Ahmed Mostafa
Intro
Egypt, a major player in the Middle East, is facing severe economic pressure due to ongoing tensions near the Bab al-Mandab Strait. The strait, located between Djibouti and Yemen, is a vital waterway for shipping goods and resources. However, recent conflicts have disrupted maritime traffic, putting the Egyptian economy and the Suez Canal as one of Egypt’s main dollar sources under pressure. The unrest affected trade and commerce in Egypt, leading to shipping delays and a decline in trade and revenues. The Strait is also a vital route for Egypt’s oil imports, which mainly come from the Persian Gulf region. As tensions rise, the security of the road becomes increasingly uncertain, increasing insurance costs and making it more costly for Egypt to continue to rely on it.
The tensions have also affected Egypt’s tourism industry, putting the Red Sea coast at risk due to security concerns. This has led to a decline in tourism, employment opportunities and overall economic growth. The decline in the value of the country’s currency and foreign exchange reserves has also indirectly affected the economy, making it difficult for the government to finance imports, infrastructure projects and basic services. This led to inflation and high costs of living for Egyptian citizens, making it difficult for them to cover their expenses.
Conflict close to Bab Al Mandab negatively impacts world trade and economy
The current conflict between the United States and Yemen due to the war on Gaza, especially in the area near Bab al-Mandab, has greatly affected global trade and the economy. Bab al-Mandab is a vital waterway linking the Red Sea to the Gulf of Aden, and it is one of the largest vital gateways for trade and international shipping due to the presence of the Suez Canal above the Red Sea. The conflict has caused major disruptions to international trade, resulting in delays, increased costs, and even the abandonment of some trade routes. The power struggle between the United States and Yemen has increased tensions and threats to trade and shipping, prompting shipping companies to divert their routes, resulting in longer and more expensive journeys. The conflict also increases the risks of piracy and attacks on ships, causing a decrease in the number of ships and goods passing through the region, harming the supply chain, global trade, and Egyptian revenues from the Suez Canal in particular. The conflict also negatively affected Egypt’s economy, due to the reluctance of major transport companies to pass through the Suez Canal and obtain its services as the best and shortest waterway linking trade between East and West. The conflict has also affected the global oil market, as unrest in the Bab al-Mandab region could lead to higher oil prices. The conflict has exacerbated concerns about the security of oil supplies, affecting various industries and consumer spending.
Opinions of Egyptian economic experts on the issue of the economic deficit due to Bab al-Mandab and the Suez Canal
Egyptian experts, who politely requested to declare their names, argue that the Egyptian regime’s economic advisors have contributed to Egypt’s debt trap since 2016. They believe that the majority of advisors hold Western passports and prioritize personal interests over the cultural, economic, and social specificity of Egyptian society. The mismanagement of the float of the Egyptian pound against the dollar has led to inflation and a high poverty level.
To support the Egyptian pound, such as collecting transit and service fees in Egyptian pounds, could have increased demand and value against the dollar without relying solely on the dollar. Neglect in tourism and neglect of Egypt’s location and civilization have also contributed to the issue. Egypt enjoys a high percentage of solar radiation throughout the year, which could have reduced the bill for foreign petroleum derivatives in dollars if many electrical energy projects had been converted from derivatives to solar energy or relied on new international petroleum partnerships. Traditional bank financing systems and increasing interest rates are still used, which is considered a wrong decision in Egypt.
Economic advisors are still interested in direct real estate investments or long-term investments that consume large capital and huge loans, forgetting digitization, artificial intelligence, and technological transformation, which can create job opportunities estimated at 55,000 jobs annually for the Egyptian market and abroad. External causes include pressure from the United States to accept the idea of forcible displacement of Palestinians from the Gaza Strip to Egypt, which has led to the Ansar Allah group attacking ships heading to Israeli ports to pressure Israel and America to cease fire on Gaza.
Can BRICS Plus membership solve the US$ insolvency of Egypt?
The ongoing war in Gaza has exposed Egypt’s financial crisis, with a massive US$49 billion external debt. The war has strained the country’s economy, and Egypt’s only hope may lie in its potential membership in the BRICS Plus. BRICS Plus countries, including Egypt, offer financial assistance to Egypt through the New Development Bank (NDB), an alternative to the World Bank and the International Monetary Fund. Egypt could also access new trade and investment opportunities, as BRICS countries, particularly China, have significant investments in sectors like infrastructure and energy. Membership could also provide political support, as the US, one of Egypt’s largest aid donors, may face pressure to reduce its financial support due to human rights concerns. However, BRICS Plus membership alone may not solve Egypt’s financial crisis, as it would require significant government effort to implement economic reforms and tackle corruption. Membership in BRICS Plus could provide a platform for soft power and support to push these reforms forward.
An urgent ceasefire in Gaza will directly stop any attack on ships crossing Bab al-Mandab and the Suez Canal.
The ongoing conflict in Gaza has raised international concern and calls for an urgent ceasefire. The safety and security of ships passing through Bab al-Mandab and the Suez Canal are at risk due to chaos and violence. Hezbollah Secretary-Generals as well as the Ansar Allah group have threatened that attacks on ships heading to Israeli ports would not stop if an immediate ceasefire is not achieved. The West has implicitly supported Israel for the continuation of the genocide against the defenseless people of Gaza, to eliminate Hamas and the Palestinian resistance. The closure of the Suez Canal or Bab el-Mandeb due to a potential attack would have a catastrophic impact on maritime trade, causing major disruptions to the global supply chain. Therefore, an urgent ceasefire is necessary to stop any attacks against ships crossing these vital waterways. The international community must condemn any attacks on Gaza and urge a rapid de-escalation of the conflict.
The striking thing is that even in the ministerial meeting at the level of the Egyptian and Saudi Foreign Ministers (Shukri and Al-Farhan), they declared the following: “What is happening in Gaza cannot be tolerated, and that it is a systematic war of genocide, and that the continuation of this absurd war will only lead to an exacerbation of the crisis and a threat to the security of the Red Sea, which affects the future of the two countries economically and strategically, and that they support an immediate ceasefire from the side of the Zionist entity until all conditions are stabilized.”
EU Parliament and Egypt urge a ceasefire in Gaza for better economic prosperity
The ongoing conflict in Gaza has caused immense suffering and devastation, affecting not only the people of Gaza but also the entire world. The European Parliament and Egypt have urged for an immediate ceasefire to promote economic prosperity and stability. The conflict has resulted in countless deaths, destruction of homes and infrastructure, and severe economic repercussions for Gaza and its neighboring countries. The closure of borders and restrictions on imports and exports have hindered trade and economic growth, leading to high unemployment rates and a declining standard of living. The current instable stance has also deterred several investors and businesses from operating in Egypt, stagnating economic activity. The European Union, a major trading partner for Egypt, holds significant weight in the international community, calling for all parties involved to prioritize civilian well-being and end the violence. The two parties also emphasize the importance of humanitarian aid and reconstruction efforts in Gaza.
In conclusion, The ongoing tensions near Bab ElMandab have put Egypt under severe economic pressure, affecting trade, oil imports, tourism, and overall economic stability. The government needs to urgently address these issues and find a solution to the region’s conflicts to secure its economic future and the well-being of its citizens. The Suez Canal faces challenges in maintaining its status as a major source of hard currency, with declining revenue from tolls and increased competition from other shipping routes. Alternatives include expanding the tourism industry, investing in infrastructure, seeking foreign aid and loans, and diversifying revenue streams. Membership in the BRICS Plus could help solve Egypt’s US$ insolvency in the Gaza war crisis, providing financial assistance, opening new trade and investment opportunities, and political backing. The European Parliament and Egypt have united in calling for a ceasefire in Gaza to end violence and promote global economic prosperity.
