As Egypt slides deeper and deeper into economic crisis, Saudi officials have sent a stern message: No more blank checks, states New YorkTimes.
“For much of the past decade, Saudi Arabia sent billions of dollars in aid to Egypt, bolstering a poorer regional ally seen as too strategically important to neglect,” stated a piece by Vivian Nereim and Vivian Yee published by the New York Times, continuing:
But recently, there has been a noticeable shift. Even as Egypt slides deeper and deeper into economic crisis, Saudi officials have sent a stern message: No more blank checks.
Flush with an influx of oil revenue, the Gulf kingdom’s 37-year-old leader, Crown Prince Mohammed bin Salman, is increasingly attaching conditions to such aid — insisting on economic overhauls like cutting subsidies and privatizing state-owned companies.
“It used to be ‘Egypt is too big to fail,’” said Karen Young, a senior research scholar at Columbia University’s Center on Global Energy Policy. “Now the attitude is ‘Egypt is responsible for its own mistakes.’”
The world’s largest crude oil exporter, Saudi Arabia ended 2022 with a $28 billion budget surplus after Russia’s invasion of Ukraine pushed up oil prices, sending profits flooding to producers. Despite that windfall, Saudi officials say they are tired of doling out endless aid to poorer states like Egypt, Pakistan and Lebanon only to watch it evaporate.
The kingdom is still sending money abroad — possibly more than ever. But much of it is now geared toward international investments for profit and influence and at kick-starting new industries at home, like electric vehicles. The Saudi government has also taken on a role similar to the International Monetary Fund, which gives it even greater sway than before over regional politics, with larger nations like Pakistan effectively beholden to it.
“We used to give direct grants and deposits without strings attached,” the Saudi finance minister, Mohammed al-Jadaan, said in January in Davos, Switzerland, at an annual gathering of the world’s political and economic elite. “And we are changing that. We are working with multilateral institutions to actually say, ‘We need to see reforms.’”
Mr. al-Jadaan’s declaration set off a war of words between Saudi and Egyptian pundits, fueled by Egypt’s anxiety over its deepening dependency on wealthier Gulf countries like Saudi Arabia and the United Arab Emirates.
Saudi and Egyptian officials have worked to smooth things over, but the new power dynamic is not going away: Since his father became king in 2015, Prince Mohammed has transformed the way that Saudi Arabia uses its financial muscle, chasing higher investment returns and deploying oil revenue for leverage in the Middle East and beyond.
Underpinning this more broadly is the crown prince’s effort to remake the kingdom’s own economy after oil prices plummeted in 2014, saddling the country with eight years of budget deficits. The focus is on spending that helps the conservative Islamic country to develop sectors beyond oil and to become a hub for a wider array of businesses as well as culture.
He is building on a model that smaller Gulf countries like the United Arab Emirates and Qatar followed years ago, partly to increase their international influence.
“What the Gulf has that almost no one else in the world has is quite a lot of excess capital,” said Timothy E. Kaldas, an expert in Egypt’s political economy at the Washington-based Tahrir Institute for Middle East Policy. “That comes with power.”
In March, Saudi officials agreed to offer $5 billion for use by Turkey’s central bank, shoring up the Turkish economy two months before national elections. That brought Turkey closer to Saudi Arabia’s sphere of influence after years of tensions, which boiled over after the 2018 murder of the Saudi dissident and Washington Post columnist Jamal Khashoggi by Saudi agents in Istanbul.
For other countries in the Middle East, Saudi aid has shriveled as the kingdom’s priorities shifted.
In 2016, Saudi officials suspended billions of dollars of army and security-related aid to Lebanon as they grew frustrated with the mounting influence of Iran, their regional rival, in the country.
A few years later, Lebanon, long dependent on Gulf assistance, spiraled into a financial crisis so desperate that people have turned to robbing banks to access their own savings. The Saudi government did not step in to halt it, and analysts said this was an early sign of the kingdom’s shifting approach to regional funding.
Prince Mohammed’s emphasis is on “Saudi first” as he stokes nationalism. Last year, the Saudi sovereign fund announced that it would invest $24 billion in Egypt, Iraq, Jordan, Bahrain, Oman and Sudan. But channeling that financial support through investments lets Saudi officials prioritize their own profits.
As Egypt devalued its currency three times over the past year, Saudi entities sought to buy assets at a discount.
“The state is effectively selling its assets under duress,” Mr. Kaldas said. “They might like to say they’re bailing out Egypt, but from the perspective of Egyptians, some of them see it as them taking advantage of a bad situation.”
These shifts reflect longer-term changes in the relationships between Arab states over the past half-century, with the center of gravity shifting from places like Egypt — once the region’s cultural and political heavyweight — to the oil- and gas-rich Gulf.
That does not sit well with many Egyptians.
And the tensions over aid this year reignited those frustrations. In February, after a Saudi novelist wrote on Twitter that Egypt had its “neck tied to aid from here or there,” the Egyptian newspaper editor Abdelrazek Tawfik referred to the Gulf countries as “barefoot and naked” nouveau riche who have no right to dictate to Egypt.
But the opinion article soon disappeared from the internet, and Abdel Fattah el-Sisi of Egypt played down the conflict, speaking warmly of “the support our brothers have given us.”
For Mr. el-Sisi, an authoritarian leader who seized power in a military coup in 2013, Gulf support has been critical.
Mr. el-Sisi overturned a democratically elected Islamist president, Mohamed Morsi, who was viewed as a security threat by the monarchies of Saudi Arabia and the United Arab Emirates. Even though Saudi Arabia’s ruling elites built their nation on a narrative entwined with religion, many of them feared political Islam as a potential source of opposition at home, where political parties are effectively banned and Mr. Morsi’s Muslim Brotherhood movement is branded a terrorist group.
From 2013 to 2020, Saudi Arabia sent $46 billion to Egypt in the form of central bank deposits, direct investments and oil and gas, according to data aggregated by Ms. Young. And that support, while it has lessened, has not evaporated entirely.
When Egypt’s economic crisis became acute last year, a group of Gulf countries stepped in. They deposited billions of dollars in Egypt’s central bank, shoring up its depleted foreign-currency reserves and helping it pay for imports.
Saudi Arabia is also essential to the International Monetary Fund’s latest bailout agreement with Egypt, which requires it to raise some of the funds for its own rescue by selling off $2 billion of government assets to wealthier Gulf countries. These assets could potentially include marquee banks and state-owned industrial enterprises — raising anxieties in Egypt about its sovereignty and standing.
That the Egyptian government “placed the state in this extraordinarily vulnerable position” is worrying for its “geopolitical independence” in the long term, Mr. Kaldas said.
Saudi and Egyptian officials are still talking about potential investments — and the policy changes that Saudi and I.M.F. officials want in return, including subsidy cuts and a reduction in the military’s sprawling role in the economy — according to two people familiar with the discussions, who spoke on the condition of anonymity because they are not public.
But as months have gone by without substantial progress, Saudis and Egyptians alike have questioned Egypt’s ability to streamline its economy.
“Sometimes you need to know where the money’s going,” said Hesham Alghannam, a Saudi political scientist. “Is it going to the benefit of the people?”
Asked during a conference in Riyadh, the Saudi capital, this past month if Saudi Arabia was concerned about Egypt, Mr. al-Jadaan, the kingdom’s finance minister, struck a warmer tone than in Davos.
“They may face some difficulty,” he said. “But I think they have what it takes to be a great nation.”
In a statement soon after, Egypt’s finance minister said his country was “keen to support everything that is required to increase Saudi investments.”