Egypt for Sale
Egypt's recent decision to relinquish two Red Sea islands to Saudi Arabia in exchange for aid has contributed to the breakdown of the longstanding myth that Egypt is a dominant regional power. And, as the population becomes increasingly disillusioned, the alternative narrative offered by jihadist groups is gaining traction.
CAIRO – Last week’s visit to Egypt by King Salman of Saudi Arabia resulted in 22 agreements, including a $22 billion oil deal to prop up Egypt’s moribund economy. But the lavish aid came at a price: Egypt had to relinquish two Red Sea islands ceded to it by Saudi Arabia in 1950. The move exposed the Egyptian leadership’s narrative that the country remains a major regional power as a lie. Indeed, Egypt cannot even handle domestic challenges posed by a rapidly growing population dependent on unaffordable subsidies – a situation that jihadists are exploiting with much success. How did the country reach this point?
When Muhammad Ali defeated the British in 1807, Egypt became the first Arab country to gain de facto independence. But Ali’s grandson, Ismail, squandered that independence with profligate spending, establishing a dependency on external assistance that persists to this day.
First, Ismail was forced to sell Egypt’s shares in the Suez Canal in 1875 to cover his budget deficits. When that proved insufficient to stop the fiscal hemorrhaging, European creditors established a committee to ensure payment. By 1877, more than 60% of Egypt’s revenue was servicing this debt. In 1882, the British took control of the country to protect their investments.