Loans for the president: external debt and power consolidation in Egypt

Egyptian President Abdel Fatah al-Sisi has consolidated his authoritarian regime in recent years. This has been accompanied by a significant increase in Cairo's foreign debt, which more than tripled between June 2013 and March 2022. The country's debt policy was directly linked to the presidential centre of power. The government managed a well-choreographed mix of incentives, threats, and concealment that made it possible to take out more and more new loans. The Egyptian military, on whose support President Sisi is dependent in order to assert his claim to power, is the main beneficiary of the debt policy. External debt helped to protect the revenues and assets of the armed forces, to finance major projects in which they could earn significant money, and to pursue an expansive military build-up. The instrumentalisation of debt policy for power politics increases the risk that Egypt will no longer be able to service its liabilities in the future. Above all, however, the misallocation of scarce financial resources under­mines the socio-economic development of the country and promotes police-state repression. The latter, in turn, favours the political instrumentalisation of debt policy for power politics, as it prevents any control of govern­ment action. In the future, Germany and its European partners should therefore tie bi­lateral lending as well as support for Egypt in its negotiations with international financial institutions to two conditions: firstly, the dismantling of military economic activities - whereby the assets of the armed forces must also be disclosed - and secondly, concrete steps towards ending police-state repression. (author's abstract

Egypt, Saudi Arabia and the UAE: the end of an alliance; divergences of interest in bilateral relations offer opportunities for Germany and the EU

Over the past 10 years, the de facto alliance of the governments of Egypt, Saudi Arabia and the United Arab Emirates has exercised significant influence over developments in the Middle East. The common goal has been to prevent democratic transformation, stop the rise of political Islam and counter the influence of Iran and Turkey over the region. But joint regional political interventions have so far had little success. Moreover, divergences of interest in bilateral relations between these authoritarian Arab states have come to light in recent months. The potential for conflict has become evident with regard to both economic and regional political issues and is only likely to increase in the future. For Germany and the European Union, these divergences of interest between the three countries offer an opportunity to pursue their own goals in the region. (author's abstract

A sovereign wealth fund for the Prince: economic reforms and power consolidation in Saudi Arabia

With the “Vision 2030” development plan, Saudi Arabia wants to diversify its economy and end its dependence on oil in the long term. The Public Investment Fund (PIF) is of particular importance here. By 2030, it is to become the world’s largest sovereign wealth fund (SWF) and manage finan­cial assets worth $2 trillion. The PIF is not designed as a savings fund, but as a stabilisation and development fund: The fund capital is intended to cushion the state budget against price fluctuations on the commodities market, finance development projects, and attract investments and know-how from abroad to the kingdom. The analysis shows, however, that the expansion of the PIF is primarily motivated by power politics. The SWF gives Crown Prince Muhammad Bin Salman direct access to the state’s substantial financial resources. He can use these resources according to his preferences and thus purchase the loyalty of politically important factions within the elite. In addition, Bin Salman could use the PIF to “buy” international support for his political goals. Through the SWF, the economic transformation in Saudi Arabia is closely linked to the consolidation of the crown prince’s rule. Decision-makers in Germany and Europe should be aware of these functions of the PIF. Economic cooperation with the kingdom involving the PIF or companies controlled by it has a po­litical dimension that must not be ignored. In addition, a stronger in­volve­ment of the PIF in Europe could require a political impact assessment that would have to examine whether the SWF primarily acts as a profit-seeking investor or whether it is pursuing a foreign policy agenda. (author's abstract

"Flash-in-the-pan" development in Egypt? IMF-backed economic recovery stymied by absence of structural reforms and massive human rights violations

In November 2016, Egypt agreed a comprehensive aid programme with the International Monetary Fund (IMF). Its stated objective was to stabilize the country’s macroeconomic situation within three years and put it on track for inclusive economic growth. At the half-way stage, hardly any structural reforms have been implemented despite a short-term macroeconomic stabilization resulting from the conditions put in place. Rather, the increasingly influential military has prevented the emergence of a functioning market economy. This has been compounded by the disastrous human rights record of the government under President Abdel Fattah el-Sisi, which has also had a negative impact on Egypt’s economic development. Germany played a key role in the IMF agreement being concluded. The German government should, therefore, work to ensure the IMF produces a critical assessment of the reforms that have taken place so far. It should also link its willingness to support future aid packages with improving the human rights situation and strengthening civil society. (Autorenreferat

Al-Sisi's development visions: projects and power in Egypt

Abdul Fatah al-Sisi came out as winner of a highly unfree and unfair presidential election held between 26 and 28 May. In office the former military chief now faces great challenges. The country’s economy is in ruins and living conditions have tumbled over the past three and a half years. But comprehensive economic reforms are not on al-Sisi’s agenda. Instead, during his election campaign, the former army chief proposed gigantic development projects. Here he has a particularly firm eye on the interests of his most important supporters. Such a course will not improve Egypt’s economic and social situation. Germany and Europe should therefore definitely not support the approach of the new leadership in Cairo, but instead push for structural reforms in the Egyptian economy. (author's abstract

Egypt's business elite after Mubarak: a powerful player between generals and brotherhood

"Alongside economic wealth, Egypt's business elite attained notable political influence under Mubarak. And after Mubarak's fall in February 2011 Egyptian entrepreneurs very successfully defended their power, profiting from the laxness of fraud and corruption investigations after the armed forces took power. The same course was continued by the Muslim Brotherhood under the presidency of Mohammed Morsi in 2012/2013. More broadly, the Brotherhood’s policies closely echoed Mubarak’s pro-business economic policy. But its attempt to co-opt the business elite failed, as did the efforts of certain Brotherhood members to seriously expand their own business activities. Many of the mostly secular-leaning top entrepreneurs were deeply mistrustful of the Brotherhood and supported its adversaries by funding opposition parties and politicians and via private-sector media. These activities contributed to the Brotherhood's failure to consolidate the power it gained through elections. The armed forces' removal of Morsi in July 2013 could permit the influence of big business on the political process to increase still further. Regardless of current political turbulence, Germany and the European Union should therefore shape their long-term cooperation with Egypt so as to counteract the foreseeable negative consequences of such influence by supporting both the creation of transparency and competition in the Egyptian economy and the establishment of a more equitable tax system." (author's abstract

Political prisoners in Sisi's Egypt: arbitrary detention as an obstacle to German stabilisation efforts

Thousands have been imprisoned for their political and ideological views in Egypt since the 2013 military takeover and Abdel-Fatah al-Sisi's subsequent rise to the presidency. This policy has dramatic humanitarian consequences, but also increasingly promotes radicalisation, strengthens rejection of state institutions, and hinders devel­opment of the country's civil society and economy. It also undermines Germany's efforts to use financial aid and development cooperation to stabilise Egypt, the Mediterranean's most populous country. The German government should therefore increase its pressure on Egypt's leaders and call for far-reaching amnesty. In doing so, it is important to emphasise the personal responsibility of the president and to tie future loans and debt rescheduling to concrete steps that end arbitrary detentions. (author's abstract

German arms exports and the militarisation of Arab States' foreign policies

Measured in terms of licenses issued, Arab states will again be among the main recipi­ents of German military equipment exports in 2020. This continues a trend that has been evident since the early 2000s and especially since 2010, all despite Germany’s recently extended ban on arms exports to Saudi Arabia. From 2018 to 2020, the value of export licences for the five most important Arab buyer countries has decreased compared to the previous period. However, their share of total export licences is still over 25 percent. In view of regional developments, this is problematic. The foreign policies of the biggest customers have changed in recent years as they become less predictable and more willing to use military means to assert their interests. Military equipment exports could thus contribute to further escalation of the numerous inter­state conflicts in the Middle East and North Africa, thereby posing great risks to Ger­many and the EU. Against the backdrop of Germany and the EU’s own export gui­de­lines, it is therefore advised to halt exports of military products to these countries. (author's abstract

From Yemen war to joint army? Egyptian-Saudi differences over Arab military cooperation

"On 25 March 2015 a Saudi-led coalition of Arab states launched air strikes on Yemen to halt the advance of the Houthi movement. A few days later the summit of the Arab League decided to set up a joint Arab army. Nevertheless, the two most important Arab countries support opposing concepts for military cooperation: Egypt proposes institutionalised long-term military cooperation to increase its political weight in the region, while Saudi Arabia prefers ad hoc coalitions precisely in order to avoid long-term dependency on other countries, not least Egypt. However, the two events suggest that states in the region are stepping up military cooperation. Germany and the European Union should treat this development with scepticism. Experience shows that such collaborations tend to exacerbate rather than resolve regional conflicts." (Autorenreferat

Three scenarios for the Qatar crisis: regime change, resolution or Cold War in the Gulf

On 5 June 2017 Saudi Arabia, the United Arab Emirates (UAE), Egypt and a number of allied states broke off diplomatic relations with Qatar and imposed a partial blockade. Their stated demand was for Qatar to cease its support for "terrorist" groups and its policy of "destabilising" other countries. With Qatar rejecting the charges as baseless, the prospects for resolution appear thin. The most conceivable scenarios are forcible replacement of the Qatari leadership, peaceful resolution between the parties, or consolidation of the rift between two camps in the Gulf. Germany and other European states should avoid taking sides, but should assert three fundamental demands: the conflict parties must respect national sovereignty and the proportionality required by international law, refrain from instrumentalising the fight against terrorism, and prevent the dispute spilling over into other conflicts in the region. (author's abstract