Egypt Food Crisis Update
“Government on alert as wheat crisis looms” was the headline in today’s Egyptian Gazette. Ahmed Kamel writes:
As wheat prices shoot up worldwide, Egypt, the world’s top grain importer, is squeezed between price hikes and growing demand. There are 2.9 million tonnes of grain reserves, enough to cover 117 days, Abu Zeid Mohamed Abu Zeid, Minister of Supply and Home Trade, was quoted by local media as saying when commenting on the possibility that Ukraine could ban grain exports.
Last June, the government claimed to have 4.7 million tonnes of wheat, or six months’ supply. It appears that Egypt has been running on reserves and failing to replenish stockpiles, mainly because the country remains desperately short of foreign exchange. A chronic shortage of diesel fuel and electricity, as well as shortages of vaccines for children, has plagued the Egyptian economy for the past year. The butane cylinders with which most Egyptians cook are in short supply, and the black market price has risen to ten times the subsidized official price. Egypt is billions of dollars in arrears to suppliers of diesel, butane, foodstuffs and other essential imports.
The fuel shortage has worsened the food shortage, because farmers can’t obtain enough diesel to run irrigation pumps and agricultural equipment, al-Arabiya reported last October 8. The extent of the damage to this year’s harvest is hard to estimate but seems substantial, according to the newspaper.
The latest central bank data for foreign exchange reserves suggest that Egypt is running on fumes. The country’s trade deficit has risen to about $3 billion a month, and its foreign exchange earnings from tourism, the Suez canal and workers’ remittances amount to $1 to $1.5 billion a month, leaving a monthly hole of $1 to $1.5 billion. Cash reserves were at $7.7 billion in October, the central bank reported this week, essentially unchanged from $7.63 billion in September, after $1 billion in new loans from Qatar and Turkey, Reuters reported:
Egypt in October received $500 million from Qatar and another $500 million from Turkey, state-run al-Gomhuria newspaper said on Monday quoting an unnamed central bank official.
It was the second such payment from Qatar, which has promised to deposit a total $2 billion with Egypt’s central bank by the end of the year.
Egypt drew $600 million from reserves during the month to pay for petroleum imports and $100 million to repay foreign loans, the newspaper quoted the official as saying.
The $1 billion of loans in October evidently failed to cover Egypt’s import needs; although liquid reserves remained stable (at barely two months’ coverage of the trade deficit) the country continued to burn through stockpiles of wheat, and failed to import enough diesel and butane to run the economy. Turkey is running a current account deficit of between 8% and 10% of GDP and still owes money to the IMF, while Qatar’s total foreign exchange reserves of $20 billion are barely sufficient to fund Egypt for a year. Saudi Arabia refuses to lend money to the Muslim Brotherhood regime in Cairo because the Muslim Brotherhood wants to overthrow the Arab monarchies of the Sunni world. The Obama administration proposed $1 billion in emergency US aid (a lot less in terms of actual folding money) but it seems unlikely that the Republican-controlled House of Representatives will approve even this pittance.
The Morsi government almost certainly will resort to rationing (in what I characterized last August as a “North Korea on the Nile“) but the political consequences of such an unpopular action may be ugly.
David, wouldn’t the implications of all this for Egypt’s military mean that its ability to pose a truly strategic threat to Israel is headed inexorably for degradation?
Let’s see if I understand this. The nation of Egypt purchases foodstuffs, fuel and medicine, directly, then resells them to the populace at a loss? Right?
That means, I assume, that someone with a little capital of their own is not legally able to take a dhow a short distance to, say, Italy (or heaven forbid Israel!), purchase some stuff at world pricing and resell in Egypt.
So, the black market thrives…with prices even higher due to the risk of beheadment.
It really isn’t all that hard.
sigh.
Or even better they could hire the Israelis to teach them the advanced agriculture and water management techniques they use to grow food in the desert.
A few thousand years ago an Egyptian Pharoh hired an Israelite named Joseph to manage food stores and the economy to avoid a famine. They have kicked out all the Jews since then. Too bad. All of that trade and cooperation was supposed to happen after the peace treaty but they just hated the Jews too much. That same treaty gave them back the Sinai for which so much blood was spilled and now they are losing it to the jihadi terrorists there.
I think Golda Meir said something about the Arabs never missing an opportunity to miss an opportunity.
That comment was by Abba Eban, at one time Israel’s Foreign Minister. (He also referred to the 1949 Armistice lines – what Obama pushes as the “1967 lines” – as the “Auschwitz borders”.
Hmm, makes me wonder. Egyptian military knows a crash is coming. Lets the Muslim Brotherhood take control, crash ensues. MB is the one holding the bag when the crash occurs. Discredit goes to the MB, with the only viable, credible option to replace them is . . . the Egyptian military!
Your thesis is interesting and plausible. However, do read Goldman’s article “North Korea on the Nile”. Therein Goldman suggests an alternate scenario, i.e., Morsi, like the N. Korean dictator, uses hunger and power of allocation to control the restive population. It all depends upon the military in both cases. In other words, would the military engage against Morsi or remain in the background as the scenarios demand? Any other alternatives?
I don’t think Morsi can control the info feeding into the poulation as the Norks did. The food situation could be similar bu the cell phone access is very different.
There are a big differences between Egyptians and North Koreans:
1) Egypt have long borders with many different states and two seas (easy smuggling)
2) Egypt population is Islamic, not Confucian/Buddhist or atheist (less willing to accept a leadership they don’t agree with)
3) People IQ is lot lower for Egyptians than Koreans (Shorter Time Horizon) so it is more difficult to control them when hungry.
4) North Korea have China backing (no one will attack it), where Egypt have no one backing it. It move, Israel will hack it in pieces and no one will do a thing apart telling angry words.
5) If Morsi control the people with food and fuel, famine must be there. An hungry army is not able to fight in a modern war. The army will disintegrate under the battle stress in a few days.
It’s possible that things could work out that way, but Morsi spent last Spring and early summer purging the military and putting his own people in charge. I don’t think it was complete, but the military does not appear to be as independent as it was when Morsi took over.
I wonder a bit about a “Mouse that Roared” scenario, where a direct (and doomed) military attack on Israel results in a humanitarian crisis that leaves Israel and the US pouring aid into Egypt to keep it from complete chaos, and possibly involves Israel retaking the Sinai, meaning that all those Bedouins are no longer Egypt’s problem.
I don’t think Israel wants to deal with the hostile Bedouin of the Sinai. They have enough problems with their own Bedouin, whose numbers are increasing rapidly. (They still practice polygamy and tend to have large families.)
Tragic. When your enemies run out of design margin.
Now, you Egyptians have no one. You must pray for yourselves.
Morsi and his cronies do not know what to do and have no real plan to even attempt. As Egypt goes under they will still be debating whether or not the Shariah is the “main” source of legislation or the “only” source of legislation or some other similar nonsense. At least the Bolsheviks under Stalin had a plan to industrialize: re-enserf the peasants, squeeze out all food, sell it for foreign expertise and equipment. That is horrific but it is a plan. With Islam, your plan can only ever be about the oppression of women, banning alcohol and bikinis, restricting speech and thought, making students memorize the Koran, above all more Islam, always more Islam. As they fail, their anger will be interesting. Of course, Obama may always rescue them with a loan or two and some free wheat.
I have personally witnessed collapse in Zimbabwe and I would say Egypt still has some way to go. But the wall is in sight – it comes down to food and energy. I am sure that the Egyptian Army has planned and planned on how they can defeat Israel the next time they try, but I’m not sure they really have the ability to do it – particularly with their people hungry and a fuel shortage. . Syria is not exactly in great shape to help out either. If the Israelis can solve the Iran problem it might be OK. Interesting point about the Republican controlled house not funding aid to Egypt. It reminds me that the House used the power of the purse to defund the Vietnam war and Reagan’s action against the Contras. I was a Democrat at the time but was uneasy with both defundings because I noticed at the time they tended to favor our enemies – the Communists. I think the MB is our enemy too. Their idealogical goal of world dominance is strikingly similar to Communism. Steve’s comment above about the MB ideology having even less of a plan that Communism is to the point. The Communists were trying to modernize, the Islamists are trying to prevent modernization. So I must say I see no reason to lend our enemies money. Obama may well still want to pursue the fantasy of engaging totalitarians, but perhaps after bringing Iran to a state of economic desperation with sanctions he wont fall for their negotiations scam again. Still, I reckon Israel will find it has to go it alone against Iran if it wants to stop its development of the bomb.
Obviously there are no easy choices for Egypt. The rational choice would be to ask Israel for help, but that seems to be impossible given the mindset of the MB. The most pressing need is for hard currency, that could be achieved by annexing Libya (under the guise of “restoring order”) that would give Egypt access to substantial oil wealth and is probably within the ability of the Egyptian military, whereas a war with Israel would see the Egyptian military destroyed within 24 hours.
Another pressing problem is Ethiopia expanding the dams on the Blue Nile, this will severely restrict the water flow to Egypt, thereby reducing both the power output from Aswan and available irrigation water. As Egypt and Ethiopia are not on good terms Egypt has to see this as a military problem.
What is clear is that, as Mr Goldman has said, for Egyptians the apocalypse is now.
The old Egyptian government understood, keep bread cheap, keep hashish available, and you will keep the population under control. They did not concern themselves as to why Egypt was so backwards, unable to feed itself, unable to export. They accepted the fact that Egypt was essentially hopeless due its maasive inefficiency and out of control population growth. Perhaps they even thought falling fertility over time would restore the situation but in the meantime, keep the masses under control. The new government however really thinks they are not going to have to fix the symptoms – they think they can cure the illness. And they believe the root cause of the backwardness is lack of Islam. Once you restore Islam, everything will fall into place and prosperity and fairness will follow. Everyone talks about the deep thinker Qutb, but at base, this is what Qutb believed. That is magical thinking. That is a cargo cult. And once you think that way, when things go wrong, the only solution will be to double down, to build more fake runways and control towers and watch the sky. Right now the MB has no idea what to do – except build those runways and hope the planes begin to land.