Gaza war presents Egypt with daunting challenges, some with long-term impact

Not by design, Egypt could benefit from the crisis, with donors showing empathy for the nation's economic vulnerability

A displaced Palestinian boy stands on the Gaza border with Egypt. The Israeli war in Gaza is reshaping Cairo's relationship with powers across the Middle East and North Africa. Reuters

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Israel's war in Gaza has brought significant challenges to Egypt, the most populous Arab nation already facing economic difficulties, as it unfolds on its border.

Some of these challenges, analysts told The National, would bedevil Egypt long after the guns in Gaza fall silent, reshaping its regional policies and redefining relations with other Middle East countries.

“In its entirety, the situation is not in Egypt’s favour,” said a senior Egyptian diplomat.

One example, he said, is the attacks by Yemen’s Iran-backed Houthi rebels on Red Sea shipping, which cut Egypt’s revenue from the Suez Canal in January by half compared to last year.

“It’s possibly the worst direct result of the war for Egypt and that’s not just because of the slump in revenue from the canal,” said the diplomat.

“The attacks have created a new situation in the Red Sea that could repeat in the future.”

Another example of the impact of the war on Egypt is that it has shown Cairo to be in command of few or no means of influencing Israel, its partner in a 1979 peace treaty that is widely seen as a cornerstone of regional stability.

Egypt has successfully mediated truces to end wars between Israel and Hamas, the militant group that has ruled Gaza since 2007. It was part of a mediation effort that included Qatar and the US that produced a week-long truce and a detainee and hostage swap between them in late November.

They have since tried and failed to mediate a similar deal.

The war began with an attack on Israel by Hamas on October 7 that left 1,200 dead and another 240 taken hostage.

Israel's response was a bombardment of Gaza that has to date killed nearly 29,000 people, displaced 85 per cent of the enclave's 2.3 million people and laid waste to many built-up areas.

“The Gaza war has shown the weakness of the cards held by Egypt … moreover, our economic situation leaves us with limited options and that, one way or another, determines our policies,” the diplomat said.

Egypt is the first Arab nation to sign a peace treaty with Israel. Relations between the neighbours have been lukewarm for the better part of the 44 years since the US-sponsored treaty was signed.

They have been fraught with tension since the Gaza war broke out, with Cairo recently warning that it would suspend the treaty if Israel began a ground offensive in Rafah, Gaza’s southernmost city on the Egyptian border.

An Israeli offensive there, Egypt contends, would send many of the more than one million displaced Palestinians in Rafah across the border into Egypt, a scenario Cairo believes would hurt the Palestinian cause and add one more hurdle to any future peace negotiations as Israel would not allow their return.

Wary of combat operations on its border with Gaza and Israel, Egypt has in recent weeks strengthened its forces there, and increased reconnaissance flights and ground patrols.

On Sunday, the Defence Ministry declassified documents on its military operations against Israel in 1973 – the last of the four full-fledged wars the two countries have fought since 1948.

“The purpose of their declassification is to show that Egypt’s military is able to efficiently lay down and execute combat missions at any time and regardless of the circumstances,” said a security source.

Significantly, Egypt shares with Gaza the latter’s only link to the outside world that’s not controlled by Israel – the Rafah border crossing in Sinai – which has placed on Cairo’s shoulders the moral responsibility to ensure that sufficient aid reaches Palestinians facing hunger, disease and lack of services in Gaza.

In the four months since the war began, Egypt had to defend itself against charges by Israel that it was delaying the delivery of aid to Gaza and a more recent assertion by US President Joe Biden that he had to persuade his Egyptian counterpart Abdel Fattah El Sisi to open the Rafah crossing to allow relief aid through to Gaza.

Egyptian officials said the charges were baseless, while pro-government media portrayed them as part of a scheme to undermine Egypt and tarnish its image.

Equally, or perhaps more damaging, are recent media reports, supported by satellite photos, that claim Egypt could be covertly preparing an area adjacent to the border to receive a possible influx of Palestinians fleeing Gaza to escape Israeli bombardment.

What makes this claim so sensitive is that Egypt has campaigned since the war began against forcing Gazans to flee into Sinai, saying resettling Palestinians in its territory, even if temporarily, would harm national security and make it a party to the “liquidation” of the Palestinian cause it has long championed.

To avert this scenario, Egypt, like the US and others, have warned Israel against launching a ground offensive on Rafah, saying that will amount to a massacre because the city is packed with displaced Palestinians.

Israel is determined to attack Rafah. Not to do so, it says, would deny it a war goal.

Egyptian Foreign Minister Sameh Shoukry, speaking at the Munich Security Conference on Saturday, did not dismiss the reports of construction under way.

“It is not our intention to provide any safe areas or facilities, but necessarily if this was a case we will deal with the humanity that is necessary,” he said.

On a different level, Egypt may benefit – but not by design – from the Gaza war whose impact on Egypt has prompted major donors to realise that something must be done to avert an economic meltdown.

Already, the International Monetary Fund says it is negotiating an extension of a $3 billion loan it agreed with Cairo in 2022 to help Egypt survive the crisis but which has been derailed because of Egypt’s reluctance to implement agreed economic reforms.

The EU is also preparing a multibillion-dollar rescue package for Egypt.

The depth of Egypt’s crisis is demonstrated by an acute and persistent foreign currency crunch, a free-falling currency, high inflation and the heavy burden of servicing a foreign debt that stands at about $160 billion. Key food items, such as sugar, rice and milk, are either in short supply or their prices have skyrocketed.

“The Gaza war has in many ways eclipsed the economic crisis but did not make people completely forget about it,” said Middle East expert Michael Hanna of the International Crisis Group. “It did overshadow the crisis but that can only go so far. There’s an opportunity for Egypt that’s rooted in its current vulnerability.

“The war has created a new dynamic in its favour and there’s a great deal of appreciation for Egypt’s vulnerability in the IMF, Washington and the EU.”

The war has also significantly raised Mr El Sisi’s international standing, with scores of world leaders and senior western officials travelling to Cairo since October to discuss the conflict with him and lend support to Egypt’s aid efforts for the enclave’s residents.

Mr El Sisi, said Ammar Ali Hassan, a prominent Egyptian sociologist and author, has handled the crisis with a steady pair of hands, especially relations with Israel.

“The war has brought world leaders to Cairo. They’ve indirectly propped up the government at a time when millions are struggling because of the economy. They have also become reliant on Egypt to deliver aid to the Palestinians in Gaza,” he said.

Mr El Sisi’s criticism of Israel, speaking against the expulsion of Palestinians, and the perception that Egypt is being punished economically by the West for its pro-Palestinian stand have made many Egyptians rally behind the former general at a time of growing popular discontent over the economy, he said.

He has, meanwhile, effortlessly won a third term in office in December elections overshadowed by the Gaza war.

The vote was held after an independent presidential hopeful and an outspoken critic of the president was unable to collect the support of at least 25,000 voters required by law to make him eligible to run.

The hopeful, Ahmed Tantawy, claimed that a campaign of intimidation orchestrated by authorities denied him the chance to run against Mr El Sisi.

The president was left to run against three little-known politicians whom he defeated easily, winning another six years in office by a landslide.

This month, a Cairo court handed Tantawy a suspended one-year sentence for forging election forms and banned him from running for public office for five years.

“The international community is talking about Egypt differently now, with hardly any mention of democracy or human rights,” said Mr Hanna of the ICG.

“There was no comment on the elections or the absence of an independent candidate [Tantawy] who could have posed a serious challenge.”