Amid the tensions in Cairo-Washington relations after the toppling of former president Mohamed Morsi, Egypt has been largely betting on Russia not only as a political ally and source of arms, but also as an important economic partner. This was obvious in President Abdel-Fattah Al-Sisi's two visits to Russia in less than a year, the first of which even before his election as president. The first official visit of Al-Sisi to a non-Arab country after his election was to Moscow, where he discussed setting up a Russian Industrial Zone in the Suez Canal area and negotiated a free-trade zone between Egypt and the Moscow-led Customs Union of Russia, Belarus and Kazakhstan. Moreover, the sanctions imposed on Russia by the United States and the European Union since March due to Russia's position on the Ukrainian crisis gave Egyptian exports an advantage. Moscow has responded by imposing an embargo on food imports from countries that have hit Russia with sanctions. Egyptian exporters, especially those of oranges and potatoes, stepped in to the breach, aiming at increasing Egyptian exports of agricultural goods to Russia by at least 30 per cent. In return Russia pledged to increase its wheat exports to Egypt. However, the recent decline in international oil prices has now called into question some of the high hopes of better investment and trade relations with Russia. “My company's exports to Russia declined by 50 per cent during November and December compared to last year,” said Hisham Al-Naggar, vice-chairman of Daltex, one of Egypt's top exporters of potatoes. Al-Naggar explained that the decline in the value of the Russian currency the rouble had reduced the purchasing power of Russians and thus made the cost of Egyptian exports higher. “This means that we either export fewer quantities or do so at lower prices,” he said. Talking to Al-Ahram Weekly from Russia, Al-Naggar said that some exporters were trying to make up for the retreat in yield by importing now cheaper Russian commodities. There were also negotiations underway with the Russian authorities to lower tariffs imposed on Egyptian exports entering Russian markets, he said. “But these may not be applied as the Russians need all the revenues they can get right now,” Al-Naggar added. Trade between Egypt and Russia amounted to $3 billion in 2013, with Egypt exporting around $450 million worth of goods, 80 per cent of which was fresh produce. The imported items were mainly oil, steel and wheat. Egypt is the largest buyer of Russian wheat, a fact that raised fears when Russia said last week that it might curb wheat exports to contain hiking local prices. This could mean that about 200,000 tons of grain due for export until the end of January might not reach Cairo. However, the Minister of Supply Khaled Hanafi, told Reuters on Monday that Egypt expected Russia to honour all its January contracts after assurances from Moscow that steps taken to cool domestic prices would not hit supplies to Egypt. While Hanafi said Egypt would keep Russia as a source for its import tenders, he noted that Egypt had alternatives and would accept offers based on dependability as well as on cost, quality and timing, according to Reuters. Egypt, the largest wheat importer in the world, buys 10 million tons of grain annually. Other export markets are France, Germany, the US and Argentina. Press reports this week said that Minister of Tourism Hisham Zaazou was working on a proposal to buy Russian commodities in return for receiving Russian tourists. The mechanism resembles the bartering system implemented between Cairo and Moscow during the rule of former president Gamal Abdel-Nasser. The plan aims at maintaining the flow of Russian tourists, which according to Elhami Al-Zayat, chairman of the Egyptian Tourism Federation, represent 30 per cent of all tourists visiting Egypt annually. Reservations by Russians for Christmas and New Year, considered high seasons for beach tourism in the Red Sea, were down on last year, Al-Zayat said. “We now see travel agents who had already rented hotels and paid for flight tickets lowering their packages to make Egypt cheaper for Russian tourists,” he said. Al-Zayat believes the worst could be yet to come in the post-holiday season. “Most of those who were planning to spend their holidays here already made their reservations before the problem intensified. Now we should worry about new reservations,” he said. This contradicts expectations by the Ministry of Tourism a couple of months ago that the number of Russian tourists would increase to three million in 2014 compared to 2.4 million in 2013. “When their currency loses 50 per cent of its value this means that a travel package will cost them double what it did just a year ago,” Al-Zayat explained. This did not only mean that the number of tourists would be less, but also that their spending would be slashed, a fact that could undermine the revenues of tourism-related activities. The slower Russian demand on travel packages to Egyptian resorts could put an end to the tourism sector's short recovery, he said. Tourism yields jumped by 112 per cent during the third quarter of 2014 compared to the same period of the previous year after four years of political upheaval that stripped the sector of multi-billion dollar revenues. The three-month period ending in September saw revenues of $2 billion compared to $900 million in the period before.
