As Israel clamps down on Gaza and talks in Cairo over a ceasefire stall, Egypt continues to sweat over the effects of the war on its national security and economy. While the media primarily focuses its attention on the two warring states, there are repercussions of this conflict being felt elsewhere in the world, most notably neighboring nations like Egypt. This article analyses how Egypt’s economic woes will exacerbate as this conflict rages on, and how the fighting in Gaza, the Red Sea, and Sudan could be a three-pronged stab that sinks the land of the Pharaohs.

IMMEDIATE ECONOMIC WOES

Al Jazeera has used the term ‘on life support’ to describe Egypt’s economy, and with public debt more than 90% of the GDP, coupled with a failing currency, this phrase doesn’t seem to be an inaccurate description of Egypt’s economic situation.

Egypt greatly relies on tourism and the Suez Canal to maintain its foreign exchange reserves. The Gaza conflict, occurring near to Egypt’s Sinai peninsula, could cause tourism revenues to fall between 10-30% from last year, which could be a great setback for an economy where tourism accounted for 8.3% of the GDP in 2023.

And the fighting in the Red Sea, which commenced following Houthi missile and drone attacks against Israel-linked shipping vessels, has only worsened matters. The Suez Canal, the shortest trade route linking Asia to Europe, saw a more than 40% drop in revenue in January 2024 compared to the same period last year. The Canal, which brought in $9.4 billion for Egypt in the fiscal year 2022-23, has also seen the number of ships navigating through it fall by 36% as vessels choose to reroute around the Cape of Good Hope.

Egypt, which in 2022 had exported 80% of its Liquefied Natural Gas (LNG) to Europe following Russia’s invasion of Ukraine, witnessed a 10% year-on-year decline in LNG production due to ‘aging gas fields and upstream issues’. And high domestic consumption of LNG in 2023 left no surplus for exports. This, followed by a 30% decrease in remittances from abroad in the third quarter of 2023, has further increased the Egyptian economy’s vulnerability to future setbacks.

INCREASED MIGRATION

According to the UNHCR, Egypt hosts more than half a million refugees from more than 62 countries, with more than half of these refugees coming from Sudan. Prior to the conflict that began on October 7th, the refugee crisis in Egypt was already dire. Refugees in the nation lacked a basic source of income and access to education, and were unable to meet basic food and medical needs due to soaring inflation. The present conflicts in Gaza and the Red Sea threaten to tip this refugee crisis in Egypt over the edge.

Egypt hosts more than 50,000 Palestinian refugees, a huge share of these having come between 1947 and the Camp David Accords of 1978. The current Israeli offensive in Gaza has threatened to displace thousands of Palestinians into the Sinai peninsula- something Egypt is not too keen about. While it has accepted around 10,000 refugees through the Rafah border crossing since the start of the present conflict, Egypt has officially rejected the displacement of Palestinian refugees by stating that such a displacement would ‘liquidate the Palestinian cause.’ Girdling this official refusal to accept the refugees could be two other issues. One, Egypt is unable to support the existing refugees. Palestinians in Egypt struggle with tuition fees, rent, and food. Two, and more importantly from the government’s standpoint, a Palestinian influx presents a security issue to Egypt. In an unambiguous statement, Egyptian President Abdel Fatah El-Sisi said, ‘the displacement to Sinai means transferring the attacks against Israel to Egyptian territories, which threatens the peace between Israel and a country of 105 million people.’ Emerging in 1987 as an offshoot of the Muslim Brotherhood- which was systematically dismantled by Sisi in 2013- Hamas has previously been viewed as a security threat by Egypt, and an influx of Palestinians could mean an influx of Hamas militants into the country, which, to Sisi’s concern, could potentially lead to a resurrection of the Muslim Brotherhood and increased militancy in and from Egypt. To deal with these dual concerns, Egypt has repeatedly emphasized its refusal to accept Palestinian refugees and is purportedly building a walled buffer zone to host refugees from Rafah.

While Egypt attempts to secure its border with Gaza, it also runs the risk of being overwhelmed by Sudanese migrants due to the fighting in the Red Sea. The latest round of fighting in Sudan, which began in April 2023 between the Sudanese Armed Forces and Rapid Support Forces for control of the state and its resources, has already killed more than 10,000 people and displaced 5.6 million. More than 317,000 of these refugees have arrived in Egypt, and are plagued by the same troubles as the Palestinian refugees. Egypt, gripped by its economic struggles, where ‘32.5% of Egyptians were already living below the national poverty line before the onset of the Sudan crisis’, is unable to provide proper housing, education, or medical facilities to these refugees, and has been forced to turn its back on many of them, prompting them to return to the torrent of violence they had escaped from. The fighting in the Red Sea and the targeted Houthi attacks on shipping containers will only make matters worse for the Sudanese. Vital aid from Asia to Sudan is being disrupted by Houthi attacks, with many containers choosing to dock at the UAE, transport supplies by road to Jeddah, and from there make the Red Sea crossing so that they can avoid routes in close proximity to the Yemeni coast. But such a journey greatly increases the delivery time and raises costs by 40%, resulting in underfunding in many aid agencies in Sudan, while putting thousands more Sudanese at risk of starvation and death by preventable illnesses.

Apart from the disruption to aid, the fighting in the Red Sea could also have severe environmental implications for Sudan and other North-East African nations.

The sinking of the British-owned cargo ship Rubymar, by anti-ship ballistic Houthi missiles, has caused an oil slick in the Red Sea, spelling grave environmental danger for the water and the reefs in the surrounding regions. The Programme Director at Greenpeace MENA, Julien Jreissati, summed up the terrible effect this slick could have on the marine life and coastal communities by stating, “Without immediate action, this situation could escalate into a major environmental crisis. As well as any further leaks of fuel oil from the engines, the sinking of the vessel could further breach the hull, allowing water to contact with the thousands of tonnes of fertilizer, which could then be released into the Red Sea and disrupt the balance of marine ecosystems, triggering cascading effects throughout the food web. This disruption could have far-reaching consequences, affecting various species that depend on these ecosystems and, in turn, potentially impacting the very livelihoods of coastal communities.”

There is the possibility of similar incidents in the near future that gravely threaten communities in the Red Sea nations. Marine disasters could risk the survival of fisheries in these countries, putting thousands of people, who depend on fish as a source of livelihood and nutrition, at increased risk of poverty and starvation. Low-income countries like Eritrea depend on fisheries for national food security and as a great potential source of foreign exchange through exports. A marine disaster could jeopardize these livelihoods and lead to increased migration towards countries like Egypt, which already hosts more than 20,000 Eritrean asylum seekers and refugees and hundreds of thousands of Sudanese.

Increased migration, due to insufficient aid into Sudan and a marine disaster in the Red Sea, would only further strain Egypt’s dire economic resources and worsen a heretofore terrible financial crisis.

CONCLUDING REMARKS

Egypt’s importance to the world cannot be stated enough. Located at the epicenter between Asia, Africa, and Europe, Egypt occupies one of the most strategically important locations around the globe. The Egyptian-owned Suez Canal Authority oversees approximately 12% of the global trade, and an economic collapse in Egypt could have severe repercussions for the rest of the world. The population’s frustration at the government due to the economic fragility of the nation could also provide fertile ground for the resurrection of organizations like the Muslim Brotherhood, which could, through its offshoot groups, threaten the security of the country and turn the Sinai Peninsula into a launchpad for terrorist attacks.

A recently announced $35 billion UAE investment in the Ras al-Hikma project and an expected $8 billion IMF bailout could ease some of the nation’s economic woes. Yet for long-term national stability, along with other economic and political factors, regional peace- in Gaza and the Red Sea- remains crucial. Ceasefires in these conflict-ridden regions could not only save the lives of thousands of Palestinians, but could also alleviate the suffering of thousands of Egyptians, Sudanese, and Eritreans.

Swaraj Parameswarann holds a Master's in International Relations from King's College London and writes on international issues focusing on geopolitics and armed conflict.