be seen, but the new government has done a superb job of taking advantage of opportunities.
Not the least of those assets has been Israel. To say this is to admit an unconventional view of the current situation in the region. The dominant approach is to say that Egypt is the ally or even the cat’s paw of Israel. The Israelis, after all, rely on Egyptian weakness to carry out their assault on Gaza and Israel is the dominant military and economic power in the eastern Mediterranean. Many believe that Egyptians (and thus any democratically elected Egyptian government) really want nothing more than for their army and their economy to come to the aid of the beleaguered Palestinians. Exactly why, after even the Morsi government closed down tunnels to Gaza and maintained the blockade, anyone should unquestioningly believe this is something of a mystery. It is true that the Muslim Brotherhood, of which Morsi was a leading member, had a fraternal relationship with Hamas. It is equally true that the Freedom and Justice party leaders vociferously campaigned at rallies on their intentions to liberate Jerusalem. As all the little communist parties of the world learned to their sorrow during the years of Stalin’s Comintern, the interests of big brother take precedence. Morsi and his allies may have talked a good game of fighting Zionism but in the end they turned out to be mainly interested in the victory of Islamism in one country.
The Sisi government (which includes the transitional period) is far less enamored of the Palestinian cause and Hamas than was the Muslim Brotherhood. The new government, faced with continuing unrest in the Sinai Peninsula and ongoing armed attacks on border guards, police and army units, sees the entire region as a security threat. Gaza is, in this view, a source of and a refuge for armed elements that the new government sees as threatening. That Hamas militants paraded through the streets of Gaza before the recent fighting while holding weapons and making the raised four-finger sign of Rabaa could not have been pleasing to President Sisi and his government.
Egypt’s new generals, it has been widely observed, have little combat experience. Unlike former Defense Minister Tantawi they never fought the Israeli Defense Forces. If they have never been victorious in battle neither have they suffered defeat at the hands of the IDF. Nor does the Israeli government of Benjamin Netanyahu appear to harbor any ill will toward an Egyptian military that stolidly guards its own borders. On the contrary, ministers and pundits alike committed to the Netanyahu government see political Islam (whether in Iran or the Arab world) as the most dangerous strategic threat they face. In their rhetoric, and perhaps in their own strategic calculus, the Muslim world is a seething cauldron of rage about to pour down on the Jewish state. Against this possibility the Egyptian military are a bulwark.
It is thus not so surprising that Israeli diplomats and American organizations strongly connected to Israel urged the Obama Administration not to cut aid to Egypt in the wake of the coup. One way to look at this is that the new regime in Egypt had been rewarded for truckling to Israel. Another way—at least as honest a description—would be that the Israeli government carried water for the Egyptians. To repeat: the Israeli government judged its interests best served by aiding the strategic interests of the Egyptian regime in exchange for no formal promises or assurances.
Israeli intelligence about Gaza is known to be relatively impoverished. Unsurprisingly, Israel is better informed about the more open society in the West Bank than what many describe as the open air prison of Gaza. Despite the fantasies of Jeremy Bentham and Michel Foucault, prisons are not easy places to observe nor does the Hobbesian world of incarceration lend itself to stable patterns of alliance or preference. If Israeli officials rely to any degree on Egyptian colleagues for intelligence about Gaza, they would not be the first occupying power to risk being systematically misled by those from whom they seek information.
Israel’s assault on Gaza and weakening of Hamas has gone well for President Sisi. The Israelis and Islamist Palestinians have wounded each other. Hamas has been materially weakened and Israel has, in the eyes of important sections of the developed world, forfeited much of its moral and political capital. Egypt, a country which for a year had labored under the threat that the US or the European states would diminish both economic and diplomatic support has now become once again a crucial interlocutor. In fact, as President Obama’s attention is drawn increasingly to Syria and Iraq as well as Ukraine, Egypt is a welcome partner. Cairo becomes the venue and the primary agent in facilitating talks between the two warring parties. Whatever possibility there was that the Obama administration would further cut aid to Egypt has vanished in the plumes of Hamas’s rockets and the explosions of Israeli ordnance.
On the home front the picture facing the Egyptian government is less rosy, but it is not quite as dismal as Sisi’s opponents suggest. A year after the government violently dispersed the demonstrations at Rabaa and Nahda squares, it has managed to write and implement a new constitution. That the new constitution was approved by 98% of the voters and President Sisi elected by 96% has not embarrassed the new government nor does it seem to be an element of popular discontent for now.
The government faces far more severe problems than the validity of its mandate. It has so far proven incapable of resolving many of the issues that President Morsi unsuccessfully confronted. In the process it has become clear that the profound challenges that faced the Morsi government were not manufactured by the deep state, foreign interests, or anything other than the present structure of the Egyptian economy and politics.
There has been significant commentary about Egyptian food imports and the dire consequences of bread shortages in a country where bread is a necessary dietary staple. Nevertheless, among the most pressing problems in Egypt is that of electricity supply. The persistent outages that occurred before the coup have become longer and more frequent over the last year. Initially there was a respite as power consumption dropped below production for a brief period but the general trend has been negative. The government plans to resolve the issue in the short term by increasing coal imports but these will necessarily increase the drain on foreign currency reserves. A cleaner alternative would be natural gas. Although Egypt has very large reserves of natural gas, it faces increasing shortages. The government has diverted more of the gas from exports (including small but very controversial shipments to Israel) to domestic consumption but has been unable to increase production. The major stumbling block is the unwillingness of the government to increase the price for foreign partners as well as the government’s inability to pay its previous energy debts. A possible resort to increasing imports of liquefied natural gas may briefly alleviate the physical shortfall but at the cost of further drain of foreign reserves and foregone investment in production.
Long-term problems include high unemployment and continued weakness in production and investment as well as the diminished activity in the tourist sector. Although Egyptians like to think of the tourist attractions in their country as unique this is something of a mistake. It is true that no other country has pyramids so large or Pharaonic monuments so grand, but the Pyramid of the Sun in Teotihuacan is also unique. Having visited Luxor once globetrotters are as likely to want to see Angkor Wat as make a return visit to the temples on the Nile. Other Egyptian tourist attractions—sandy beaches, clear blue water, exotic scenes for scuba diving—must compete with similar accommodations in Thailand, Mexico, Brazil, and even socialist Cuba’s white sands of Varadero. Tourism is a source of hard currency and Egypt’s historical attractions are uniquely important in human history but the global tourist market is highly competitive. The number of tourists coming to Egypt dropped from 14 million in 2010 to around 9 million last year. That other destinations can be visited without fear of disruption or political unrest makes them even more desirable today.
One bright spot is remittances, which according to the central bank, flow on the order of $22 billion annually. In academic discussions of the Egyptian economy remittances are often referred to as a form of “rent” probably because, like royalties on oil production or Suez Canal transit fees, they are paid in hard currency. They are better thought of as as a form of export of human capital. The higher returns abroad to the joint investment between individual Egyptians and the state in education are partially returned to Egyptian society through this mechanism. What is insufficiently appreciated is that the particular form inter-Arab economic relations have taken in the past five decades makes it possible for this economic arbitrage to function effectively from the vantage of the state. Ordinarily migrants take their education with them as well as their entrepreneurial talents when they settle abroad. Egyptians cannot, for the most part, do this because although they can often enter other Arab countries in search of employment they cannot easily become citizens in their new homes and must return to Egypt. The Arab world would look would look very different today if millions of Egyptians had permanently left the country over the past three decades and become citizens in Gulf countries or Libya.
President Sisi has also announced a plan to dig a second Suez canal and widen the existing channel. This would allow more ships to transit and increase revenues to the government. Increasing the capacity of the Suez Canal is certainly a better investment than building a second Nile in the Western Desert parallel to the existing one. Whether the government can accomplish this in the year that President Sisi set for the project is dubious and even the Suez Canal is no longer a certain source of rents or hard currency. Today, unlike in decades past, Suez and Panama--in opposite hemispheres--can compete for the shipping trade between China and Europe. With Suez tolls for some ships set at more than a million dollars for the round trip, the journey around Africa or through a widened channel in Panama have become competitive for some shippers.
The numbers make the economic situation appear impossibly grim. There are also many accounts detailing the stranglehold the army is said to have over the economy with estimates of military enterprises accounting for between 5% and 40% of the whole. It is something of a mystery in this case why Egypt does not experience the complete collapse pundits have been predicting regularly for the last three years. Remittances and the financial support of the Gulf monarchies certainly make a difference. The state budget is nevertheless under pressure and there is little reason to believe that the Armed Forces, despite the engineering degrees held by many of its officers, will be able to chart a successful course out of the current mess.
What Sisi and the generals may be able to rely on at least for a while is the informal economy. Estimates of the size of the informal economy—defined as those enterprises that pay no taxes and which have no legally recognized property rights—range from between thirty to forty percent. There is every reason to believe that the informal sector plays an important and possibly even nearly a dominant role in urban housing markets and that informal systems of property rights and adjudication procedures exist. Living in the informal markets for labor and commodities is precarious but on balance it is clear that millions of Egyptians manage to do so. There is no need to romanticize the difficult lives of those for whom pennies (or more appropriately piasters) spell the difference between ruin and relief. What studies there are suggest that for some Egyptians, informal employment is a first step in a ladder to a viable livelihood and for others (women and poorly educated men for example) it may well be an inescapable trap. Nevertheless for the moment it provides some stability in an economy that is increasingly at risk. And it may well be that Egyptians in the most precarious situations are the ones who most desire stability, even at the cost of increased political repression. Sisi’s supporters, who helped to drive President Morsi from office, are not drawn only from the ranks of well off liberals any more than were the enemies of Maximilien Robespierre during Thermidor of 1793. He went to the guillotine with the assent and even the enthusiasm of much of Paris as well as the French countryside. Although Robespierre’s downfall is linked in modern imagination with the Terror it appears in retrospect to have been more closely connected to how opposing elites deployed issues of more widespread popular concern: rising prices, bread shortages, and the absence of fuel.