The Suez Canal is of particular importance to the Egyptian economy as one of the most important sources of foreign exchange, in addition to its distinction that its customers are more keen on continuing its work as much as the Egyptian authorities are keen on continuing its work, which was evident in the US administration’s contact during the post-January 25 revolution period. 2011 in the military council running the country at the time to confirm the need for continued navigation in the canal, and to offer assistance in securing the navigational course in the event that the Egyptian authorities were unable to do so.
The result is that while the events of the Egyptian revolution in 2011 affected the country’s resources, from tourism, direct foreign investment, portfolio investment, and export, navigation in the Suez Canal remained at its normal rates, with army forces strengthening their presence along the course of the canal to ensure the safety of transit ships.
During the last three decades, the Suez Canal occupied a privileged position on the map of foreign exchange resources, as it remained the third resource in terms of value, after remittances from Egyptians abroad and commodity exports in the early nineties of the last century.
This is not new. When navigation in the Suez Canal was disrupted with the June 1967 war for 8 years, several countries rushed to participate in operations to clear the shipping lane of mines, projectiles, ships and sunken dredgers, including aircraft and naval vessels from the United States, England and France, until navigation resumed again. On June 5, 1975, that is, less than two years after the end of the October 1973 war.
The sending of the Shah of Iran, his son, the Crown Prince, to attend the inauguration ceremony of the return of navigation in the canal was an indication of the extent to which the canal benefited Iranian oil exports destined for Europe, given the international importance of the canal to link Asia with both Europe and North America, and for this reason the leaders of several countries were keen in 1888 to Conclusion of the Treaty of Constantinople, which stipulates that the canal shall always be free and open, whether in time of war or peace, for every commercial or warship without distinction of its nationality.
The canal is a global corridor on Egyptian soil
The names of the signatories to the treaty that still govern the canal's navigation until now indicate how important it was to them: the Queen of England, the Emperor of Germany, the Emperor of Austria, the King of Spain, the President of France, the King of Italy, the King of the Netherlands, the Duke of Luxembourg, the Emperor of all the Russians, and the Emperor of the Ottomans.
And since the depth of the navigational stream before the 1967 war was no longer suitable for the development of oil tankers that increased in size and their need for greater depths during the eight years of closing the canal, Japan contributed its companies and financing to the operations of deepening the navigational stream after the opening to match the sizes of ships, and contributed to financing that. Development Saudi Arabia, the UAE, Kuwait and Qatar are countries benefiting from development to export their oil.
There are many geographical regions benefiting from the canal to include the eastern and southeastern Mediterranean, the northern Mediterranean, western and southern Mediterranean, northern and western Europe, the Black Sea countries, the Baltic Sea countries and the United States of America, and in the south the countries of East Africa, the countries of the Red Sea, the Arabian Gulf, East Asia, Southeast Asia and the East Far and Australia.
Another witness is that the news of the disruption of any ship’s transit of the channel for any reason topped news bulletins around the world, which appeared with the breakdown of the “Evergiven” ship in 2021, when the United States offered its services to move the stranded ship, and efforts to move the ship remained at the forefront of global news, and the subsequent A follow-up to the crossing of ships whose passage was disrupted due to the delinquency of Evergreen, but rather a follow-up to the same ship's crossing of the canal after a period of time.
During the last three decades, the Suez Canal occupied a distinguished position on the map of foreign exchange resources, as it remained the third resource in terms of value, after remittances from Egyptians abroad and merchandise exports in the early nineties of the last century, until it occupied the second place after remittances from workers in the fiscal year 1993/1994. Then, its position declined to between the fifth and the sixth throughout the rest of the nineties and throughout the first and second decade of the new millennium, with the increase in the value of tourism revenues and oil exports.
The revenues of the Suez Canal have always been one of the most important resources of the Egyptian budget, as it has been sharing with the Petroleum Authority the highest surpluses achieved by economic bodies.
The benefit of the channel from the Russian-Ukrainian war
During the last fiscal year 2021/2022, the canal’s resources ranked seventh among foreign exchange resources after external loans, expatriate remittances, non-oil exports, oil and natural gas exports, tourism and foreign direct investment with a value of $7 billion, or 4.3% of the total resources amounting to $162.6 billion. Its relative share of foreign exchange resources during the nineties ranged from 8 to 11%.
And if some sectors of the Egyptian economy were affected by the repercussions of the Russian-Ukrainian war, such as tourism, the Suez Canal clearly benefited from that war, as the European ban on Russian energy caused it to search for alternatives, some of which were in the Arab Gulf states and Asian countries, as well as Russia’s search for Alternative markets for its oil and liquefied natural gas.
This matter enhanced the passage of oil and natural gas tankers through the canal, whether from the Gulf and South Asia to Europe or from Russia to India and other Asian markets. It also caused an increase in the price of oil, which averaged about $100 during the year of the Russian war, which increases the cost of sailing. Ships coming from Asia heading to Europe or North America, or returning from Europe heading towards Asia if they take the Cape of Good Hope route.
This enabled the canal to raise its transit fees more than once in 2022 and reduce the rates of reduction that it granted to some types of ships to encourage them to pass through the canal. The amount of loads of goods is also unprecedented.
Ambiguity about the direction of the channel surpluses for the budget
The increase in the channel’s revenues came as a rescue collar for the Egyptian administration in light of an acute crisis of foreign currency shortage after an intense exit of hot money. Likewise, on the moral side, the existence of a facility that achieves success in light of a severe crisis for the productive sectors, and confusion in the economic and popular scene as a result of high prices, which necessitated a new agreement with the Fund. International criticism.
The revenues of the Suez Canal have always been one of the most important resources of the Egyptian budget, as it has been sharing with the Petroleum Authority the highest surpluses achieved by economic bodies, but the Canal Authority has taken the lead in recent years, along with the taxes it pays at a rate of about 40% of its profits.
According to the latest final data published in the fiscal year 2020/2021, the Suez Canal Authority paid taxes amounting to 28.7 billion pounds, compared to 31 billion pounds in the previous fiscal year.
Its net profit, which accrues to the Ministry of Finance, amounted to 47 billion pounds, compared to 44.8 billion pounds in the previous fiscal year, but the Egyptian ruler stated at the economic conference held last October that he directed the head of the canal to establish a fund for the canal from the proceeds of its surpluses, directing its proceeds to the development of the canal. .
This raises questions about the extent to which the Ministry of Finance - that is, the Egyptian budget - will continue to obtain the surpluses of the Canal, especially with what the Egyptian ruler mentioned that the proceeds of the Suez Canal Fund amounted to 70 billion pounds, meaning that it had already been established before an official law was issued to establish it.
And with the presentation of the law establishing that fund to Parliament last December, it was opposed by a number of supporters of the regime before the opponents, which prompted the ruling regime to wait to issue it, as Parliament’s approval of it was only preliminary and then it was not issued. legislation done so far.
Fears of forfeiting the channel to treat the dollar gap
The establishment of the fund is a deprivation of the public budget from a major resource, which is the budget that suffers from a chronic deficit that pushes it to continue internal and external borrowing. It is also considered a violation of the principle of budget unity and the necessity of subjugating all government agencies, including funds and agencies, to be under the mantle of the state’s general budget.
What was recently published on social media, which was called the concession contract for the management of canal facilities for a period of 99 years, shocked the Egyptians, and therefore the Canal Authority hastened to issue a statement that the contract was not valid, but the matter did not end with the Authority’s denial of the contract, as opponents of the ruling regime continued to express their fears that The leakage of that contract would have been done by the regime itself as a test balloon, so that a similar agreement would be implemented with a Gulf country instead of contracting with an Israeli company, and for a period of time less than what was mentioned in the contract.
Their fears are reinforced by what they considered a negligence on the part of the ruling regime in the maritime borders in the Mediterranean Sea for Egypt, in the interest of Cyprus, Greece and Israel, which caused Egypt to lose huge quantities of natural gas that were present in those lands, as well as what they considered a negligence in the islands of Tiran and Sanafir to allow Israel freedom of movement in the Gulf of Aqaba, and also What they say about the regime's concession of Egypt's rights in the Nile waters to Ethiopia, in exchange for Ethiopia's assistance in ending Egypt's suspension of membership in the African Union.
And later, the Egyptian companies neglected in favor of Gulf sovereign funds, according to their opinion, to cover the external debt of the countries of those funds, and for this reason they believe that the problem of the current shortage of dollar resources may be a reason for accepting that agreement regarding the canal, and therefore their concerns have not ended and they give themselves 6 months to judge the extent of The validity of the concession contract for the management of the Suez Canal, which is the period during which it is decided - according to the alleged contract - to erect a wall along the course of the canal in Sinai, and that the Egyptians will not enter that area except with the approval of the company that owns the concession, and they believe that the commencement of building that wall will be confirmation of the validity of the contract .