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Geopolitics

Patronage Or Politics? What's Driving Qatar And Egypt Grand Rapprochement

For Cairo, Qatar had been part of an “axis of evil,” with anger directed at Al Jazeera, the main Qatari outlet, and others critical of Egypt after the Muslim Brotherhood ouster. But the vitriol is now gone, with the first ever visit by Egyptian President al-Sisi to Doha.

Patronage Or Politics? What's Driving Qatar And Egypt Grand Rapprochement

Egyptian President Abdel Fattah al-Sisi met with the Emir of Qatar in June 2022 in Cairo

Beesan Kassab, Daniel O'Connell, Ehsan Salah, Hazem Tharwat and Najih Dawoud

For the first time since coming to power in 2014, President Abdel Fattah al-Sisi traveled to Doha last month on an official visit, a capstone in a steadily building rapprochement between the two countries in the last year.

Not long ago, however, the photo-op capturing the two heads of state smiling at one another in Doha would have seemed impossible. In the wake of the Armed Forces’ ouster of the Muslim Brotherhood government in 2013, Qatar and Egypt traded barbs.

In the lexicon of the intelligence-controlled Egyptian press landscape, Qatar had been part of an “axis of evil” working to undermine Egypt’s stability. Al Jazeera, the main Qatari outlet, was banned from Egypt, but, from its social media accounts and television broadcast, it regularly published salacious and insulting details about the Egyptian administration.

But all of that vitriol is now gone.


Both sides have exchanged a flurry of trade delegations in recent months. The two heads of state have now met twice and informed government sources say the frequency of their meetings will only increase. And the evildoer label once affixed to Qatar has shifted to some other undefined group, with one Egyptian columnist urging the “evil people” not to “kill the awakening” in the relationship as an attempt to “keep Qatari investment away from Egypt.”

Ukraine effect

In many ways, the catalyst for the opening comes down to the economic crisis facing Egypt, brought on by the effect that Russia’s invasion of Ukraine has had on the world economy. The outbreak of war sent investors in Egypt’s bond market fleeing to more secure havens, placing a significant strain on Cairo’s fiscal position as it must pay US$18 billion in debt servicing in the final two quarters of 2022. At the same time, a global inflationary wave has sent Egypt’s import bill soaring. This confluence of factors has seen Egypt facing a severe crisis in its foreign currency holdings.

To find a way out of the economic crisis and its political ramifications, Egypt has resorted to several channels. First, it has been engaged in long discussions with the International Monetary Fund for a new Extended Facility Fund loan, the lender’s funding program for countries suffering significant balance of payment issues that Egypt agreed to in 2016 and which began the country’s full enmeshment in the world economy and accelerated a host of austerity measures.

However, those negotiations have dragged on, with the two sides haggling over several conditions, including the size of Egypt’s external debt, the management of the value of the Egyptian pound, ending key commodity subsidy programs, the military’s overarching control of the economy, and promises that none of the money will be used in construction endeavors, according to several sources informed of the talks who have spoken to Mada Masr in recent months. How willing Egypt is to agree to the IMF’s conditions will dictate the size and timing of the loan it receives.

In early July, before further delays set in, an Egyptian official spelled out the government’s approach: “It is clear that the IMF deal is not moving as fast as we had hoped. Our focus now is to work on attracting Gulf investments.”

Gulf investment

However, courting Gulf investment, Egypt’s primary second channel for financing, is not a purely economic affair. Political, diplomatic and security sources who spoke to Mada Masr in the weeks leading up to Sisi’s visit to Qatar document a growing sense of frustration at the highest levels with the compromises Egypt has been forced to make with one of its main traditional allies in the United Arab Emirates in order to secure vital economic support.

One source went so far as to describe the UAE’s activities in Egypt as more of “a patronage presence” rather than “foreign investment.” And for the administration, the sources say, it is in Egypt’s interest to allow for Qatari investment and pursue Qatari-Egyptian cooperation on areas of mutual foreign policy interest to counterbalance the UAE’s influence.

Frustration with the UAE starts with its refusal to provide the unconditional support that Egypt has depended on since 2013. Gulf deposits to the Central Bank of Egypt played a significant role in supporting foreign currency reserves and stabilizing the value of the local currency between 2013 and 2014.

During that period, the Egyptian government received large, exceptional cash flows from the Gulf, with Saudi Arabia, the UAE and Kuwait committing to $24 billion in deposits to Egypt as well as financial and in-kind grants and project aid money. And during the Egypt Economic Development Conference held in March 2015, GCC countries committed to another $12.5 billion.

There is no chance for Egypt to manage its debt crisis without losing some of its best assets.

But through the years, Gulf deposits have decreased gradually, to the point that the remaining deposits at the central bank sat at $15 billion at the end of 2021.

According to data released at the end of August by the central bank, Egypt obtained $3 billion from Qatar in short-term deposits as well as $10 billion in similar deposits from Saudi Arabia and the UAE during the first quarter of 2022, but the central bank did not clarify when their repayments are due.

“The traditional ‘lenders’ have lost their appetite for coming to the rescue in the old way of providing aid or introducing reserves,” says a government official. “What they want to do now is buy strategic assets. The trouble is that they are buying the kind of profit-making projects that the government should have worked to upgrade and expand. However, realistically speaking, there is no chance for Egypt to manage its debt crisis without losing some of its best assets.”

The selling off of assets serves two purposes for Egypt. In the first case, it will allow for liquidity for vital debt servicing. And in the second, it will help shore up “the real reserves” in the central bank that the IMF is requiring as evidence of Egypt’s ability to make good on its debt obligations, says an informed Cabinet source.

Traditionally, the Cabinet source continues, the IMF has always required an informal third party to loan agreements with Cairo that would act as a guarantor by transferring over a percentage of the total loan value to Egypt. For the 2016 and 2020 loan, the guarantor was the UAE. However, the UAE has refused to act as the guarantor in the current loan negotiations, prompting Cairo to ask both Saudi Arabia and Kuwait, who have also refused, according to the source and a second Cabinet source.

UAE shopping in Cairo

What is worse, two government sources say, the UAE has actively lobbied the IMF to take a hardline stance in negotiations regarding the military’s involvement in the economy and in favor of the full devaluation of the pound.

Egypt, government sources tell Mada Masr, was hoping to put off the devaluation of the pound until after it received the first tranche of an IMF loan in order to prevent the fall from being that steep. But that doesn’t seem fully possible now.

Sarah Saadeh, a macroeconomic analyst at CI Capital, believes that the “attractiveness” of Egyptian assets for Gulf investors “depends on two sides of the picture: the first is the price of the pound, with its attractiveness naturally increasing as the price of the pound decreases. And the second is the valuation of the assets themselves.”

“It may be the optimal situation for Gulf investors to wait for the pound to drop more sharply to take advantage of both sides of the picture, but, in practice, this does not seem realistic, because a sharp drop in the pound will most likely only happen with the signing of the agreement with the IMF,” she says. “The stock market will rebound dramatically with the announcement of the signing of the agreement, which means a rise in the valuation of assets in a way that reduces their attractiveness. The best time to seize opportunities will be right before the signing of the agreement.”

Beyond the assets’ prices, there is increasing unease in some quarters about the sheer volume of acquisitions that the UAE has been making, particularly in terms of land in the east of Egypt close to the Suez Canal, according to security reports shared with the highest levels of the executive that Egyptian government sources have seen.

Ultimately, the idea that was circulated in these quarters was that there is no harm whatsoever in opening up for Qatari acquisitions because that would actually send a clear message to the UAE that, as much as it shrugs Egypt off, Egypt would also look for alternatives.

“At least with the Qataris, things are clear,” says another government official, pointing to the transactional nature of bilateral ties with Qatar. “Whereas with the Emiratis, we thought we were allies, and then suddenly it was clear that we were not.”

Stronger economic relationship

Qatar and Egypt have been slowly building out a stronger economic relationship over the past year.

According to data issued by the Central Agency for Public Mobilization and Statistics in Egypt, the value of Egyptian exports to Qatar amounted to $4.5 million in 2021, compared to $395,000 in 2020, an increase of over 1,000 percent, while the value of imports from Qatar rose to $40.3 million last year, compared to $25 million in 2020.

But economic cooperation is still likely to see a major jump, as Egyptian officials are in talks with Qatari counterparts for more than US$15 billion in investments before the end of the year, according to another government official. This includes stakes in the Eastern Company for tobacco manufacturing, Vodafone, the United Bank of Egypt, and other companies in which Saudi and Emirati investment funds have made acquisitions.

Companies affiliated with Egypt’s most valuable asset, the Suez Canal, are also being subject to competition for acquisition between Qatar, the UAE and Saudi Arabia, according to informed government sources. These include Timsah Shipbuilding Company, Canal Harbor and Great Projects Company, Canal Mooring and Lights Company, Canal Naval Constructions Company, Canal Company for Ropes and Fiber Products, Suez Shipyard Company, Port Said Engineering Works Company, and Canal Company for the Nile Arsenal.

The UAE has become a major power broker.

During Sisi’s visit, the Sovereign Fund of Egypt and the Qatar Investment Authority inked an agreement for cooperation in ports, according to the presidential spokesperson.

However, the UAE has already made significant inroads in the canal and the vital Red Sea waterway.

The Gulf country has become a major power broker and the principal architect of the security framework in the fiercely competitive Red Sea, with bases in Berbera, Somaliland; Bosaso, Somalia; and several coastal ports in Yemen, where it had fought alongside the Saudi-led coalition since 2015. Abu Dhabi Ports recently took over the management of Egypt’s Ain Sokhna Port, and while Sisi was in Doha, the Emirati company acquired 70 percent of the Egyptian IACC Holdings’ assets, including majority stakes in two shipping companies operating in the Red Sea: Transmar and Transcargo International.

Egyptian-Qatari investment is not limited to the canal

According to another government official, Egyptian and Qatari officials also discussed extending a pipeline to transport Qatari gas through Saudi Arabia to Egyptian ports in order to speed up the transfer of Qatari gas supplies to European markets as well as to enable Qatar to benefit from and invest in Egypt’s gas sector infrastructure and achieve profitable returns from it.

Such a move would be a major boon for Egypt’s regional energy hub dreams, which have to this point heavily relied on the re-export of Israeli gas.

And beyond investments, the Egyptian side has requested a further deposit at the Central Bank of Egypt, as well as a financial grant to the Egyptian economy ranging between $3 and 5 billion to be provided over five years, but discussions are still ongoing in this regard, according to the same Egyptian official.

A Qatari source close to Emir Tamim bin Hamad confirms the discussions regarding the potential deposit in the central bank, putting the figure at $5 billion and indicating that it comes in light of the UAE’s “withdrawal.” However, Doha is insisting that a portion of the money go to social support, as it has “received reports” that “the Egyptian people do not always benefit from assistance.”

Officials in Cairo know very well that encouraging Qatari investments in Egypt is bound to be part of a trade-off. And the clearest political compromises will come with the Muslim Brotherhood and Qatari media.

At the construction of a new terminal basin in Sokhna Port, south of the Suez Canal

Meng Tao/Xinhua/ZUMA

Reconciliation talks

Today, the Cabinet source, a government source, a political source and two security sources all say that reconciliation talks are subject to discussion between senior intelligence officers in both Qatar and Egypt — with inevitable progress expected to be made prior to the end of this year to encourage Qatari investments. The sources say that the investments are not conditional on fixing this issue but would be expedited if this matter is addressed.

According to the political source, who is close to intelligence quarters, Qatar might be contributing to the financial compensations that some Muslim Brotherhood members might otherwise pursue in courts of law overseas, thereby suspending any potential plans to sue the Egyptian regime.

Two Egyptian security sources confirm these talks, telling Mada Masr that the Egyptian side asked Qatar to help manage the reconciliation process, given the extreme sensitivity of the file amid the escalating economic crisis in Egypt, as officials in Cairo believe that Qatar can play the same role it played between the Taliban and the US.

The same security sources say that the Qataris encouraged Sisi and his delegation to make a political breakthrough by releasing a number of prominent Muslim Brotherhood leaders, especially the elderly ones, including Khairat al-Shater, Saad al-Katatny, Mohamed Ali Bishr and Mahmoud Hussein, as a way to facilitate the negotiation process between the authorities and the group. The Egyptian side promised to study this step first and lay the groundwork before proceeding with the negotiations.

Political tradeoff

The same government source says that the Qataris also requested that Egypt stop blocking access to Qatari websites in the country, most prominently including Al Jazeera and Al-Araby Al-Jadeed, which the Egyptian side promised to do in the coming weeks.

On the first day of Sisi’s visit, Qatari officials discussed with Foreign Minister Sameh Shoukry and intelligence chief Abbas Kamel the acceleration of procedures to reopen Al Jazeera’s office in Cairo and to release the channel’s imprisoned journalists, according to a government source.

But Egyptian-Qatari talks on media are not limited to Qatari outlets. Egypt, the government source says, received positive indications from the Qatari side for support of the series of new channels that the Egyptian intelligence-controlled United Media Services is planning to launch in the coming weeks.

Egypt also requested Qatari support in Ethiopia.

The two sides also have several areas of foreign policy overlap, especially in areas where Egypt has grown wary of Emirati intervention.

According to an Egyptian government source, officials in Qatar agreed to unify the countries’ positions on Libya and to support a push for a new presidential council while maintaining the Government of National Unity headed by Abdul Hamid Dbaiba, after the repeated setbacks suffered by the former Interior Minister Fathi Bashagha and his upstart government to enter the Libyan capital.

Egypt had provided backing to Bashagha’s bid to oust the GNU prime minister in large part as a plan by security bodies to cause chaos in the west of the country due to Cairo’s unease with the alignment between the United Arab Emirates and Turkey in their support of Dbaiba, Egyptian security officials previously told Mada Masr. Ankara and Abu Dhabi had backed opposing sides of the 2019 war in Tripoli but have increasingly found common ground in Libya and in their bilateral relations.

Egypt also requested Qatari support in Ethiopia, another major foreign policy arena where Egypt has seen itself working at cross purposes with the Emirates.

Major stakes

The UAE has been a major backer of the federal Ethiopian government’s war against Tigray forces in the country’s north. While both sides had agreed to hold peace talks earlier this year after months of an informal truce mediated in large part by the Emiratis, fighting has erupted again in the last month. Open source data shows private charter flights between the Emirates and Ethiopia, believed to be Emirati military support, have kicked up again.

Beyond the war, the UAE is making a bid to increase its footprint in Ethiopian politics, as it has made a $20 billion economic development proposal to Sudan, Egypt and Ethiopia in order to bypass the political deadlock over the filling and management of the Grand Ethiopian Renaissance Dam, an Egyptian government official and an informed political source in the Gulf previously told Mada Masr. The deal, which has brought the three countries together for technical talks, would see the Emirates invest in projects across the three Nile Basin countries over the course of seven years, “establishing a mechanism that will make it impossible for any of the three countries to harm the interests of the other two countries,” the government official said.

According to the Egyptian government source, Egyptian officials encouraged the Qataris to reconnect with Addis Ababa in order to limit Emirati influence there, which Cairo has come to realize does not serve its interests.

In return for support in Libya and Ethiopia, officials in Egypt agreed to support Qatar’s efforts to sponsor the Chadian national dialogue between the transitional military council led by Mahamat Déby and armed opposition forces, according to the Egyptian government official.

Egypt took steps toward that end, with Sisi pardoning on September 13 Tom Erdimi, the nephew of former Chadian President Idriss Déby whom he has opposed since 2005. Erdimi had been held in an Egyptian prison since 2020, and he returned to N’Djamena shortly after his release.

Erdimi’s brother Timan, co-founder and leader of the Chadian Union of Resistance Forces (UFR), returned to Chad after a decade in exile in Qatar for talks billed as aiming to pave the way for democratic elections.

Comprising at least 40 rebel groups, Erdimi’s UFR signed a peace agreement on August 8 in Doha for talks that would pave the way for elections after 18 months of military rule in Chad following the death of former president Idriss Déby.

The UFR has long accused the Chadian government of having “negotiated” with Egypt to ensure the arrest and detention of Tom Erdimi.

Chad, which is in talks to restructure its external debt in order to clear the way for further financial assistance, owes one third of its external debt to commercial creditors, and almost all of that to Glencore, one of the world’s largest multinational commodity trading and mining companies.

While Qatar’s sovereign wealth fund sold off a large stake in Glencore earlier this year, it still holds a major stake in the Anglo-Swiss company.


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Ideas

The Unifying Power Of Art In A World Divided By Religion And Morality

Political battle lines are becoming increasingly entrenched, and opposing views are being pushed towards ever greater extremes. Language has become a battlefield. If morality pushes us apart, and religion does not help in the process, we may find a solution in our sense of humanity, writes German psychiatrist Manfred Lütz in Die Welt.

The Unifying Power Of Art In A World Divided By Religion And Morality

Eugène Delacroix - La liberté guidant le peuple (1830). Commemorates the French Revolution of 1830, also known as the July Revolution.

Manfred Lütz

-Essay-

BERLIN — In the Middle Ages, people didn’t read texts about the meaning of life. Most of them couldn’t read at all, and they saw the meaning of life in the images in their churches. Academics have recently started speaking about the “iconic turn”, the return of images, and it is true that the Instagram generation prefers to communicate visually. Could pictures offer a way for our deeply divided society to come together once again?

For the latest news & views from every corner of the world, Worldcrunch Today is the only truly international newsletter. Sign up here.

Both in terms of foreign and domestic policy, political views are becoming increasingly entrenched, and on both sides of the debate, opposing views are being pushed towards ever greater extremes. In the world of today, many people are cut off from any contact with those who think differently, living in echo chambers, surrounded by people who confirm their worldview. When those who disagree with their position condemn them from a moral perspective, this only serves to vitalize the group under attack.

The public pillorying that dominates social media can be a cause of great anxiety for individuals. But for those who feel they are part of a community, their fear often transforms into an aggressive form of self-defense. The topic itself isn’t as important as the sense of being attacked.

That is a possible psychological explanation for a strange phenomenon, whereby attacks on groups such as the right-wing Alternative for Germany (AfD) party and some of their individual members have strengthened the sense of community within these groups and brought together a surprising mix of people, from radical free marketeers to nationalists, conspiracy theorists, pro-lifers, COVID deniers, right-wing extremists, conservative Christians and racists.

They are united by a single experience, that of being excluded. Conversations within these groups are reminiscent of chats around a pub table: the more harshly someone criticizes “those in power”, “the lefties”, “right-wingers” or even, “the others”, the more likes they get.

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