Eurasia Press & News
European foreign ministers met with leaders from Saudi Arabia, Egypt, Jordan plus the Arab League secretary-general on Monday (22 January) to discuss the ripple effects of the war in Gaza and the disruption of Red Sea trade.
After weeks of attacks by Houthi militants on merchant ships, trade through the Suez Canal has plummeted. The US-led retaliatory mission, Prosperity Guardian, has upped the stakes amid fears of a regional conflagration.
Shipping costs from China to Europe have already tripled, which will push up consumer prices. The impact of this on the European and Israeli economies will take some time to play out.
However, the economic damage to Egypt is already severe and compounds a deep financial crisis that has wrecked the country’s finances, which could potentially destabilise the country if no solution is found.
“What this does ultimately is that the poorest suffer, the poorest in Africa, the poorest in the Middle East, in terms of food supplies,” Irish foreign minister Micheál Martin said at arrival in Brussels on Monday.
“It’s one of the crazy things — the Houthis say this is an operation against Israeli interests, but it’s not at all. The Israelis have almost no interests in the Red Sea, and the Houthis are simply harming poor Egyptians,” Edmund Fitton-Brown, a former British ambassador to Yemen and an advisor to the Counter Extremism Project — a group based in Germany and the US, told EUobserver.
The Suez channel is one of the major trade arteries connecting Europe to Asia. It represents 13 percent of global trade and is a crucial source of foreign currency for Egypt.
In the first week of January, transit volumes reaching the Suez Canal were 37 percent lower than last year, according to the IMF’s PortWatch platform. Further disruptions could cost the Egyptian government billions.
“Egypt desperately needs to raise foreign revenues,” Riccardo Fabiani, the North Africa expert at International Crisis Group, a not-for-profit conflict prevention organisation based in Brussels, told EUobserver.
Foreign debt has ballooned by more than 50 percent since 2019, fuelled by ballooning food and fuel costs following the Russian invasion of Ukraine.
Egypt is now among the countries most at risk of default—needing more than $28bn [€26bn] to meet repayments in 2024 alone.
Egyptian foreign minister Sameh Shoukry held a working breakfast seeking to increase bilateral cooperation and financial support for his country’s economy.
But even though the country is in dire straits financially, as a critical player in the region and a gateway for aid to Gaza, it now has more leverage to negotiate financial help.
After talks initially stalling, the Egyptian government is in talks for a $6bn loan from the International Monetary Fund. Saudi Arabia and the United Arab Emirates are reportedly also considering financial support to prevent further regional destabilisation.
Meanwhile, according to the official communication, the EU has proposed an investment plan that is meant to ‘enhance stability’ in the country.
But figures mentioned so far are in the €100m range, insufficient to help Egypt meaningfully, and are primarily meant to block migrants from reaching EU shores.
“The realities are the EU doesn’t have a big vision for Egypt,” said Fabiani.
