Egypt in a dangerous crossroads

Egypt is undergoing a serious economic, social, political, military, and diplomatic crisis. Egypt has a larger population than Iran, but its economy is smaller, and it is a country with a not negligible geostrategic importance because of its location between Africa and Asia.

Currently Egypt is not able to feed properly its population, neither to provide it with enough employment. It is estimated that some 35 – 40% of Egypt's population is earning less than the equivalent of two dollars a day. Egypt has a population of over 90 million, and whilst the official figures for unemployment are of 27%, estimates put the number at a minimum of 40%. Recently the government devaluated the Egyptian pound by nearly half of its value. A veteran writer on Egyptian affairs has described last month the situation of the sugar deliverances as follows: “Sugar supplies have dwindled. Supermarkets and shops have run out, long queues are forming outside government cooperatives, and prices have doubled over the last few weeks. The state-owned Food Industries Holding Company has been reduced to rationing meagre sugar supplies to the food processing industry, especially soft drink makers, to keep factories running.” (cfr. http://www.thenational.ae/business/economy/patrick-werr-sugar-shortage-in-egypt-leaves-a-bitter-taste#full)  Tourism, another key factor in the Egyptian economy, is also under a severe crisis due that because of security concerns England canceled its flights to Sharm el-Sheikh and Russia canceled altogether its flights to Egypt.

Politically, Egypt’s power elite is divided between on one side President al-Sissi, backed by the Central Intelligence, and on the other the Armed Forces and the Military Intelligence. There seems to be no danger currently of another coup, because the fear of total political and economic collapse enhance the preference for a smooth leadership transition in the next few years. It is within this framework that we must see the call of some army officials to al-Sissi not to run for reelection in 2018.

The national security is challenged by the extremist armed actions in the Sinai Peninsula, in especial the Islamic State group. The army is having difficulty to cleanse the area due to its mountainous character and the presence of some highly trained terrorist insiders among Bedouin tribes who are difficult to track down.

If all this wasn’t enough, things got worse with the Cairo rejection of participating in the Saudi-led coalition battering the Shiite Houthis and their vote for a Russian resolution on Syria. As a result, last month Saudi Aramco decided to stop the transfer of discounted oil to Egypt.

In spite of everything, Egypt is still considered a leading power in the Arab world. The eyes are put now in the new incoming administration in Washington, to see if and how it will help Egypt, or if it will keep the retreatment path of the Obama policy. Trump will have to understand that the price of isolationism is the enhancement of the danger of pushing Egypt into Russian or Iranian arms.

Ethnic cleansing in the current war

The Middle East war is causing gigantic demographic changes, in a proportion than can be compared to the massive expulsion of ethnically Germans from East Europe at the aftermath of World War Two or the formidable population exchange between Indians and Pakistanis. Interestingly the latter was not done on historic or linguistic lines, but were implemented on religious lines, in the same vein that the main source of tension in the Middle East today runs in the lanes of the Sunni-Shia confrontation. The religious variable has shown much wider influence than what we thought during the Cold War years. The large-scale population movements originated in the region have not been a simple byproduct of war. Rather, they represent conscious strategies of ethnic cleansing by each faction. Already last year, Fabrice Balanche, of The Washington Institute for Near East Policy, wrote that “the Syrian conflict is a sectarian war, and ethnic cleansing is an integral part of the strategy used by various actors, even if they claim otherwise.” (http://www.businessinsider.com/these-maps-show-how-ethnic-cleansing-has-become-a-weapon-in-syrias-civil-war-2015-12).

Before the inner war in Syria began in 2011, the Sunni Muslims make up about three quarters of the Syrian population, whilst the Shia Muslims were only some 11-13%. This was a problem for the nepotistic Alawite regime, and their Iranian and Russian allies. The war soon brought up the issue of the destruction of the sheltering populations, and the depopulation and ethnic cleansing of rebel-held areas was incremented. More than a million Sunni Syrians have gone to Europe, and some four million are refugees in Jordan, Turkey and Lebanon. On the other hand, hundreds of thousands of Shiites have come to Syria from Iraq, Iran, and other countries. Another aspect, is the redistribution by the Damascus regime of land and houses that belonged to Arab Sunnis who relocated to other places to remaining Arab Sunnis, and so increasing their dependence on the official authorities and arising conflict with anyone who decides to return.

The ethnic cleansing is a rising phenomenon both in Syria and Iraq. And if the main confrontation trench is the Sunni-Shia one, Christians are disappearing in both countries. But the latter is not something new. It is useful to recall that even after the Arab conquests of the Middle East in the 7th century, the majority of the population in most cases was still Christian. Yet the number of Christians steadily declined over the centuries that followed. A century ago, Christians represented some 20 percent of the population of the Middle East; today, that figure is estimated at less than 4 percent. It has been estimated that between one-half and two-thirds of Middle Eastern Christians have either been killed or left the area over the last century.

Of course nobody knows what is going to happen in the Middle Eastern quicksands, but it seems safe to acknowledge that the region will not return to its previous configurations. The Sykes-Picot designs seem to have failed, but consensus on lines of solution seem scarce. The current battle in Mosul, which is already causing thousands of refugees, is also dangerously arising the mutual suspicions and tensions between the Sunni Turkey and the Shia-dominated Iraq. The Turkish military are deploying heavy armor, including tanks, to the border near Iraq, a step to which Iraq’s Prime Minister Haider al-Abadi menaced with nothing less than stating in a televised news conference that “the invasion of Iraq will lead to Turkey being dismantled”. In the current dangerous Middle East everything is suspicion and tension in the best case, war in the worst.

The use in the Middle East of civilians in armed conflicts as human shields

The present developments in Mosul are putting on the table the unlawful issue of the use of civilians as human shields for Arab armed forces. The United Nations have already expressed their concern about the ISIS taking of 550 families from villages surrounding Mosul to the city, apparently to avoid them fleeing and to use them as human shields. This is done in the framework of what is expected to be the largest attack since the US invasion of Iraq in 2003 and the ousting of the dictator Saddam Hussein. There are currently about five thousand US soldiers in Iraqi soil, from which about a hundred are counselling the Kurdish Peshmerga and the Iraqi troops.

This wouldn´t be the first time in the last decades in the Middle East that captive populations are used in armed conflicts as human shields. During the 1991 operations in the Gulf War, the Iraqi Government moved a large quantity of weapons and military equipment into civilian areas with the deliberate purpose of using them as shields against attacks on legitimate military targets. During the Second Intifada (2000–2005) Palestinian gunmen routinely used civilians and children as human shields, for which there is photographic evidence. In 2006 the Hizballah used Christian villages in Lebanon as human shields whilst they lead a rocket aggression towards Nahariya and the coastal Galilee. In Gaza the Hamas has used civilians to shield their military operations against the Israelis, and footage has been released showing Hamas' Al-Aqsa TV calling upon children to form a human shield at various structures in Gaza to prevent anticipated IDF airstrikes. On the Hamas unashamed exposition of their tactics of using civilians as a shield against the Israeli Army, see the Hamas MP Fathi Hammad speech in al-Aqsa TV: https://www.youtube.com/watch?v=CWIDZ7Jpdqg

Picture taken during the Gaza war of 2008-2009 showing civilians gathered on a roof to avoid attacks from the IDF (Israel Defense Forces).

In the past, Hamas has shot from the Islamic University of Gaza, used an UNRWA school as a munition arsenal, relocated a police northern command to the Kam’el Adwuan Hospital, hide terrorists in the Shifa Hospital, etc.

It seems that now the ISIS is using this technique in the defense of their positions in Mosul, one that is illegal by nations that are parties to the 1949 Geneva Conventions, the 1977 Additional Protocol I to the Geneva Conventions, and the 1998 Rome Statute. But of course the international law is of no concern for ISIS, for whom only the Sha’aria, the Islamic law, counts.

Egypt Imports of Liquefied Natural Gas

Egypt, the most populous Arab country, is seeking about 120 LNG (liquefied natural gas) cargoes for 2017, worth about $2.4 billion at current spot prices in Singapore. But this giant tender is done under the shadow of the discovery of a huge natural gas field in the Mediterranean would provide massive supply of feedstock to Egypt in the near future. The Zohr natural gas prospect discovered in 2015 could hold a potential 30 trillion cubic feet of natural gas; the field is located in the in Mediterranean Sea about 190km off the Egyptian coast and is the country’s energy sector's crown jewel. Egypt hopes to become the center of regional natural gas development. However, Egypt’s new gas discovery will not cover energy needs in the next four years, as the preparation of the new gas discovery’s full infrastructure may take five to six years.

Natural gas has become a vital resource for the Egyptian economy. Electricity consumption amounted to 62 per cent of the domestic production of gas, while the industrial sector consumption reached 23 per cent, homes and car fuel five per cents and oil derivatives 10 per cent. If in the year 2000 gas provided 35 percent of the total energy needs of the country, now it’s more than half. But the Zohr project is questioned by the price fundamentals of natural gas. LNG imports became attractive for nations such as Egypt after prices fell 61 percent over the past two years. This are enhanced mainly by two factors. Demand has been reduced by Japan, which had become one of the world’s largest LNG consumers after its Fukushima disaster, because it recently began restarting its nuclear reactors. There is an increased supply capacity coming online around the world that is likely to put further pressure on prices.

In any case, Egypt has chosen three firms to supply liquefied natural gas to its markets for the remainder of 2016: giant Glencore, an Anglo-Swiss commodities trading house, will supply cargo for October; Dutch Trafigura (the third-largest oil and metals trader in the world) will deliver a shipment for November; and U.K.-based B.B. Energy – a relatively new player in the LNG trade – will ship in December.

Yemen: the dangers of economic implosion

War, a high population growth rate, high unemployment, declining water resources, and severe food scarcity is leading Yemen to a bleak future for which is already the poorest country in the Middle East.

The country is infested by military activity that is harming its infrastructure and the access to all type of goods. For example, the Port of al-Hudaydah, which handles 60% of Yemen’s commercial traffic, was damaged in August 2015, its four cranes were destroyed and several warehouses were damaged, and it was operating at only half of its capacity.

The country has currently over 27 million inhabitants, 0.8 million are born each year, and the population is forecasted to reach about 33 million in 2025. Analysts have pointed out that at any given time almost 1 in 5 women is pregnant and nearly half of the population is under 15 years old.

Unemployment was of about 17-18% high.

Groundwater levels have been falling and Sanaa could be the first capital city in the world to run dry.

Scarce food resources caused a third of Yemenis facing chronic hunger even before the unrest. That number is growing quickly.

The not encouraging economic situation has to overcome war and the hindrance of tribalism. These seem to be the main impediments to the betterment of the Yemenite society, but they do not seem easy to toss away, at least in the near future.

Morocco’s economy and OCP

Office Chérifien de Phosphates (OCP) — Morocco’s state owned phosphate producer and world’s leading exporter is a key factor in the Moroccan economy as it contributes more than 4 percent to the country’s GDP.

OCP is the second world’s largest producer of phosphate rock (the Chinese are the first) and ranks fifth among the main phosphoric acid makers, and had close to 8 million tonnes of granulation capacity in 2015.

Looking at the company’s activity, it is interesting to observe that on one hand since 2011 they have engaged into a massive multi-billion dollar expansion and modernization plan, but on the other OCP is currently receiving 40% less for its output than it did four years ago.

Between 2016 and 2020, OCP plans to commission four phosphate complexes, each with a one million tonnes granulation capacity, at its Jorf Phosphate Hub. In early 2016, OCP announced the project for a one million tonnes granulation facility in Phosboucraa, in the political disputed Western Sahara, for completion in 2020. A key element in OCP’s plans to expand its phosphate rock mining capacity from 30 million to 55 million mt/y has been the construction of the 187km long pipeline from Khourigba, inland, to the port and fertilizer production complex at Jorf Lasfar. Capable of handling 38 million mt/y of phosphate rock slurry, the pipeline has cut the company’s logistics costs by 90% while saving some 3 million m3 of water a year.

OCP accounts for some 28% of global phosphate exports in all forms, with mining capacities in excess of 32 million tonnes p.a. The company plans to expand its mining capacity over the next ten years, with the objective of reaching an effective capacity of 55 Mt in the longer term. Expansions are taken place in the main mining centers of Khouribga and Gantour. In the long term, the company will open new mines on the Meskala deposit (Essaouira Region), to feed downstream capacity projects at its Safi Phosphate Hub. A key feature of these projects is the expansion of floatation capacity, allowing OCP to further extract and process lower grades of phosphate ore. The bulk of the projected increase in production of phosphate concentrates would be earmarked for captive uses at OCP various Hubs. It has been reported that OCP plans to increase its phosphoric acid capacity from its current 4.7 millions of tonnes of P205 to 7.8 million in 2020.

The problematic current ceasefire in Syria

The Syria ceasefire agreement was signed by the United States and Russia but its implementation has to overcome the mosaic of conflicting interests in the framework of a cruel war that already claimed more than 300 thousand dead, more than two millions wounded, and drive more than half of the country's citizens away from their homes.

The main victim of the Syrian war has been the notion of a Syrian nation, if there ever was one.

The Damascus ruling Alawites are a 12-13% minority, but they level their numeric inferiority with the support of the Shiite camp, led by Iran with the involvement of its proxy Hezbollah, and the backing and military aid on the ground from Russia. The Alawites were originally known as the "Nusayris," and became established along the Mediterranean coast under the Shiite Hamdanid dynasty. The French colonial regime favored the Alawites in order to balance power against the majority Sunnis and their Ottoman backers. In the present situation, the term "the Assad regime" no longer refers to a state's regime but to this ethnic group controlling certain areas across what used to be Syria.

The Sunni Arabs of Syria constitute about 60% of the population but are divided into dozens of militias, few of which are jihadist (like ISIS, Jabhat Fateh al-Sham and others), that receive support from the Gulf states, led by Saudi Arabia, and recently from the US as well.

The Kurds in northern Syria, constitute about 9% of the population, or approximately 1.6 million people, and are fighting the Islamic State, but oppose the regime as well. They are supported today by the US and other Western states, but are attacked by Turkey, which sees a Kurdish autonomy in northern Syria as a threat to its interests.

In what makes up to the foreign forces, the US is interested in seeing in Syria a moderate Sunni regime leaning towards the West, but, due to the Obama’s administration policy of neo-isolationism, has so far hesitated to put any significant effort into that task. Russia supports the continued existence of an Alawite minority regime for fear that the alternative would lead to Moscow losing its foothold on the ground. Turkey would like to see a Sunni regime in Damascus, but is busy fighting the Kurds. That is the reason why Recep Tayyip Erdogan's regime supported ISIS for such a long time and allowed jihadists from around the world to flock to Syria so that they would join the war and strike the Kurds. Israel does whatever it can to keep itself out of the conflict but for humanitarian medical help and military responses to any fire on Israeli territory, including accidental fire.

This mosaic of opposing interests makes not only difficult the complete implementation of the ceasefire, but poses also serious problems in Syria’s long term future. The concept of a Syrian Homeland – Watan - was first convened in the late 19^th century by a group of Christian-Arab intellectuals, headed by Butrus al-Bastani. He was born in 1819 of a Lebanese Maronite Christian family in the village of Dibbiye in the Chouf region, Lebanon. But, divided among different ethnic and religious groups, the idea of a Syrian nation seems something not to be accomplished in the near future. The division of what once was Syria into different emirates or ethnic enclaves is not necessarily a danger, but could be a pragmatic solution.

Unemployment as % of total labor force

Source: World Bank, World Development Indicators.

Last Updated: 08/10/2016

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