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Egypt’s Gas Curse

“Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil!”

So said the former Israeli Prime Minister Golda Meir in reference to the Biblical Book of Exodus and the modern Israeli states’ relative paucity of natural energy resources. Indeed one of the justifications Israel had for remaining in the Egyptian Sinai Peninsula for so long (1967-82) was due to the fact oil from that region fulfilled many of its energy needs.

In more recent years Israel has been “blessed”, so to speak, with natural resources with the discovery of a sizeable offshore gas field. Having long imported gas via pipeline from Egypt (at one stage approximately 40% of Israel’s gas came from Egypt) Egypt at one stage was about to import oil from newly discovered Israeli reserves. That may all be about to change with the recent discovery of what looks to be a very large and substantial gas field (possibly even “the largest gas discovery ever made in Egypt and in the Mediterranean Sea”) in Egyptian coastal waters.

It has already been pointing out that power shortages and other energy-related problems which afflicted Egyptians contributed to the downfall of the two past Egyptian government’s of President’s Mohammad Morsi and Hosni Murbarak. The current regime in Cairo of the military-backed President Abdel Fattah el-Sisi may not have these problems. Indeed they may well perceive this new gas find to be a blessing considering it has promoted itself as a regime which will heal Egypt’s economic-ills and indeed bring prosperity. Sisi has been trying to establish a renewed and reinvigorated “authoritarian bargain” in Egypt – hence investing generously in the public and state sectors in return for the peoples acquiescence to his despotic form of governance. However Egypt has been quite a poor country and in recent years has been plagued by economic difficulties, terrorist threats and political instability.

That may all be about to change given this recent discovery. It’s exactly what Sisi needs. Fuel for a machine he is struggling to get up-and-running. Since coming to power as a result of a military coup Sisi’s regime has relied partially on handouts from the Arab monarchies of the Persian Gulf (who have a vested interest in keeping the Muslim Brotherhood forcibly subdued) to keep the Egyptian economy from foundering. Since the revolution of January 2011 it has suffered a multitude of setbacks. Since coming to power Sisi has planned to change that and indeed has very lofty goals for Egypt, from the building of one-million apartments to an entire new capital city in the desert, from scratch. He recently heralded a new and expanded Suez Canal (now it’s a two-way shipping system) which cost an estimated $8.2 billion. One of many such planned mega-projects. Projects which cost a fair amount for a country with a troubled economy like Egypt. Add the exorbitant multi-billion euro arms deal he recently negotiated with France to that equation and you get an idea of the vast sums required to fund Sisi’s brave new Egypt.

Now that he has natural gas his Egypt potentially has a new source of revenue. Initial projections indicate that this find is a big deal. However it may not prove to be the solution to Egypt’s economic woes. It may well prove to have an enabling effect on Egypt’s increased authoritarianism under Sisi’s military-backed regime. The ‘resource-curse’ (also known as the ‘paradox of plenty’) theory reasons that countries with plenty of natural nonrenewable resources such as oil and gas tend to have less actual development. Usually such resource serve to empower regimes which become oppressive or otherwise stymie other productive industries. It’s no surprise that Egypt’s resource rich Arab patrons in the Persian Gulf are singled out for their utter lack of economic diversification. In other words this find may well be a blessing in the short-term and a curse in the long-term.

While this gas may give Egypt the economic windfall it so dearly needs it may well in the long-term prove to be a curse. Yes it will get the factories up and running again and keep the country afloat economically. But given the authoritarian political order in Egypt one fears that it will serve to solidify the despotic status quo which has prevailed despite the democratic aspirations and goals of many Egyptians who took to the streets less than five-years ago to demand more representation in their government.