MS Risk Blog

Egypt Update: Second Suez Canal Project, National Security Issues

Posted on in Egypt title_rule

On 5 August, Egyptian President Abdel Fattah Al Sisi announced the nation’s plan to build a new Suez Canal. The new canal will be built alongside the 145-year-old historic waterway in a goal increase income to the Egyptian economy by expanding trade between Europe and Asia.

Egypt has suffered a severe blow to its economy since the 2011 revolution which ousted former President Hosni Mubarak. With the severe downturn in the tourism industry and a slowing of foreign investment, the bulk of the nation’s revenue now comes from the Suez, which earns Egypt approximately US $5 billion. Investors and Egyptians are hoping to establish a major international industrial and logistics trade hub and raise Egypt’s international profile. The country has, for years, had plans to develop 29,000 square miles for this endeavour. In January, Egypt invited 14 consortia to bid for project.

The new canal will run parallel to the existing canal, and span approximately 45 miles. The project is expected to cost $8 billion and create over one million jobs. Estimates suggest it will take five years to complete, although the Egyptian government has set a completion goal of three years. During a press conference in Ismailia, President Al-Sisi declared that the project would be completed within just one year, but it is unlikely that such a large project can be completed in this truncated timeline.

President Al Sisi has put the Egyptian Armed Forces in charge of the project, primarily citing security reasons. As many as twenty Egyptian firms are likely to be involved in development of the canal, but will work under military supervision. The canal has been targeted by militant groups in the Sinai on more than one occasion, including the firing of a missile at the Cosco Asia, a merchant vessel that was traversing the canal in September 2013. The group that claimed responsibility, Al Furqan Brigade, hoped to create fear in shipping companies, causing them to reroute away from the Suez Canal, and thereby weaken the Egyptian economy. The Egyptian military has since put in place increased security measures, including additional security troops and fencing off areas around the Canal Zone.

The Egyptian military is more than a national security force. The Egyptian military owns a minimum of 35 factories, where it produces a range of products including bottled water, food items, flat-screen televisions, refrigerators, cars and more. The military also owns a series of restaurants, football grounds, petrol stations, and a great deal of real estate. The Egyptian military has also been involved in joint ventures to build infrastructure and resorts. However, the business aspect of Egypt’s military is opaque; their budgets are secret, and their industrial investments are neither audited nor taxed. It is estimated by some that the Egyptian military holds a 40% stake in Egypt’s economy, however it is near impossible to verify. Sisi has stated the actual number is closer to 2%. Egypt’s military will likely be responsible for managing the first stage of the project, which will be the “dry digging” of the new canal.

In an additional effort to boost the nation’s slowing economy, Egypt is seeking US $1.5 billion in loans to repay debts owed to foreign oil companies operating in the nation. The move is another part of the scheme to revive the economy and gain interest in foreign investment. The government is avoiding borrowing money from the nation’s central bank in order to avoid putting strain on the national reserves. Simultaneously, Egypt is attempting to woo foreign oil investors into increase exploration and production. Current production rate for gas is approximately 5.1 billion cubic feet per day, and oil production is approximately 675,000 barrels of oil per day.

Egypt has been troubled by the decline in gas production in the face of the worst energy crisis in a generation. Later in August, the Egyptian government will seek bids to import gas to support the nearly 85,000,000 population. Much of the energy bills that Egypt accrues have been in the form of energy subsidies to the poor. However, shortly after Sisi’s election, those subsidies were slashed, spiking energy prices by over 70 percent.


In addition to the nation’s economic woes, Egypt is struggling to control a wave of violence that has hit since the ousting of President Mohamed Morsi in August of last year. Morsi’s removal sparked clashes between those supporting and opposing the Morsi’s organisation, the Muslim Brotherhood (MB), as well as sectarian clashes between supposed MB supporters and Christians. On 5 August, sectarian clashes broke out in Minya, reportedly after news was released that Coptic Christians were planning to build a church. However it has been revealed that the clashes were actually ignited by a feud between rivalling Christian and Muslim families, and spread rapidly. Over a dozen people were arrested. Currently the situation is stable. Minya, with its high Coptic Christian population, has seen some of the worst sectarian violence since the ouster of Morsi. The court in Minya is also responsible for a series of mass death sentence punishments against Muslim Brotherhood members for clashes that occurred last year.

Egypt is also struggling to maintain national security as it is faced with threats on all of its land borders. To the west, Egypt has increased security and closed its borders with Libya as the threat of violence in their neighbouring nation threatens to spill over. To the south, Egypt is battling human trafficking that is filtering up from Eritrea and Sudan, the latter of which has been fighting an escalated war with recently separated South Sudan. To the east, the Egyptian border with Gaza has been closed after a breakdown of relation with Hamas in 2013, and in particular since the escalation of fighting between Palestine and Israel. Egypt is also targeting radicalised bases in the restive Sinai Peninsula, and attempting to protect the nation from home-grown radicalism that has grown through the chaos of building a new government in the nation.

Tagged as: , , , ,