Egypt to boost trade with the Russia-led Eurasian Economic Union; acquires equity position in BRICS’ New Development Bank
Egypt will become Russia and China’s key gateway for investment in Africa. Financing through the New Development Bank will sanction-proof and de-dollarise trade.
In a recent visit to Egypt, alongside a group of Russian businessmen and investors, Russia’s Deputy Prime Minister and Minister of Trade and Industry stated that it is important to conclude a free trade agreement between the Eurasian Economic Union and Egypt in order to increase the volume of trade and diversify it. In 2022, trade between Egypt and Russia has increased by 30% to reach 6 billion dollars, maintaining Egypt’s position as the largest trade partner for Russia in Africa.
Several agreements were signed during the visit. A protocol was signed regarding the establishment and operating conditions of the Russian Industrial Zone in the economic zone of the Suez Canal, which is expected to increase the volume of investments to 8 billion dollars. Another agreement was signed on cooperation and exchange of information between the customs institutions of Russia and Egypt to reduce trade friction and facilitate trade. Particularly, the agreement allows Russian companies to sell their products in the Egyptian market, not just export them through Egypt to other countries.
Since the beginning of the war in Ukraine, Egypt’s debt crisis and currency devaluation problem have worsened. In response, the government sought to expand its relations with Russia in an effort to secure more investments and attain food security. More strategically, Egypt is positioning itself for a multipolar world as it has pursued membership in the BRICS block. In a demonstrable progress of this process, it has acquired an equity position in the BRICS New Development Bank. The Bank offers new multilateral financing for developing countries, something Egypt is desperately in need of to address its spiralling debt crisis.
Overall, the number of Russian companies in Egypt reached 400 with a total investment of $7.4 billion. Russia continues to support the construction of Dabaa nuclear project including providing Russian financing of $25 billion. Furthermore, the Russian-Hungarian consortium Transmashholding began delivering 1300 train coaches to improve Egypt’s transportation system. Lastly, Russian tourism represents 25% of the total tourism to Egypt and was affected by the current Russian-Ukrainian crisis. However, it has now recovered substantially after the return of Russian flights to Egypt. Hence, Russia’s investments in Egypt are a major source of employment for millions of Egyptians.
Business implications
Egypt is set to diversify its debt sources which will increase investments and reduce the pressure on the state budget resulting in greater societal and political stability. However, it may be a recipient of additional pressure from the US which may cause the reduction of the annual aid to the military and worsening of already tense ties.
The newly generated job opportunities will contribute to increasing Egyptians’ disposable income and improving their purchasing power which deteriorated due to the deepening of the national debt crisis.
By joining BRICS, Egypt will become Russia and China’s key gateway for investment in Africa. It is important to note that financing through the New Development Bank may be conducted in currencies other than the dollar which will boost trade de-dollarisation in Egypt and sanction-proof it.