Monday,22 April, 2019
Current issue | Issue 1342, (27 April - 3 May 2017)
Monday,22 April, 2019
Issue 1342, (27 April - 3 May 2017)

Ahram Weekly

Russia’s failures on Egypt

Egypt’s balance of trade with Russia is massively in Russia’s favour, yet Russia seems unwilling to trade fairly with Egypt, writes Nader Noureddin

Russia’s failures on Egypt

When Egypt announced last week that it had stopped importing Russian wheat for one month due to the local wheat harvest, the global wheat market saw a sharp drop in Russian wheat prices. This is because Egypt is the world’s largest wheat importer and the largest importer of Russian wheat.

Over the last two years the Egyptian public and private sectors have imported 12 million tons of wheat a year, some 90 per cent of it from Russia. Earlier Egypt figured prominently on the list of importers of US wheat, and it was even at the top of this list until 2010.

The classification of grades of Russian wheat is different from that used elsewhere. Ordinarily, wheat is divided into three grades based on criteria such as weight, purity, and the maximum percentage of damaged and foreign materials in it. Grade one wheat contains up to three per cent of such materials, grade two up to six per cent, and grade three up to 12 per cent. The latter is used for animal feed.

Russian wheat is classified into five grades and not three. The country prohibits the sale of first and second grade wheat, allocating this for domestic consumption. It exports the third and fourth grades, while the fifth is considered to be good only for animal feed. This contrasts with the Egyptian policy set out by former minister Khaled Hanafi who wanted to export first grade Egyptian wheat and import second-grade wheat from abroad.

Russia’s failures on Egypt

Egypt began importing Russian wheat in 2005 in order to diversify its sources and reduce reliance on US wheat. This was one of the reasons behind the deterioration in the relationship between the two countries up until the 25 January Revolution when the US backed the change of regime. The change in policy at that time was led by the then minister, Rashid Mohamed Rashid, immediately after the integration of the General Authority for Supply Commodities into the Ministry of Trade and Industry.

Prior to this date, no Arab country imported Russian wheat in significant quantities. But after it, Yemen, Algeria and Morocco, on the list of the top 10 wheat importers worldwide, started to import Russian wheat, and they were soon joined by the United Arab Emirates, Kuwait, Saudi Arabia and Iraq, three countries well known for being allied to the US. The low prices of Russian wheat compared to other sources and Egypt’s example encouraged others to follow suit.

African countries have begun to import Russian wheat because Egypt is a leading country on the African continent. Russia should have recognised the contribution Egypt has been making to the Russian economy, because without Egypt’s example the Arab and African countries would have continued to import US, Canadian and Australian wheat instead of Russian wheat.

Egypt imports 11 million tons of its total imports of wheat per year at a price of $200 per ton, meaning that Egypt pays Russia $2.2 billion a year for wheat alone. Egypt also imports yellow maize and edible oils from Russia and Ukraine. Last year, the country imported 8.5 million tons of maize from Russia, in addition to its imports of soy and sunflower oils, which means that Egypt pays Russia at least another $2 billion a year for these goods, making Egypt’s volume of trade with Russia worth about $5 billion a year.

Russia would lose a lot if Egypt decided to diversify its sources of wheat, maize, edible oils and fish, as it did earlier with US imports. This should have made Russia keener on trade with Egypt, as the balance is in Russia’s favour.

However, the opposite has been the case. When Egypt decided to import ergot-free wheat last summer, Russia rejected the decision and stopped importing vegetables and fruit from Egypt, trade worth some $250 million a year. Egypt’s reaction to this decision should have been stronger, but unfortunately under the pressure of importers and other beneficiaries the minister of supply, lacking the necessary knowledge of global trade, approached the prime minister who permitted imports of wheat infected with the ergot fungus from Russia to continue.

CLARIFICATIONS: In order to clarify the extent of global competition for Egypt’s markets, it might be useful to give some examples that might be of benefit to Egyptian officials when taking decisions regarding trade with other countries.

In 2005, I was an advisor to the minister of supply at the General Authority for Supply at the time the imports of the Russian wheat started. The agriculture attaché at the US Ebassy in Cairo used to attend the tenders for wheat imports from Russia, protesting against the import of Russian wheat instead of wheat from the US. He reminded those present of the aid given by the US to Egypt, while Russia does not offer anything, and he said that Egypt should import wheat from the US as a mark of gratitude if nothing else.

This is not the only example of Egypt’s weight in trade negotiations. A representative of British agriculture came to Egypt periodically at around the same time and organised trade meetings at hotels, paying the cost of luxury accommodation and vaunting the benefits of British wheat. Britain offered to build storage silos for its wheat in Egypt if Egypt would buy British wheat, the amount coming to around four or five million tons a year.

Similarly, Australian, Argentinian and Canadian diplomats were also worried by Egypt’s withdrawal from their wheat markets. Yet, Egypt fell under Russian pressure and continued to import ergot-infected Russian wheat despite the Russian measures taken against Egypt after the downing of the Russian plane over Sinai in 2015. Russian flights were halted, drying up the supply of Russian tourists to Egypt.

Russia’s failures on Egypt

But terrorism does not only affect Egypt, It happens in the UK, the US, Germany and even Russia. No one can forget the terrorist attack on the parliament building in Chechnya 20 years ago and its storming by Russian troops. Egypt like the rest of the world maintained the same level of relations with Russia despite that incident. It also kept the same level of relations with France after the incident of the Egyptian plane stopping for transit in Paris and later crashing into the Mediterranean Sea. There were no accusations against France for lacking proper security procedures at its airports.

Was the cause of the terrorist attack in London earlier this month negligence by Scotland Yard? Will terrorist acts really come to an end as a result of measures taken by Russia against Egypt?

It is well known that Russian tourists look for cheap destinations, and when they visit Egypt they are fully aware it is suitable for low-spend tourism. But the concern here is not tourism particularly, but Egypt’s relationship with a notionally friendly state, which yet insists on undermining the reputation of our airports and does not seem to be enthusiastic about maintaining a constant trading relationship. Russia seems to have forgotten how eager other countries, including Australia, the US, Canada, Argentina, Romania and Ireland, have been to access Egyptian markets.

Trade with these suppliers would eliminate the Russian intransigence and Russia’s unjustified reluctance to repeal the suspension of imports from Egypt. It would end its insistence on unnecessary inspections of vegetable and fruit farms in Egypt. Russia is refusing to apply the principle of reciprocity. Perhaps the late president Anwar A-Sadat was right when he said that Russian policy was unfair and arrogant.

When the Russian ambassador in Ankara was killed, Russia did not consider this to be a terrorist act, nor has it accused Turkey of negligence in protecting diplomatic personnel or intelligence failures. When the Western embargo on Russia was implemented as a result of its actions in Ukraine, Egypt did not follow suit, and it even offered to export the potatoes, citrus fruit, vegetables and other items Russia needed as an alternative to European exports. Russia does not seem to remember Turkey’s position against Russia in the Syrian conflict, and it does not seem to remember Egypt’s prevention of militants travelling to Syria to support groups fighting the regime in that country.

In commercial relations having to do with the trade in food Egypt should lead and Russia should follow, and it should take into consideration the interests of the Egyptian people just as Egypt takes into account the interests of the Russian people. If Russia does not improve its relations with Egypt, Egypt will not be able to achieve satisfactory relations with Russia either.

The writer is a professor at the Faculty of Agriculture at Cairo University.

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