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Saudi-Egyptian business ties set to strengthen

Saudi-Egyptian business ties set to strengthen

RIYADH: After several months of reported tensions between the two countries, it seems that Saudi Arabia and Egypt are overcoming their differences meaning their ties are back on the right track. President Sisi’s visit to Saudi Arabia last month and prior to that, his meeting with King Salman on the side-lines of the Arab League summit in Jordan on March 29th, were likely to have sealed an improvement in Saudi-Egyptian relations. It appears that both Riyadh and Cairo are overlooking their differences (Syria, Yemen and the transfer of sovereignty of two Red Sea islands Tiran and Sanafir) and concluded that they should not impede the development of their economic ties or rupture political relations. Egypt is in dire need of Saudi Arabia’s support, while Egypt’s stability is a strategic interest for the Kingdom.

To be sure, Saudi Arabia has already provided several multi-billion dollar schemes for aid and credit since President Abdel Fattah al-Sisi assumed power in Egypt in 2013. The influx of the Kingdom aid and financial support are still needed, as the performance of Egypt economy’s three pillars: tourism income, Suez Canal revenues, and foreign direct investment (FDI) continues to struggle compared with years before the so-called Arab Spring. Not only that, Saudi Arabia is one of the largest countries in the world hosting huge number of Egyptian workers estimated at more than two million sending remittance to Egypt of over $8 billion annually. Additionally, more than 100 thousand Saudi tourists visit Egypt each year, pumping hundreds of millions of dollars into the Egyptian economy. Importantly, the move last March by Saudi Aramco to resume petroleum products shipments to Egypt can be seen as a very positive sign for foreign investors.

In this regard, the Economist Intelligence Unit, (EIU), has noted in a recent report that: “There would also be economic benefits for Egypt, both in terms of managing its import costs and through improving investor sentiment”. The Saudi petroleum products are provided under an agreement signed in April 2016 (during King Salman’s visit) for the supply of 700,000 tons per month of petroleum products (400,000 tons of gasoline, 200,000 tons of benzene, and 100,000 of low-quality) for five years, funded by a 2% interest rate on a payment that can be settled over 15 years. The Saudi supplies are equivalent to about 180,000 barrels/day and responsible for supplying over 40 percent of Egypt’s foreign oil imports.