Egypt and Italy .. What did the Regeni crisis do to the future of economic relations between the two countries?

The past few days witnessed a state of escalation from Italy regarding the killing of its citizen Giulio Regeni in Egypt.

Italy has even succeeded in escalating the crisis at the European Union level.

This led to the issuance of a decision by the European Parliament to demand that Egypt fully cooperate with the judicial authorities in Italy, in addition to demanding that Egypt release some Egyptian citizens detained on political issues, and improve their human rights conditions in general.

To face the Italian and European wave of escalation, Egypt did not find anything other than opening a file for a former Italian diplomat accused of smuggling Egyptian antiquities, while Egypt was expected to threaten to use common economic interests with Italy, on top of which are the natural gas investment files for the "ENI" company in Egypt.

Why did not Egypt resort to using this paper?

What is the future of the Egyptian-Italian economic relations in light of the escalation of the Regeni murder file?

Economic relations

Egypt represents the weakest side in economic relations with Italy, whether in terms of trade exchange, receiving investments, or cooperation through the Debt Swap Program for Development.

According to the data related to trade exchange between the two countries, the value of this exchange reached $ 7.2 billion at the end of 2018. Egypt is one of the developing countries, whose trade balance suffers from a chronic deficit, so trade exchange between the two countries remains in the interest of Italy.

In that year, Egyptian exports to Italy reached $ 1.3 billion, while Egypt's imports from Italy reached $ 5.9 billion.

In the first half of 2020, trade exchange between the two countries reached $ 1.8 billion, of which $ 1.19 billion was imports to Egypt from Italy, while Egyptian exports to Italy reached $ 636 million.

As for investments, Italy ranks 11th among the countries investing in Egypt, and there are about 1204 Italian companies there, with investments amounting to about $ 4 billion, excluding Zohr field investments.

The Italian companies operate in a wide variety of fields, including financial services, building materials, and petrochemicals.

Italy is also one of the important countries whose members flock to tourism in Egypt, with about one million tourists annually.

Egypt is benefiting from an Italian aid program, within the framework of debt swap for development, which includes 3 agreements between the two countries, worth 350 million euros, whereby the interest on debts to be paid from Egypt to Italy is transferred to projects that serve development in Egypt.

Indeed, a number of projects have been initiated according to these agreements, including solid waste management in Minya Governorate, and the establishment of 10 silos for storing grain, in addition to other projects related to the education and transportation sectors.

The escalation in the file of the killing of the Italian citizen Regeni comes in light of an unfavorable economic environment at the global level due to the Corona pandemic (Reuters)

Exclude gas paper

The Egyptian government did not resort to brandishing the natural gas file paper for the Italian company Eni, which is in more than one investment, such as the Zohr field, which is the most famous of these investments, in addition to its presence in the largest natural gas liquefaction plant in Damietta.

It is unlikely that Egypt would brandish the Italian company Eni’s investment paper in the field of natural gas in Egypt, as a pressure card on Italy to close the file of Regeni's death, or his death - meaning that it remains open in the long term without reaching a decisive result - otherwise Egypt will find itself facing many partners, or Disrupted projects that are in dire need of them.

Egypt also does not have the financial resources that would make it seek to close or disrupt Italian projects there.

For example, with regard to the natural gas liquefaction plant in Damietta, in which Eni owns 40% of the capital of the project, there are other partners such as Spain, which also owns 40% of the capital of this project.

As for the Zohr field - in which Eni owns 40% - it seems to have prepared for this day, as it sold 30% of its ownership in the field to the Russian "Rosneft" company, and 10% to the British Gas Company.

And it didn't stop there.

Rather, the Russian company sold 10% of its stake to the State of Qatar, and another 10% to the Emirates.

Consequently, there are many parties who have become partners in the ownership of the Zohr field with Egypt, and any attempt to influence Italy alone without the rest of the partners will be weak, or to be more precise, not included.

Due to the weakness of the Egyptian position, especially since Egypt considers the Zohr field an important resource to support its needs of natural gas and foreign exchange alike.

Eni is not the only company concerned with the important participation of Egypt in the field of natural gas. Egypt signed an important contract with the Italian company, TECHNIP, to raise the refining capacity of the Midor plant in Alexandria at a cost of $ 1.5 billion. It is difficult for Egypt to try to exit such These binding contracts, which usually include penal clauses, cannot be tolerated by Egypt in light of its difficult financial circumstances.

The well-known rule in international contracts is that “contracts are formulated in favor of the strongest.” There is an important observation about Egypt's performance in trade and economic agreements that it usually has a weak position, which is what we saw in the contracts of privatizing public business sector companies during the Mubarak era.

These contracts have brought great financial threats to Egypt, in light of the arbitration cases that have been filed against the Egyptian government abroad to request compensation, after the issuance of Egyptian court rulings nullifying the privatization contracts, and so did the Zionist entity requesting compensation, in relation to stopping the supply of Egyptian gas to it after the January 25 revolution. / January 2011.

Egypt did not resort to brandishing the natural gas file paper for the Italian company Eni, which has more than one investment (Reuters)

Future shaping

The escalation in the file of the killing of the Italian citizen Regeni comes in light of an unfavorable economic environment at the global level due to the Corona pandemic.

Moreover, the economic conditions in Egypt will not help Cairo escalate to reduce or limit its economic and trade relations with Italy.

Egypt does not have a strong position on the level of trade exchange with Italy.

It also does not have the ability to adopt a negative attitude towards Italian investments in Egypt, as it seeks to attract foreign direct investments.

To help her in her financial and development crisis.

As for the trade exchange between the two countries, it is in the interest of Italy.

Some may argue that Egypt has $ 5.9 billion in imports with Italy, and that it can pressure Italy through this path;

But the other side of the equation is that Egypt has exports of about $ 1.3 billion to Italy, and it cannot dispense with this share, especially since its total exports to the world are weak, and do not exceed $ 28 billion, including oil exports.

Any step that Egypt takes towards Italian investments in the country will have a negative impact on foreign investments in the country, especially since Italy has changed the nature of its crisis with Egypt and made the European Union the party facing Cairo.

It is known that the European Union is the first commercial and economic partner of Egypt, and any escalation will not have valid consequences for the country, in light of the continued use of the collective decision-making mechanism through the European Union institutions to manage the crisis with Egypt.