Egypt: Funding the reaction

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The return of the old regime under Abdel-Fatah al-Sisi, underpinned by billions of petro-Dollars from the Gulf kingdoms, has seen a rehash of devastating neoliberal policies, writes Anne Alexander.

On 13 March Abdel-Fattah Al-Sisi will open the Egypt Economic Development Conference (EEDC) in Sharm el-Sheikh. The event’s slick website (egyptthefuture.com)urges attendees to “join world leaders and the international investment community in shaping an unprecedented plan for Egypt’s prosperity”.

The international investors gathering in the Sinai resort are unlikely to spoil the occasion with awkward questions about their host’s bloody ascent to power, nor take up the cases of the tens of thousands detained for protesting against the regime. Sisi already knows that the men and women who have steered the world’s major economies and global financial institutions through crisis and austerity by making the poor foot the bill are not particularly interested in nit-picking over his human rights record. They sat in rapt attention as he lectured on the evils of ISIS at the World Economic Forum in Davos in January. The IMF mission to Egypt gave the general’s economic reforms a clean bill of health in mid-February. Since his election in 2014 Sisi has cut subsidies on fuel and brought in new taxes, with the introduction of VAT planned for later this year.

Austerity measures have slashed subsidies on baby milk and medication by more than half, and cut spending on health insurance for households headed by women, while the fuel price hikes disproportionately affected the poor through knock-on effects in rising transport costs. Privatisation of basic utilities and state assets, a policy abandoned by the government in 2011, is now back on the political agenda with proposals to sell off parts of the electricity network tabled at a recent cabinet meeting.

At its heart, the conference is a showcase for the particular model of neoliberal capitalism which Sisi has dressed up in his election speeches as a revival of Nasserism. Here the state plays a central role along three axes: as the guarantor of “stability” (through the most brutal forms of repression that modern Egypt has ever experienced), as the enforcer of neoliberal reforms demanded by the IMF and Western governments, and as the key organiser of foreign investment by creating opportunities for foreign private and state capitals to invest in “mega projects”, such as the construction of the new Suez Canal channel.

This strategy has been conceived and executed in partnership with Gulf capital, led by Saudi Arabia and the United Arab Emirates. Even the conference was the brainchild of the late King Abdullah. It is unthinkable without the billions of dollars of loans, grants, bank deposits and subsidised fuel which have flowed from Saudi Arabia, the UAE and Kuwait since 2011 (and sharply accelerated after Sisi’s overthrow of Muslim Brotherhood president Mohamed Morsi in July 2013), staving off economic collapse. It is not the lofty pronouncements of the IMF which cement the kind of deals Sisi needs. That requires the personal attention of experienced fixers whose contact books provide the grease which keeps the wheels of the mechanism turning smoothly.

Thus the other villains of the piece are the brand managers and strategic consultants of WPP Group, whose chief executive Martin Sorrell is one of the key speakers at the EEDC, and Peter Mandelson, whose “strategic consultancy” Global Counsel was set up in 2010 in partnership with WPP, following in the footsteps of that professional befriender of despots, Sisi’s unpaid “adviser” Tony Blair.

WPP’s role in the EEDC deserves special attention, as it goes far beyond Sorrell’s top table billing. The entire event is being managed by a WPP affiliate, Richard Attias Associates, led by the Moroccan conference promoter Richard Attias, who used to manage the World Economic Forum in Davos.
RAA lists as its London office the address of Mandelson’s Global Counsel, and Bob Dudley, chief executive of one of the consultancy’s only two publicly acknowledged clients, BP, is another keynote speaker. Of course BP has a long-existing stake in Egypt, and reasons to be grateful to Sisi’s efficient crushing of public protest. The company’s flagship investment in a new major gas plant near the town of Idku in North Alexandria had stalled since 2011 in the face of determined resistance from local residents who organised marches, held street assemblies and occupied the construction site.

BP then pursued a relationship with the Muslim Brotherhood government, attempting to bring MB politicians on board with attempts to revive the scheme. The crisis which engulfed Morsi’s presidency stalled the project once more, but by July 2014 Dudley was back in Cairo meeting with Sisi’s prime minister Ibrahim Mahlab to celebrate renewed cooperation. Morsi’s hapless attempts to deliver the right environment for BP’s investments are an important part of a bigger story. It was not the Brotherhood’s lack of neoliberal will which doomed their brief season in power. Like Sisi after him, Morsi made a pilgrimage to Saudi Arabia in a vain effort to unblock aid promised after 2011. He travelled to China with an entourage of Mubarak-era businessmen (Sisi has secured the presence of the head of China’s Investment Corporation at the EEDC). He met the IMF and tried to meet some of their conditions for a loan by imposing a raft of new sales taxes in the midst of massive popular protests against the new constitution in December 2012 — an act which at least some of his saner advisers must have realised was close to political suicide — and the taxes were withdrawn a few days later.

Morsi’s fatal weakness, from the point of view of those counting on him to restore conditions for the neoliberal project, was his inability to tame the movement in the streets and workplaces: a task which was all but impossible with the repressive institutions of the state in barely disguised revolt against him. Nor was the Brotherhood’s relative success in winning substantial financial support and investments from Qatar enough to stave off disaster. The partnership between Egypt’s field-marshal and Saudi Arabia’s king lies at the heart of the counter-revolutionary project. But it was never simply an expression of the short-term pressures generated by the acute crisis of the Egyptian state since 2011 in the face of an immense popular uprising.

It also reflects their longer-term aim to make a neoliberal capitalist order at a regional level, and the desire of the Gulf’s rulers to protect the substantial investments they made in Egypt in the decade before the revolution. Gulf capital formed the highest-value bloc of investments in Egypt between 2003 and 2010, far outstripping investment from the EU and North America. That is why, days before Mubarak’s fall, Saudi Arabia’s rulers signalled that, for them, ensuring the survival of his regime was little short of a personal obligation. As the uprising rose to a climax on the streets of Egypt, King Abdullah made his displeasure at US failure to back the dictator known to President Obama while Egyptian diplomats told the media that if the US stopped military aid to Egypt, Saudi Arabia would step into the breach. Three months later Mubarak’s generals announced the first Saudi aid package of $4 billion worth of grants, loans and fuel shipments.

The rulers of the Gulf were always the only likely source of the funding required to keep the Egyptian economy afloat. Ironically, only the deep pockets of the Saudi king offered a ready route to paying the wage bill for millions of workers in the public sector who were mobilising through strikes, workplace occupations and protests to demand social justice. The Gulf was also the obvious source to meet expanding demand for subsidised fuel products, which as oil prices rose globally, was consuming an ever growing proportion of state budgets.

The first post-Mubarak military regime proved an unreliable vehicle for the restoration of the old regime. Its leaders frittered away the military’s political capital in clashes with energised movements in the streets, and brought the country to the brink of a further insurrection in November 2011. A repeat of the January uprising was averted because parliamentary elections appeared to offer an alternative route to change by allowing the Islamist former opposition movements into power. Saudi funds, so swiftly committed in the wake of Mubarak’s fall, appeared to dry up as the months passed. By the time Morsi was elected in June 2012 only $1.5 billion out of $4 billion had been delivered, and the remainder proved elusive. The contrast with the flood of aid which Sisi received after overthrowing Morsi could hardly be greater, with Saudi Arabia, the UAE and Kuwait pledging around $20 billion during the fiscal year 2013-14, 90 percent of which has been delivered.

Yet despite Sisi’s success in restarting the neoliberal reshaping of Egypt, many challenges remain. The regime is reliant on the influx of Gulf aid and other investments. The high oil prices which originally pushed Gulf capital to invest in the wider region have dropped by half since June 2014. Saudi ministers are busy retrenching their own budgets and even the Saudi state oil producer, Aramco, is looking for ways to cut costs. Should the flow of aid to Egypt falter, other cracks in Sisi’s regime may begin to show. One key weakness is the lack of a political party to institutionalise a section of the counter-revolution’s popular support and deploy it against Sisi’s opponents at moments of crisis.

Despite the difficulties, that opposition remains far more resilient than Sisi hoped, continuing to mobilise on the streets despite the crackdown, as the broad response to the call for protests on this year’s anniversary of the 2011 revolution showed.

Anne Alexander is co-author of Bread, Freedom, Social Justice: Workers and the Egyptian Revolution. Published by Zed Books at £16.99.