Saudi oil shipments to Egypt have resumed after several months of political crisis between Cairo and Riyadh. Egyptian oil ministry sources stated on 19 March that the first two oil shipments from Saudi giant Aramco have been delivered. No reactions were given by Saudi Aramco or officials until now. Egypt expects to receive two other deliveries on March 26-27.
Analysts have been watching the crisis between Saudi Arabia and Egypt, as both Arab leaders were in a brawl based on differences on regional politics, the position of Syria’s president Assad and the role of Russia in the region. In April 2016, Saudi Arabia agreed to finance Egyptian imports of refined products from Aramco for five years in a $23 billion deal.
In October 2016, Aramco suspended oil deliveries to Egypt after Cairo supported a Russian backed UN Security Council resolution on Syria. Saudi Arabia is a staunch supporter of the anti-Assad rebels in Syria, while Egypt’s president, Abdel Fattah el-Sisi, is showing an inclination to be more flexible in his approach. The crisis has heated up due to the blocked handover of two Egyptian Red Sea islands to Saudi Arabia. Even though Sisi supported the handover, Egyptian politicians, a majority on the streets, and the Egyptian courts have been blocking the transaction.
The current situation, perceived by some as a thaw in the relation between Egypt’s president Sisi and foremost Saudi Deputy Crown Prince Mohammed bin Salman, is still unclear. The crisis is deeper than currently shown on the surface. Riyadh has been very unhappy with Egypt’s unwillingness to commit troops to join the Saudi-UAE led coalition war against rebels in Yemen. Mohammed bin Salman is also worried about the growing thaw, at least in the media, between Cairo and Tehran. Related: Are U.S.-Saudi Relations Turning Sour?
From the position of Sisi, support from Saudi Arabia is still key. As long as Saudi Arabia fully opposes the Muslim Brotherhood, Sisi’s position is not under real threat. To support Cairo’s fight against terrorism and the Muslim Brotherhood, Riyadh has already provided several multibillion dollar schemes for aid and credit since the overthrow of Muslim Brotherhood president Mohammed Morsi in 2013. The influx of Saudi cash is needed still, as the Egyptian economy is struggling to cope with the devaluation of the Egyptian pound, high unemployment rates, and a lack of government revenues. Additionally, investors and tourism have been hit by terrorist attacks in Cairo, Giza, Alexandria and the Sinai.
The move by Saudi Arabia to restart oil deliveries to Egypt can be seen as a positive sign for international investors. Politically, it is a very positive step, as it shows renewed confidence by Arab states in Egypt’s stability and the regime of president Sisi.
There is, at the same time, an ongoing Arab diplomatic offensive going on behind closed doors in Cairo. Egyptian sources have reported that a senior Saudi official has been meeting with Egyptian counterparts in Cairo in the last few days. At the same time, Arab kingmaker, Jordan is again playing its mediation role. Jordan’s minister of foreign affairs, Ayman Safadi, has been setting up meetings in Cairo to mediate between Cairo and Riyadh. Officially, the latter is to wipe out some of the differences before an Arab Summit which is being held at the end of this month in Jordan. Insiders have, however, stated that there is still a long way to go before all issues are solved between Riyadh and Cairo.
The need for this is clear, as the Amman Arab Summit could be a watershed meeting in Arab regional politics. If rumors are to become reality, Russian president Vladimir Putin could also be attending the Summit. No invitation has been sent to Washington or Brussels. The attendance of Putin could be crucial for the next years in the Middle East. Russia’s growing influence in the Middle East (Syria, Iran) and possible intervention in Libya, is one of the main reasons for the Summit invitation. This could put the relationship between Riyadh and Cairo under pressure again, if no mitigating measures by other Arab countries are put in place. Egyptian sources also indicated that some high-ranking Saudi officials are expected to be in Cairo soon to prepare the common standpoints for the Arab Summit.
At the same time, both sides are still battling for a power position with the Trump Administration. Sisi and Saudi Deputy Crown Prince Mohammed bin Salman, especially after the fall out with regards to Syria and Yemen, have tried to gain the support of the new Washington Administration. This presents Washington with an extremely difficult situation as Trump doesn’t want to alienate Saudi Arabia but also cannot ignore Egypt’s overall strategic position in the region. The meeting between Mohammed bin Salman and Trump last week will be followed soon by the visit of Egyptian president Sisi. Saudi analysts have reiterated that official White House statements were promising, while U.S. newspapers have reported that the Trump team was unimpressed by the Deputy Crown Prince.
For Trump, Egypt is still a very important player in the region. President Trump’s first action on January 23, 2017 (his first day in office), was to call Egyptian President Sisi. The two had already been meeting even before Trump became president. Sisi’s official visit to Washington on 1-4 April will be looked at with anticipation by Saudi Arabian power brokers. For Washington, the Saudi position is one of risks. Riyadh’s strong adverse position towards Iran, which is officially being supported by the Trump Administration and most of the Arab states, does not hide that Washington (and Egypt) are not fully impressed by the Saudi approach to the Syrian conflict, and especially, the Yemen war. The U.S. doesn’t want to get pulled into these two conflicts by the Saudi-led Arab alliance. The more ambiguous approach shown by Egypt is seen as more appropriate to US strategic interests.
Taking the latter into consideration, Egypt’s position has increased without even firing a bullet. Washington, based on its assessments that Saudi Arabia, Qatar, and Turkey are supporting sides in the anti-Daesh wars, which cannot be supported fully, feels that Egypt should be supported to take over in the coming months. Saudi Arabia, without acknowledging the latter openly, has assessed this development, and now is opening up to Cairo again.
For the Arab region, any military or economic venture, looking for long-term stability and prosperity, without having Egypt take a central role, is a nightmare. The option that Egypt could join ranks of the opposition (Russia-Iran) is seen by most Arab states as a possible nail in the coffin for any Arab coalition. Saudi Arabia’s choices, at present, are weak and constrained. The Syria-Yemen adventure has not been a success, Turkey’s power play in the region conflicts with the Arab coalition strategy, and, at the same time, Russia is opening up to major Arab players such as Egypt, Iraq and the UAE. In the past week, news emerged about a possible direct military involvement of Russia in Libya, maybe even from Egyptian military bases. Several intelligence sources stated on March 13 (Reuters) that Moscow reached an agreement with Egypt to deploy Russian military forces in Egypt, towards the Libyan border. News even emerged that a 22-member Russian Special Forces unit had already deployed into Egypt, to be operating from the Sidi Barrani military compound, located about 100 kilometers from the Egyptian-Libyan border.
The presumed Russian forces would be used to assist Russian backed Libyan National Army General, Khalifa Haftar, as well as expand the Russian influence in Egypt and the MENA region. This could be another push for Saudi Arabia to reconsider its Egyptian position. The main outcome seems to be that, for Saudi Arabia, the time for a power play with Egypt is over. Riyadh had to acknowledge that Egypt’s central power position cannot be beaten. Now the other geopolitical adagio pops up again. “If you can’t beat them, then join them”.
The current rapprochement is one first step. Saudi Arabia’s willingness to restart oil supplies to Egypt should be seen as a fig leaf offered to Sisi. Both sides will need to come together and restart their military-economic cooperation. Stability in the region is of the utmost importance to both. A stable and strong Egypt, with good relations with its Arab Gulf neighbors, is preferable to Cairo joining the Russian battle plan. Related: Saudi Arabia Tries To Reassure Markets After Oil Price Plunge
Mohammed bin Salman, based on his qualities and political insights, will have recognized that having Cairo onboard will be the most positive outcome at present. Even when looking at Bin Salman’s Saudi Vision 2030 project, Egypt will be of vital importance. Investors will be only interested in a multibillion dollar investment spree in Saudi Arabia if the surrounding region is stable. Mainstream economic projects inside of Saudi Vision 2030, such as the development of industrial cities in the west of Saudi Arabia, which will include new ports and infrastructural links to Africa and Europe, will only be viable if the neighbor on the other side of the Red Sea is looking at it positively. Increased trade to and from Saudi Arabia also will have to go through the Suez Canal, Egypt’s artery to the world. Cooperation could still be threatened, however, as long as another bilateral disagreement is not resolved quickly.
Egypt’s Cairo based Court for Urgent Matters has announced April 2 as the date to rule on a lawsuit demanding the annulment of the Supreme Administrative Court’s final ruling that the Red Sea islands of Tiran and Sanafir are Egyptian. The latter decision blocked Sisi from transferring them to Saudi Arabia. If the legal case now reopens the transfer, this could be seen as a watershed in Egyptian legal history. In January 2017 Egypt’s Supreme Administrative Court rejected the transfer of the islands, stating that the government cannot legally transfer the islands. Saudi Arabia and Egypt also have still the issue to solve of the Egyptian-Saudi maritime demarcation, which is linked to the island transfer agreement also.
For Saudi Arabia, the two islands are a principle issue. In 1949, Saudi Arabia allowed Egypt to occupy the two islands “for defensive purposes” after the establishment of Israel. The two islands have been an instrument in blocking the Strait of Tiran, which is Israel’s only maritime gateway from the Gulf of Aqaba to the Red Sea. The islands were captured by Israel in 1967, and returned to Egypt in 1982.
Sources also stated that, in January, Cairo asked Saudi Arabia to mediate direct talks on the annexation of the disputed Halayeb and Shalateen areas with the Sudanese. The latter is a very important political issue for Sisi, as he will not be able to push the Egyptian people to agree to the hand-over of the two islands to Saudi Arabia if the two Sudanese disputes are not resolved. The Saudi-Egyptian maritime agreement also concludes that Halyeb and Shalateen are Egyptian.
The current bilateral economic-strategic relationship between Riyadh and Cairo has slightly improved. Some measures have been taken by both sides to support a thaw and possible rapprochement in the coming months. Still, there is a myriad of obstacles on this road that still could lead to a new collusion. Egypt and Saudi Arabia, leading the Arab world together, would be preferable. Stability is needed to counter economic and social conflicts currently brewing. However, power politics of both, as has been shown the last 70 years, have led mostly to direct conflict or splits. In a bipolar world, both were forced to concur to the leading global power, the U.S.A.. At present, Russia has fully overtaken American power positions in the region, leaving more openings for deviations or regional power politics. To counter extremism, however - Iranian encroachment tactics and possible third party interests (Russia, Turkey) - Riyadh and Cairo need to find a middle ground. Intrinsic interests are there to build an alliance, that is not only based on religion or mutual adversaries, but on economic and strategic interests.
By Cyril Widdershoven for Oilprice.com
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