Egypt and the West: The Colonial Echoes and Inherent Risks of Financial Aid

CAIRO, EGYPT - Austrian Chancellor Karl Nehammer, Greek Prime Minister Kyriakos Mitsotakis, President of the European Commission Ursula von der Leyen, Egyptian President Abdel Fattah al-Sisi, Nicos Christodoulides, Belgian Prime Minister Alexander De Croo and Italian Prime Minister Giorgia Meloni attend Egypt-European Union (EU) summit in Cairo, Egypt on March 17, 2024. (c) Egyptian Presidency - anadoluimages

After two years grappling with what Egypt’s Prime Minister Moustafa Madbouly has called “the worst economic crisis in the country’s history”, the Arab world’s most populous nation has received a succession of financial lifelines in recent months totalling more than $50 billion.

The first of these financing deals, signed in late February, was with an Emirati consortium that agreed to pay $35 billion in exchange for 40,000 acres of virgin land on Egypt’s Mediterranean coast, known as Ras El Hekma. The United Arab Emirates has been one of Egypt’s most prolific sponsors since 2014, having given the regime of President Abdel Fattah El Sisi more than $40 billion in investments, central bank deposits and loans before this latest deal. The Ras El Hekma agreement was then followed by a slew of western assistance.

In early March, Cairo signed an $8 billion bailout with the International Monetary Fund. Largely stalled since December 2022, the deal was able to move forward after Egypt imposed Fund-required austerity measures and currency revaluation. The IMF’s efforts were clearly in coordination with the agreements signed two weeks later that saw Cairo receive a commitment of $6 billion in financial support from the World Bank and an agreement in principal with the European Union for $8 billion.

The latter deal was announced during an EU delegation visit to Cairo, during which Brussels said it was upgrading its relationship with Egypt to a “strategic partnership.” The four-year arrangement will see European money directed to support Egypt’s public finances and improve the country’s business environment. In exchange, Cairo agreed to assist the EU on a number of key issues, the most contentious being the prevention of irregular immigration. This effort is earmarked for $200 million in the deal, with Europe’s rising right-wing nationalist movements having pushed the issue to the top of EU foreign policy.

The totality of what was gained and what was lost in these deals, however, goes far beyond money. For El Sisi, whose tenure has seen flagrantly reckless handling of public finances, widespread human rights abuses, and swelling public resentment amid financial collapse, the deals are not only a lifeline for his presidency but tacit Western endorsement of his policies. The EU agreement in particular, similar to those the Bloc has signed with other North African nations recently, reeks of hypocrisy and neocolonialism. It also comes at a time when many Western countries’ moral and ethical credibility is already in tatters for supporting Israel’s obliteration of Palestinians in Gaza. The deals, aimed at addressing the immediate and expedient needs of the parties involved, also saw meaningful accountability measures swept aside by mutual consent. As such, the longer-term costs will almost certainly be an Egyptian population further alienated from and disenfranchised by country’s elite, and an increased risk of instability that will cost even more to address down the road.

Economic bailouts amid ethical bankruptcy

Egypt's economic crisis has reached staggering proportions. Annual inflation had tripled by March to 33.3%, compared to just over 10% in the same month of 2022. The Egyptian pound has also haemorrhaged more than two-thirds of its value against the US dollar after four successive devaluations since March 2022. The government has simultaneously slashed fuel and food subsidies. Many of these draconian austerity measures were IMF prerequisites to qualify for the latest round of financing, Egypt’s forth since 2016, with the total tab now roughly $28 billion, according to Egypt’s State Information Service (SIS). The effect, however, has been to gut domestic purchasing power and make life’s basic necessities increasingly unaffordable for most Egyptians.

Even as average Egyptians have suffered, however, El Sisi's government has lavished resources on grandiose infrastructure projects, such as the $58 billion New Administrative Capital being constructed in the desert outside Cairo. Such extravagant spending has ballooned under El Sisi, with the country’s debt of $46 billion when he took power in 2014 soaring to $166 billion as of the end of the past financial year, according to the Central Bank of Egypt. Critics have lambasted the regime for squandering limited public funds on such vanity projects that benefit the elite while stripping social protections from Egypt's poor and working classes.

This immense and growing economic inequity, compounded by endemic corruption and mismanagement, is the Egyptian reality into which the international financial lifelines for Cairo have been thrown. The deals with the UAE, IMF, World Bank and EU are of existential consequence for El Sisi, shoring up his grip on power at a time when popular discontent for his policies has been building to a fevered pitch. The more than $50 billion cascade of financing and investment has acted as an emergency bailout for the sinking ship of the national economy.

The lucrative deals, however, are also rich in irony. Through these arrangements, Western powers that had been critical of the regime’s human rights abuses and authoritarian overreach, and identified such as obstacles to the country’s prosperity, have propped up the same despotic, prosperity-denying regime with billions in aid. The combustible optics were exacerbated by the EU delegation's visit coinciding with Israel's brutal bombardment of Gaza which, now entering its seventh month, has killed roughly 35,000 people as of this writing, 70% of whom are women and children. Top EU officials such as Commission President Ursula von der Leyen and Italian Prime Minister Giorgia Meloni issued humanist platitudes condemning the deaths of Gazan civilians while everyone listening understood that European countries were continuing to arm Israel for the slaughter. Egyptians then heard EU leaders condemn Hamas as a terrorist organization, even while most Arabs see the group as fighting a heroic resistance against decades of Zionist oppression.

Colonial power projection from military to economic coercion

There are various Egyptian perspectives on the recent western financial aid. The EU partnership in particular, however, cannot be viewed in isolation from the long and complex history of European involvement in the Middle East and North Africa. For centuries, colonial European powers have sought to assert their influence and protect their economic and geopolitical interests in the region, often through imperialistic militarism.

From the British occupation of Egypt in the late 19th century, to the French colonisation of Algeria, and the Sykes-Picot Agreement that divided the Ottoman Empire after World War I, the European hand has regularly intervened to shape the political, economic, and social landscapes of the region. This colonial legacy continues to cast a long shadow over contemporary dynamics, with the west’s financial arrangements with Egypt and support for Israel’s war on Gaza being just the most recent examples of this historical interference.

For Egyptian civil society figures and pro-democracy advocates, El Sisi's deepening of ties to the EU and acceptance of stringent IMF conditionalities represent an unforgivable capitulation to economic vassalage. The regime's willingness to acquiesce to externally imposed economic dictates to secure financing is, for these observers, a betrayal of national sovereignty and the economic well-being of average Egyptians.

Pragmatists and foreign policy realists framed the EU and multilateral deals as regrettable but necessary evils required to stabilise Egypt's spiralling economic crisis and forestall state insolvency. With a massive youth population and limited productivity engines to employ them, this thinking posits that Egypt has little leverage to reject external financing on principled grounds.

Egyptian media outlets, which are under strict state control, portrayed the deal as  European leaders endorsing El Sisi and his policies. Even this, however, appealed to a common post-colonial Egyptian inferiority complex that values European opinions above their own, elevating Europe as more democratic, financially successful and supposedly “forward-thinking” than their own country. Such opportunistic gaslighting is common in Egyptian state media coverage under El Sisi to discourage dissent. Other El Sisi defenders, including most talk show hosts currently working in Egypt, argued that the president was preventing the region’s descent into chaos.

On this last point, EU leaders would appear to agree that strong leadership in Cairo is a bulwark for Europe against state collapse in the Arab world’s largest country. They must also appreciate the dampening buffer a stable Egypt provides against chaotic spillover from events roiling around its borders, whether it be the civil war in Sudan, Libya’s fracturing, or Israel’s genocide in Gaza.

Indeed, El Sisi may be the most qualified agent to protect the European interests in North Africa, given his support from the country’s armed forces, their grip on Egyptian society, and their proven success in stemming irregular immigration into Europe from across the Mediterranean. That El Sisi maintains power through stamping out of any viable political opposition may be unsavoury for the EU, but not critical in the larger strategic picture. The $8 billion injection and expanded cooperation with El Sisi could be viewed as an uncomfortable but prudent, even necessary bargain to protect the EU's core priorities at the expense of more peripheral ones.

This form of neocolonial outsourcing of distasteful activities has also played out in similar EU arrangements with Tunisia, Libya, Mauritania, and likely soon Morocco. Through these arrangements, the EU effectively deputised these nations as the enforcers of its refugee containment and border policies, while offshoring accountability for the human rights abuses proliferated by these security partnerships.

The moral and long-term costs of short-term expediency

By shoring up Egypt economically and preserving a cohesive central authority under El Sisi, Brussels likely aimed to insulate itself from the potential of greater regional chaos. Yet in doing so, the EU provoked charges of perpetuating undignified colonial dynamics and betraying its ostensible values. Across North Africa, the EU has exploited the same economic leverage to purchase the service of autocrats, with the terms of the agreement then dictated to the disenfranchised populations.

For Egypt's populace, facing severe economic duress and perceiving that their self-determination is being bargained away, alienation from their own leadership, and its foreign backers such as the EU, could arguably fuel more instability in the long-term.

And herein lies the paradox at the heart of the EU's transactional engagement: for all the funding showered on El Sisi to stamp out disorder from his side, the very conditions of such arrangements risk inflaming popular fury that could bring a different and more dangerous kind of disorder down the line. The Arab Spring uprisings of 2011 should be enough evidence to show the potential for such.

As transnational economic clout overtakes more coercive colonial forms of influence, the residual cultural resentments and perceptions of humiliation risk intensifying among those on the receiving end of "pragmatic" financial directives. Finding a sustainable equilibrium where ethical norms and basic human dignity are not foregone in pursuit of hard power agendas remains an important and yet elusive proposition. Perhaps counterintuitively, truly pragmatic EU realpolitik in this century may require greater integration of normative moral principles in foreign policy.

The EU's willingness to prioritise its own security and economic interests over the promotion of human rights and democracy in its dealings with Egypt echoes the realpolitik calculations that have for too long characterised European involvement in the region. The international community, particularly entities like the EU, must rigorously reassess the long-term implications of their financial and diplomatic engagements. Moving forward, it is imperative to foster policies that not only address immediate economic relief but also champion the fundamental rights and dignities of all individuals affected by these agreements.

The views represented in this paper are those of the author(s) and do not necessarily reflect the views of the Arab Reform Initiative, its staff, or its board.