What War in Europe Means for Egypt

Streaming through Hurghada Airport to the welcoming sound of a traditional Baladi flute in the summer of 2020, 167 Ukrainians became the first tourists to return to the resorts of the Red Sea after the Covid-19 lockdown, sending a signal of their enduring affection for Egypt.

Ukrainians love Egypt: In 2019, 1.6 million Ukrainians holidayed there, a 32% increase on the previous year. Even in 2020, as the pandemic struck, there were 727,000 Ukrainian visitors to Egypt, more than a fifth of all foreign tourists. Ukraine is second only to Germany in boosting Egypt’s tourist economy, while Egypt is second only to Turkey as the favorite tourist destination of Ukrainians.

But that trade dried up in 2022 with Russia’s full-scale invasion of Ukraine. Only 220,000 Ukrainians came to Egypt last year, compared to more than 1.4 million the year before. The fall in Egypt’s tourism receipts is contributing to its current economic deficit.

The Ukrainian people are experiencing a humanitarian tragedy. The United Nations High Commissioner for Refugees has recorded more than 8 million people who have fled Ukraine, while another 1 million have been deported to Russia. Around 1 million Ukrainians are fighting Russia’s invasion. Behind these huge numbers are fathers, mothers, grandparents and children.

The ties between Egypt and Ukraine run deep. During the 1960s and 1970s, Ukrainian engineers made crucial contributions to the development of the Egyptian economy, while Ukrainian higher education institutions trained Egyptian specialists in many fields. In April 2007, the first Egyptian Earth-remote-sensing satellite, EgyptSat-1, was launched by the Ukrainian rocket carrier Dnipro, leading to a joint satellite control station. As recently as December 2021, weeks before Russia’s invasion, the Ukrainian-Egyptian Intergovernmental Joint Commission on Economic, Scientific and Technical Cooperation met in Cairo to consider a preferential trade agreement and plans to increase supplies of food and other products.

When Egypt hosted the COP27 UN Climate Change Conference in November, President Abdel Fattah El-Sisi spoke out against an “unnecessary war,” saying it is a crisis that “shakes the entire world.” Addressing world leaders in Sharm el-Sheikh, he said, “This war and the suffering it has caused must finish.”

The United Nations High Commissioner for Human Rights has recorded 18,955 Ukrainian civilian casualties, including at least 8,000 killed, but recognizes that the true figures are much higher. At least 1,941 women and 406 children have died. They include Liza Dmytriyeva, a 4-year-old girl known to her parents as “Sunny Flower,” killed by shrapnel in Vinnytsia in July while pushing a stroller with her mother in a park. Those who remain in Ukraine are focused on the fight to defend its sovereign territory from Russia’s invasion.

Among those resisting Russia are members of Ukraine’s indigenous Crimean Tatar Muslim community that once comprised 95% of Crimea’s population but now only accounts for 13%. Immediately following Russia’s latest annexation of Crimea in 2014, the UN estimated that most of the 10,000 people who left the peninsula were Crimean Tatars. “Russia has tried to destroy our identity and cultural heritage,” says Alim Aliev, a Crimean Tatar and Deputy Director General of the Ukrainian Institute. “Peace will come for us with the return of all of our territories, including Crimea.” Aliev says Russian attacks have destroyed mosques, hospitals and schools, and that the former mufti of Ukraine’s Muslims, Sayid Ismagilov, is now serving as a paramedic with Ukraine’s army.

It is now more than 12 months since Egypt was a signatory to the March 2, 2022 UN General Assembly resolution condemning Russia’s invasion. Saudi Arabia, the United Arab Emirates, Jordan, Kuwait, Qatar, Bahrain, Yemen, Libya, Tunisia, Comoros, Mauritania, Somalia and Oman were also among the 141 nations that demanded Moscow’s immediate withdrawal from Ukrainian territory. A year later, the ongoing invasion is damaging the world economy, slowing growth by driving up inflation and creating a global energy crisis. Its disruption of supply chains has increased food insecurity.

The impact of the war is being felt at Egypt’s food markets, where rice, cooking oil, bread and eggs have doubled in price. Reporting from the Embaba food market in Giza in January, Cairo-based journalist Amr Emam found shoppers alarmed by the prices of tomatoes, zucchini and potatoes. “Tens of millions of Egyptians, especially the poor and the middle class, are affected by the economic repercussions of Russia’s war on Ukraine,” he wrote.

Meat prices are particularly high. Poultry breeders have even had to carry out a cull of starving chicks following shortages of corn. “These scenes are real because there is no feed to feed them,” says Mohamed El-Shafei, Vice President of the Egyptian Poultry Producers Association.

As one of the world’s largest consumers of wheat, Egypt imported around 80% of its wheat from Ukraine and Russia. As a result of Russia’s military aggression, Ukrainian exports of grain and oil crops to Egypt decreased from 5.5 million tons in 2021 to 657,300 tons in 2022.

The war hiked wheat prices in Egypt by a widely reported 44%, increasing the cost of the government’s $3 billion-per-year bread subsidy plan, which supports 70 million of the country’s 104 million citizens with daily access to “aish baladi” flatbread loaves. “The Egyptian government is continuing to subsidize basic commodities to the maximum of its abilities. What the state shoulders exceeds even the resources available to developed nations,” says Egyptian Prime Minister Mostafa Madbouly.

Egypt’s annual food price inflation hit a new record of 48% in January, says Monika Tothova, an economist with the UN Food and Agriculture Organization, in Rome. “The increase is very significant, even if you live on a stable income,” she notes.

Ishac Diwan, Director of Research at the Finance for Development Lab at the Paris School of Economics, estimates that the war’s impact on food and fuel prices has already cost Egypt $5 billion. “Food prices are likely to remain elevated as long as the war continues,” he says. “Most costly for Egypt” is that investors are viewing Egypt as a “risky credit,” driving up interest rates and inhibiting the refinancing of Egypt’s $400 billion public debt, which equals close to 100% of GDP. “Every 1% rise in average interest rates costs Egypt $4 billion extra per year,” he says.

Bloomberg Economics identifies Egypt as one of the countries most at risk from the war’s fallout; the turmoil has alarmed Egypt’s foreign investors, who have taken billions of dollars out of the country, resulting in ongoing currency shortages. The Egyptian pound has plummeted, losing almost half of its value against the US dollar since March 2022, and inflation reached a five-year high of 21% in December. In February, Moody’s Investors Service downgraded Egypt’s credit rating to B3.

The illegal invasion that Moscow portrayed as a “special military operation” has come at a cost of hundreds of thousands of casualties. The campaign has “shown the weakness of the Kremlin’s decision-making,” says Edward Lucas, Senior Fellow at the Center for European Policy Analysis. “It was a stupid war and [President Vladimir] Putin made it on the basis of very bad information and bad assumptions. Nothing has gone right for him so far.”

John Alderdice, Director of the Centre for the Resolution of Intractable Conflict, based at Oxford University, says that the strength of Ukraine’s resistance to Russia took the world by surprise: “They really did not want to be taken over and run by Russia. They want their independence and freedom, and they are prepared to fight and die for it.”

Paul De Grauwe, a Belgian economist, says that Russia’s economy is too small to win a long conventional war, and that it continues to be weakened by the cost of the conflict. “Apart from commodities, Russia cannot deliver very much,” he says. “Even if they want to sell military equipment, it now turns out that the quality of this stuff is low.”

Egypt is taking measures to insulate itself from the ongoing impact of this conflict. It is seeking alternative sources of grain, and to increase domestic agricultural production in the face of climate change, which is expected to reduce water supplies and lower yields. “Part of Egypt’s long-term solution is to increase its agricultural output by expanding its arable land and further modernizing its farming sector through advanced agri-tech, water management and green energy technologies,” says Michaël Tanchum, non-resident Fellow with the Middle East Institute’s Economics and Energy Program. Strong relationships with Western countries are important to Egypt for technology transfer, economic investment and defense, says Riccardo Fabiani, North Africa Project Director for Crisis Group.

“Ending the war as soon as possible would contribute greatly to unlocking a wide range of cooperation activities between Egypt and Ukraine,” says Ukraine’s Ambassador to Egypt, Mykola Nahornyi. “This will undoubtedly lead to the rapid recovery of Egypt’s economy by eliminating the food deficit, reducing inflation, resuming foreign trade and normalizing the business environment within the country.”

On Feb. 24, one year after the full invasion of Ukraine began, the UN General Assembly voted again, calling for Moscow’s immediate withdrawal from Ukraine and an end to the fighting, and for securing a just peace that respects the territorial integrity of the sovereign nation. Once more, Egypt—alongside 140 other countries—backed the resolution.