Denial still is a river in Egypt (cross-posted from Asia Times Online)
[Not to belabor the point, but the reason that the Obama administration gets away with an outrageously wrong foreign policy in the Middle East is that the Republican mainstream shares the premise of his foreign policy: the US must find a solution that is good for everyone in the region, that Muslim democracy arising from the Arab Spring is the region's great hope for peace and stability, and that a democratically-elected government is prima facie a good government. This dogma was part of the reason we Republicans lost the last two presidential elections, and why George W. Bush doesn't show his face in public. Republicans who don't sign off on this utopian view are demonized, for example, the estimable Michelle Bachmann. I signed the petition to support Rep. Bachmann circulated by Caroline Glick at frontpagemag.com and I urge all my readers to do the same. I think Rep. Bachmann should spend less time worrying about low-level Muslim Brotherhood operatives in the State Department and more time bashing her Republican colleagues for voting aid money to Mohamed "apes-and-pigs" Morsi, but that's a quibble among friends].
SPENGLER
Denial still is a river in Egypt
Denial, it turns out, really is a river in Egypt. I refer not to the world’s longest waterway, but the world’s largest outpouring of pious expressions of confidence in Egypt by American and European politicians. Infusions of real cash, to be sure, could delay Egypt’s deterioration into a failed state, but not by long, because the country requires more than US$20 billion a year simply to meet its basic needs, and Western governments will not provide that much money.
As Egypt’s foreign exchange reserves dipped below what the central bank called a critical minimum and the country’s currency began sinking, the country cut imports of essentials such as oil earlier this month. Reuters reported January 8, “State-owned Egyptian General Petroleum Corporation (EGPC) has only purchased 3 million barrels of crude oil for the first quarter of this year, half of what it was seeking in a tender, traders said. That content tender was already considered insufficient to supply Egypt’s refineries, even at reduced running rates. ‘Of course it’s not enough, they need more – but no money,’ a trader, active in the East Mediterranean oil market said.”
Even before government cut back oil imports by half, 15 Egyptian power stations, representing more than a tenth of the country’s installed capacity, had stopped generating power, the daily al-Ahram reported December 28.
Egypt is running out of everything, except well-wishers from the Western foreign policy establishment, for which the Arab Spring has been a humiliating proposition. After a year of attempts to reinforce the Sunni opposition in Syria, the West is left with an insurgency dominated by radical jihadists, and an Assad regime that continues to draw support from minorities who fear the Sunnis even more than they fear Assad. In Libya, the US helped overthrow Colonel Muammar Gaddafi, and for its trouble got a dead ambassador and roving bands of terrorists equipped with the best of the Libyan arsenal.
No nation the size of Egypt has become ungovernable except as a result of war during the whole of the modern period. The deterioration of the Arab Spring into societal breakdown constitutes a reproach to the Western foreign policy establishment, which could not envision this outcome before, and refuses to consider its consequences now.
The closer Egypt comes to chaos, the shriller the expressions of solidarity with Cairo from Western leaders. The discovery of a 2010 video of President Mohammed Morsi denouncing Jews as “descendants of apes and pigs” came at an inopportune moment. The least of the problem is that Morsi hates Jews; no-one suspected him of any other sentiments. The trouble is that the speech exposes Egypt’s president as a pre-modern creature of barbaric habits of thought and Dark Age ignorance – hardly the man to execute the most difficult operation that the leader of any troubled economy has been asked to accomplish in the recent record of economic disaster.
Western leaders have a story, though, and they are sticking to it. European Union President Herman Van Rompuy was in Cairo last week, along with a delegation of American lawmakers led by senators John McCain and Lindsey Graham. The European leader promised $6.7 billion in loans and investments, provided that Egypt sign the agreement with the International Monetary Fund that it has been unable to close for the past year.
Even Bill Gates has gotten involved, as part of a consortium of US investors buying a $1 billion stake in the Egyptian cement and construction firm Orascom. The whole of Egypt’s stock market is worth about as much as a middling member of the S&P 500, on par with American Express or 3M, which is about all one needs to know about the valuation of an economy with 80 million citizens.
Money is what Egypt needs, in mushrooming quantities. Egypt’s import bill has tripled since 2006, mainly because the cost of its most important commodities – food and energy – rose drastically. Its exports, meanwhile, remain a fifth below the 2008 peak due to endemic shortages of electricity and other essentials. Tourism, the country’s biggest source of foreign exchange, has dropped by about half.
That is why the Hosni Mubarak regime collapsed when it did. Asia’s fast-growing economies crowded Egypt out of the world market for commodities, bidding up the price of food and energy to the point that the impoverished Egyptian economy could not afford necessities. Western politicians don’t seem to grasp the magnitude of the problem. On January 14, the European Union’s Van Rompuy “stressed the need for Egypt to achieve economic growth rates on par with pre-revolutionary growth, as this would help combat Egypt’s high unemployment rates,” al-Ahram reported. The trouble is that the collapse of economic growth provoked the revolution.
Egypt’s Trade Deficit Reaches Nearly $4 Billion a Month
Source: Bloomberg
The country’s trade deficit was running at an annual rate of nearly $42 billion as of November 2012, before the central bank allowed the Egyptian pound to sink on foreign exchange markets. That’s 15% of Gross Domestic Product, a startling amount (the government’s budget deficit also stands at around 15% of GDP. Against this $50 billion, Egypt can expect to earn perhaps $6 billion from tourists and $4 billion from the Suez Canal, and take in perhaps $15 billion in remittances from Egyptian workers overseas. That is dicey, because devaluation prompts workers to postpone remittances to a declining currency. In the best case scenario Egypt will need nearly $20 billion for imports during 2013. The money isn’t there.
For most of the past year, Egypt has been negotiating for a $4.8 billion loan from the International Monetary Fund, which is supposed to open the door for additional loans, for example, some $6.7 billion in “loans and grants” from the European Community – although a fraction of that money, even if committed, will be spendable during 2013. But the government of Mohammed Morsi does not have the political authority to demand painful sacrifices from a population whose lower half suffers from extreme privation.
As part of the loan package, The International Monetary Fund wants Egypt to cut its budget deficit to just 8.5% from about 15%, almost entirely by reducing energy and food subsidies. That is a reduction of government spending by the equivalent of 6% of GDP in a matter of months – the rough equivalent of a trillion-dollar one-time cut in public spending in the United States. That would impose extreme hardships on the half of Egypt’s population living on less than $2 a day. Although the present subsidy system is unwieldy and inefficient, the likelihood that Morsi’s Islamist government could introduce effective subsidy reforms by next summer is vanishingly small.
Instead of acceding to IMF conditions, Morsi has adopted the usual dodge of weak governments, that is, currency devaluation and exchange controls. Egypt’s pound has lost about 10% of its value during the past month, which will be reflected in higher prices for essentials during the next several weeks. Egyptian companies, meanwhile, can withdraw no more than $30,000 per day.
Egypt’s Pound Falls by 10%
Source: Central Bank of Egypt
Egypt’s cash position is even worse than it appears. The $7 billion or so in the central bank’s liquid cash reserves does not take into account the billions of dollars that Egyptian importers owe to unpaid suppliers. Nor does it take into account new obligations that Egypt has had to assume to get cash up front. Qatar lent Egypt $2.5 billion, all of which appears to have been spent defending the Egyptian pound on the foreign exchange market. It appears that Egypt will have to pay off the Qatari loan by purchasing natural gas from Qatar at inflated prices.
“The import price [for Qatari natural gas] is expected to reach US$14 per 1 million thermal units…The Egyptian government exports gas to Jordan at $5.50 per one million units, while Qatar exports it at more than $9,” the Egypt Independent reported December 17. It seems that Qatar is getting its money back by charging Egypt double for natural gas.
The discovery of Morsi’s apes-and-pigs comment might have provided a pretext for America’s Republican Party to wash their hands of the Egyptian president and shift the blame for the entire mess onto the Obama administration. Such is the loyalty of the Republican mainstream to the so-called freedom agenda of the former Bush administration, though, that Republican leaders have gone out of their way to declare their solidarity with Cairo.
Senator McCain declared January 17:
Among our group here, Democrats and Republicans, there is plenty that we disagree about. But when it comes to Egypt, we largely speak with one voice…We all believe in the continued importance of the US-Egypt relationship. We were all early supporters of the peaceful aspirations of the Egyptian people that inspired your revolution nearly two years ago – for democracy, for economic opportunity, for the protection of justice and human rights under the rule of law.
And we have come to Cairo with one major message: For us in the United States, especially in the Congress, the promise of Egyptian revolution is the opportunity is has presented us to recast our relationship with Egypt – to make it a truly strategic partnership between our peoples, our nations, and our elected governments, not one that rests narrowly on one person or one party.
…In our meeting with President Morsi, we voiced our strong disapproval of statements he made a few years ago that have recently surfaced. We had a constructive discussion on this subject. We leave it to the President to make any further comments on this matter that he may wish.
How one conducts a “constructive discussion” with someone who believes that Jews are the descendants of apes and pigs is a matter we will leave to Senator McCain’s memoirs, if ever they appear. President Morsi’s paranoid ravings are sadly typical of Egypt’s pre-modern backwardness – its 45% rate of illiteracy, its 90% rate of female genital mutilation, its 33% rate of consanguineal marriage – that make it a money sink unable to adapt to the shifts in the global market during the past several years.
American policymakers of both parties bring to mind the tolerance of the enamored millionaire Joe E Brown at the end of Some Like It Hot. After the manifestly anti-American Muslim Brotherhood displaced the “tech-savvy activists” of Tahrir square; after Mohamed Morsi dismissed Americans friends in the Egyptian military in August; after Morsi allowed two days of rampages against the American Embassy in Cairo following the Benghazi incident; and after Morsi himself was exposed as a paranoid clown in the 2010 video, we hear an echo of Joe E Brown’s response to the news that his intended bride is really a man: “Nobody’s perfect.”
It is hard to imagine what might change the narrative in the Republican mainstream. After falling on its collective sword for the Bush freedom agenda in two lost presidential elections, the Republican leadership cannot distance itself from its past errors without taking early retirement.
Spengler is channeled by David P Goldman. His book How Civilizations Die (and why Islam is Dying, Too) was published by Regnery Press in September 2011. A volume of his essays on culture, religion and economics, It’s Not the End of the World – It’s Just the End of You, also appeared this fall, from Van Praag Press.
(Copyright 2013 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
IIRC a high British official, somewhere near the end of British rule in India was excoriated, out of context, for saying that the problem with famine in India was that not enough people died. He was referring to that fact that the then frequent famines only reduced the population to malnutrition and extreme privation, and not enough to give some breathing room for real recovery and development.
Egypt may be facing similar disasters.
But one question remains, in failed states (Zimbabwe?) what do ordinary, uneducated folk do? They get food. Somehow. At any price or action. State police, equally hungry, become non-effective as all are on the make for a meal.
When the wheels fall completely off the Egyptian souk (is isn’t and economy), will Western aid extend the agony?
ta
It does not take much to feed someone past starvation. Mr. Goldman also underemphasizes the importance of cheap and available hashish. 30 years ago my old professor Clinton Bailey taught me: in Egypt the population will eat any government alive. So they keep beans and bread cheap (just enough to live) and they make sure hashish is available and with that they keep the population under control. Morsi may have thought with the Koran he would catapult Egypt into the ranks of a first world nation but in the end, he will be lucky to keep it as the third world country it is – and he will do it the same way his predecessors did. Beans, bread and cheap hashish.
There was a time when Egypt was the granary of the Mediterranean World. In the case of Egypt and many other non-Western places, Malthus was right.
Let us not get started with the New-Wilsonian kool aid drinkers. Despite all the carnage around them from Mali to Afghanistan they will continue to believe. Sort of like the unreconstructed Communists like Hobsbawm.
“The discovery of a 2010 video of President Mohammed Morsi denouncing Jews as “descendants of apes and pigs” came at an inopportune moment. “
The reason this isn’t an embarrassment to Morsi’s Western backers is because they mildly share his opinions.
Morsi is “authentic” in the eyes of Obama – and to a left wing student from Columbia, third world “authentic” is the highest virtue. It does not matter that the philosophy of the MB is less than 100 years old, that it owes as much to Bolshevism as to the Koran, that it is inherently antiAmerican. In the eyes of Obama and probably half the State Dept., it is the “authentic” voice of Egypt, the “authentic” native and therefore good.
Sorry Dave we’re Americans. We all the wrong things for all the right reasons and then have to respond when it’s entirely too late. Perhaps when the new F-16′s strike Tel Aviv we will then have some hearings to figure out who to blame.
Seems rather unlikely those F-16s would get anywhere near Tel Aviv, as they aren’t likely to get sufficient maintenance to take off more than a few times. Assuming the pilots have enough training even to find Tel Aviv. More likely, in the event of a war with Israel, they will all be destroyed on the ground.
We have the same problem here in Israel, with some peopel still thinking there is a “peace process”. Some problems just don’t have solutions, at least not in the near term (< 50 – 100 years).
In a rational world, Bachman would have been sworn in Sunday.
I think that David is onto something by pointing out that both parties are suffering from similar delusions in foreign policy. Richard Landes calls it ‘cognitive egocentrism’ by which he means thinking the other is just like us and is equally interested in negotiating a win win outcome. Both Bush and Obama are pro democracy in the Middle East when I think it has become increasingly obvious that those societies want and need something different. The mainstream republicans have become very much like the Liberals I grew up with. I would say that Truman, JFK, and LBJ to say noting of FDR would be classed as neocons today. So Democrats left the party over foreign policy issues and became Republicans and they have a lot of influence. What has surprise me is how much this interventionist ethos has persisted even in the postcolonial Obama administration. Both Bush and Obama are blinded by idealism and the only other thread of foreign policy we have is the old isolationism of the pre world war 2 days which has little to offer in the current circumstances. We need more realism about who we are dealing with in the Middle East – to stop pretending the Muslim Brotherhood are moderate and democratic. They are Islamist which is a totalitarian ideology that bears a close resemblance to Bolshevism and Fascism. In short we have to develop a way to deal with them that stops pretending they are something they are not.
http://www.businessweek.com/news/2012-12-10/egypt-importing-gas-for-first-time-as-exports-disappear
“We are willing to supply LNG to anybody provided the price is right,” said Nasser Al-Jaidah, chief executive officer of Doha-based Qatar Petroleum. “Egypt has asked for LNG, but they don’t have the receiving terminal” yet.
As I contended earlier, Egypt is in no position to Import LNG at this time.
Instead, at a frantic pace, Cairo is seeking contract bids to construct an import terminal — on the hurry up.
It may be the case that Cairo HAS to provide Israel LNG because of her failure to meet the ordinary provision, per the contract.
Israel, unlike Egypt, has long had a terminal dedicated to importing LNG.
IF such a swap were underway, it would be under considerable duress, secrecy. Publicity would be out of the question.
Perhaps the Egyptian government, to have any international financial credibility, HAS to endure the gas contract. It’s already walking a currency crisis razor edge.
Which makes one guess that the F-16 deal is a suave for Cairo. She gets free toys only on condition that Israel (and Jordan) is made whole on the natural gas pipeline outlay.
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It’s also apparent that my earlier assertion that Cairo has run off its natural gas drilling techs is also true. Their biggest player is essentially shutting up shop and leaving town.
“Gas producers including BG Group Plc (BG/) have curbed local production even as demand from electricity plants jumped.”
The move is being, obviously, driven by political risk. The Algerian dust-up only accelerates the desire to depart.
It’s a pretty good bet that the new boys in town are completely averse towards exporting LNG — as a matter of principle.
And, it’s a pretty good bet that BG Group cannot justify drilling for gas to sell at the wildly suppressed price obtained inside Egypt.
Socialism/ Stashism strikes again.
There’s your natural gas shortfall.
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Morsi and Company are even more obtuse than you give them credit for.
They’re gutting every source of hard currency that Egypt had going for itself.
Perhaps uniting the three Abraham faiths is more than a need but a must and seek forgiveness for selling your weapons to China
yes/no?
Is 2013 the new 1913
http://rendezvous.blogs.nytimes.com/2013/01/21/is-2013-the-new-1913/
It is interesting that China, which is buying up every natural resource in Africa it can lay it’s hands on, sees no opportunities in egypt. Once upon a time, the egyptian government was in such dire financial straits that it sold it’s share of the Suez canal to french nad British investors. Will history repeat itself?
The previous attempts by the repo squad didn’t work out. (circa 1956)
So, Egypt does not have ANY collateral.
(If you can’t enforce the agreement/ repossess the collateral any lender has no security interest, de facto.
Take a note as to how the natural gas transmission line financing has blown up. Cairo has gas in the ground, it just doesn’t want it exported — even at a profit.
(Almost like some Greens WRT North American oil and gas potential.)
So the MB has run off the drilling crews — and their supply now can’t even meet domestic demand.
Like Blanche duBois, Morsi is counting upon the kindness of strangers.
The buzz about Qatar makes one think that Morsi expects to get it, LNG, as a gift.
As IF….
Its not so much of DENIAL but rather DELUSION! To understand the worlds solution to the problems that afflict failed civilizations, one only has to watch the classic file, The Wizard of Oz. Recall the wizard was presented with a cowardly lion who wanted courage, a tin man who wanted a heart, a scarecrow who wanted a brain and poor Dorothy who just wanted to get back to Kansas.
The wizards solution? He have the cowardly lion a medal and he suddenly became brave. The scarecrow was given a diploma, which apparently made him smart enough to be ruler of OZ. And all Dorothy had to do was close her eyes and click her shoes.
I suppose the wizards of the UN have the same reasoning. Take a failed disfunctional state, or in the case of a Palestine, a failed dysfunctional non-State give them titles, documents and awards and somehow they magically become competent! Then just close your eyes and say “there no place like home” and everything is perfect, like before in dreamland!
“It is hard to imagine what might change the narrative in the Republican mainstream. After falling on its collective sword for the Bush freedom agenda in two lost presidential elections, the Republican leadership cannot distance itself from its past errors without taking early retirement.” Don’t worry Spengler, judging by the sheer stream of Twitter invective directed toward @SenRandPaul you needn’t worry about the GOP getting a clue and washing its hands of the ‘freedom agenda’ aka the arm Islamists in Syria and fight them in Mali agenda any time soon. Too darn profitable even if it’s about bailing out the ‘cheese eating surrender monkeys’.
the US must find a solution that is good for everyone in the region, that Muslim democracy arising from the Arab Spring is the region’s great hope for peace and stability, and that a democratically-elected government is prima facie a good government.
I agree that these beliefs are delusional. However, we need to accept the reality that there is NO solution to the problems of the Middle east and simply let the region go. We cannot influence events there and should not bother at all.
Withdrawal from the region, followed by the “isolationist” policy advocated by the likes of Ron Paul is both sensible and doable. The fracking and shale energy revolutions not only can make the U.S, energy independent, but an energy exporter by 2020. China, Australia, Russia, India, and even Europe have huge shale gas and oil reserves under them. Middle-eastern oil, the only product to come out of the region, is simply not as necessary to the world economy like it was 20-30 years from now.
Much has been made about the “threat” of Islamism”, as though it is the successor threat ideology to Soviet Communism. I’ve decided this is a complete non-threat. These people simply lack the cognitive ability and organizational skills to make themselves into a global threat analogous to the former Soviet Union. Ideologically, Islam has no appeal to non-Muslims. The universities around the world are not teeming with Islamic ideology like they did with Communist ideology during the 1960′s and 1970′s. Globally, young people are simply not attracted to Islam the same way they were to Communism 40 years ago.
The region offers nothing to the outside world. These people are complete zeros, literally. The region does not manufacture a single product to competitive international standards. There are more books translated from other languages into Japanese EACH YEAR than have been translated into Arabic in the past 500 years. Patent applications from the region are nearly non-existent. It is reasonable to describe the people of this region as complete zeros.
There is no rational argument for our involvement in Middle-eastern affairs, nor is there any reason to invest American public finances in this region either. The only sensible foreign policy for this region is one of benign neglect.
Agree as long as we restrict immigration from these countries into the US and into the West. Their presence here makes our life more dangerous and in turn increases the weight of government pressure upon all of us. In return we get what? Cab drivers? Afghan hot dog vendors who plot bomb attacks? Somalians on welfare? As you say we are getting Zero n return.
@ 12 “There is no rational argument for our involvement in Middle-eastern affairs, nor is there any reason to invest American public finances in this region either. The only sensible foreign policy for this region is one of benign neglect.” You sound like a Paulbot! Hey PJM, how did you miss this one? I demand an immediate stream of Paul hating comments at once! (Oh wait, it’s not January 2012 anymore, I digress).
Ahh the cordon sanitaire for Islam? Certinly…but as the poor people of mali, Nigeria, and less affluent neighborhods of France, the line has been breached, and poisons poor forth unto the world.
Which brings up the difference between Saudi Arabia and Egypt. Which is to say…none. The Salifist vision of the world looks an awful lot like Saudi Arabia without money, which looks an awful lot like Yemen, or Somalia on steroids.
There is some hope. In the Arab world certainly Tunisia, Morroco, and Jordan have a chance. I’d bet on the Kurds if they had their own borders. Any have a problem with Oman lately? Wealth and power seem to make Arabs toxic – poor and powerless and they seem to do just fine.
Nothing can save Egypt. Nothing. They are too big to save.
How much is Bigalow Aerospace charging for thoses space habitats….? Just checking.