Total crisis in Egypt

Once more Egypt is on the brink of a major turning point.  Three years after Abdel Fatah al-Sisi came to power, his regime is being engulfed by crisis at every level.

Sisi came to power in Egypt after millions of people took to the streets to protest over declining living standards and the rising instability and increasingly authoritarian nature of the Muslim Brotherhood government of Mohamed Morsi. He came to power promising political stability and the raising of living standards. But far from solving anything, Egypt under Sisi has entered its deepest crisis in decades.

Scratches on the surface

Sisi’s facade as the strong and intelligent military commander has been shattered time and time again as he has hopelessly failed to tackle even the most simple of problems. His violent crackdowns on protests to quash the revolutionary mood has only managed to embitter the masses even more. The random torture, arrest and disappearance of thousands of young people on the pretext of fighting the Muslim Brotherhood has in fact partially served to give a new lease of life to the Islamist organisation.

In the Sinai Peninsula a few hundred Islamists connected to ISIS and with next to no popular support, have been spreading terror and killing scores of civilians and armed personnel. The mighty Egyptian army has pathetically failed to do anything about it. In fact the army is killing more civilians than terrorists with its indiscriminate bombing. This is a completely counterproductive tactic which has only lead to more anger towards the army.

Together, with the rise of ISIS and Islamic fundamentalist groups in Libya, this insurgency is becoming a seriously destabilising factor in Egypt. The illusion that a powerful army could guarantee the safety of the people and act as a stabilising force has been totally undermined and it is clear that the generals are now worried about the morale within the army itself.

Two left-feet

With regards to foreign policy Sisi has not been any more lucky. The relationship with its long-time US ally had been weakened due to Barack Obama’s heavy criticism over Sisi coming to power. However, Saudi Arabia and other Gulf states filled in the vacuum left by the US by stepping in with $31 billion worth of aid in the past 3 years. This was the key to initially stabilising the Sisi regime. When it came to paying back the Saudis, however, Sisi could not offer much. First he had to hastily draw back from early promises of support for the kingdom over their war in Yemen. Besides regarding the Houthis as a good buffer against Al-Qaeda and other Islamic Fundamentalist organisations, the Egyptian ruling elite knew that the unwinnable conflict in Yemen - where Egypt has already lost one costly war in modern times - would only lead to further instability. The Egyptian masses have no appetite to send their children to fight and die on behalf of the hated Saudi monarchy.

Then, in April, during a visit by Saudi King Salman, Sisi made the surprise announcement of handing over the Red Sea islands of Tiran and Sanafir to Saudi Arabia. This humiliating act of submission to the Al-Saud family caused huge uproar throughout Egypt. Small protests mushroomed all over the country leading to hundreds of arrests and a war of words began between Egyptian and Saudi journalists and TV presenters. In the end, sensing rising tensions, the ruling class had to retreat and a court reversed the decision. Needless to say King Salman was not pleased. The authority of the regime suffered a blow by this affair which also revealed serious fissures within the ruling class.

The Saudi-Egyptian crisis has since then further escalated. The final straw came over the summer as Egypt began a process of rapprochement with Russia. Seeing the relative decline in the role of the US in the region and the rise of Russia, the Sisi regime wants to use the renewed US-Russian conflict to its advantage by using Russia as a means of getting more concessions from the US. Hence the Egyptian navy held its first naval exercise ever with the Russian navy in September followed by other exercises in October. The Egyptian regime has also made several arms purchases from Russia as well as having discussed a possible joint strategy in Libya. All of this was topped by Egypt voting with Russia and against the Saudi/French proposals in the October UN security council meeting which discussed the situation in Aleppo, Syria.

As explained above, the war in Syria and the rise of ISIS and Islamic fundamentalist groups pose a concrete threat to stability in Egypt and the generals are eager to end the crisis as soon as possible. This puts them at odds with a Saudi regime which backs several Islamist proxies in Syria, one of which is ISIS itself. For the Saudis, defeat in Syria poses a serious threat to the future of the kingdom itself. The Saudis demand full loyalty as a minimum return for their financial aid but for Sisi the requests of the al-Saud’s could have explosive domestic consequences. The Egyptian “betrayal” at the UN led Saudi Arabia, suddenly and without giving an official reason, to stop the vital supply of refined oil - a part of a $23 billion aid package - to Egypt in October.

A perfect storm

The economic shockwave coming from the sudden Saudi aid cut will have a devastating effect on the crisis-ridden Egyptian economy. This in turn will significantly deepen the general crisis of the regime. The decline in the world economy along with Egypt's political instability has driven its economy into a black hole. It was only kept floating just above the surface by the billions of Gulf dollars pouring in each year.

In 2015, investments were half ($14.5 billion) of their 2008 level ($28.5 billion). Foreign investments have collapsed from $13.5 billion to $6.5 billion in the same period. Due to the crisis, it is estimated that the state will be about $15 billion short of funds each year in the coming years. During the 2011-15 period, Egypt has seen an average yearly budget deficit of nearly 12 percent of GDP. In 2015 the public debt reached over 88 percent of GDP, and is projected to reach 94 percent this year.

The government has tried to establish many spectacular projects to find a way out of the crisis. An $8.2 billion dollar expansion of the Suez canal was supposed to double annual revenue from the canal to $13.2 billion a year, but in the context of declining world trade this is impossible. After blocking public canal revenue reports for a period, the August and September reports showed a 10% decrease (!) in canal revenue. Hence the bill for the expansion will be added to the debt of the near bankrupt state. This failure doesn't hold the government back from starting the pharaonic project of building a new Capital city outside of Cairo, the first phase of which will cost over $45 billion. Rest assured the workers and the poor of Cairo will not be the main beneficiaries of the new developments.

Declining living standards

The situation of the masses is deteriorating very fast. Official inflation has been floating at 15 percent this year, but will rise higher after the recent devaluation of the currency. Official unemployment levels remains around 13 percent, up from 11 percent in 2011, however just like then the real figure now is certainly higher. Just to remain at these levels, the economy must grow by 5-6 percent per year, yet since the 2011 revolution yearly growth has been just 2 percent, with the exception of 4 percent growth in 2015. Official poverty rates have also been steadily rising up to 27.8 percent in 2015 - the highest rate in 15 years and 2.5 percent higher than in 2010/2011. This year poverty is expected to grow at a far higher rate.

A new IMF “aid” package - with many strings attached - worth more than $12 billion is only worsening the conditions. The IMF is pushing for massive liberalisation and the cutting of the few benefits the Egyptian masses had. In August, electricity prices were raised by 20-40% under a five-year programme that will see power subsidies gradually eliminated. Petrol subsidies are next on the line.

A civil service “reform” will also attack the conditions of the six million people employed by the state and the 20 million who are dependent on public service employment as a source of income. Sisi was the man of the state apparatus with its armed forces of men and the army of bureaucrats, representing  all those who felt robbed of their power by the revolution and who felt threatened by a Muslim Brotherhood government which wanted to take its own part of this gigantic network of patronage. It is amongst these layers that Sisi’s strongest support is found and a consistent pressure to reduce its size and impose austerity will leave a serious mark on the regime. The debate about these “reforms” in parliament has revealed serious divisions within the regime. While a layer is pushing for liberalisation and attacks on living standards, another layer understands that these attacks could lead to a severe backlash. Yet within the confines of Egyptian capitalism, there is no other solution.

Already the regime has tried to sustain stability by spending vast foreign currency reserves to keep the Egyptian pound artificially high in relation to the dollar. In the context of a decline in the real economy the costs needed to keep the pound up have become even bigger, leading to an acute foreign currency crisis. By the end of October sugar started running out. While the authorities blamed mismanagement, it is clear that the sugar crisis was linked to the low dollar reserves. Sugar prices rose 100 percent. The fear of a spreading crisis led to rising prices on staple commodities while many less crucial products disappeared altogether from the shelves. This was clearly unsustainable. Pushed by the IMF the government had to let the currency float freely on the markets on 3rd November. This immediately resulted in a 50 percent devaluation of the Egyptian pound. Within hours fuel prices shot up 50 percent and other prices are expected to rise.

Anger and desperation

A mood of anger and dissent is now present amongst the masses. In October a 30-year-old taxi driver named Ashraf Mohammed Shaheen, furious at the government and rising prices, set himself on fire in front of an army office in Alexandria. The news spread quickly on social media with hashtags (In Arabic) of #Bouazizi_Egypt, referring to the street vendor whose suicide sparked the Tunisian revolution.

A video of a Tuk Tuk driver spread like wildfire and became the topic of discussions throughout the country. In the video (Which is well worth watching in full below!) the angry driver sums up the situation very sharply:

"How [can] a state that has a parliament, security and military institutions, ministries of interior and foreign affairs, and 20 [other] ministries end up like this? You watch Egypt on television and it's like Vienna; you go out on the street and it's like Somalia. Before the presidential elections, we had enough sugar and we would export rice. What happened? The top echelon spent 25 million pounds to celebrate, while the poor cannot find a kilogram of rice (…) The government keeps saying that Egypt is witnessing a renaissance, and it collects money for valueless national projects while our education is deteriorating like never before,”

When the journalist asks him where he graduated he replies “I’m a graduate of a Tuk Tuk.”

He then goes on:

“How come such large national projects are constructed while we have starving, uneducated human beings whose health is deteriorating. There are three ways for the country to develop, and they are education, health and agriculture. Is this Egypt which gave Britain loans in the past, was the second country in the world to construct railways and whose cash reserves were the biggest in the world? How could we end up like this? Chad, Sudan and Saudi Arabia were part of Egypt, and now a bunch of Gulf countries make fun of us? Those dealers have tricked people under slogans of patriotism, freedom and social justice. Their promises are as far as they could get from democracy and justice. Enough is enough.”

The video was quickly removed from the webpages of Al Hayat and the media outlet even started clamping down on independently uploaded Youtube videos of the interview. In the mass media a barrage of accusations ensued against the Tuk Tuk driver, linking him with the Muslim Brotherhood. But this only enraged people even more with thousands of people coming to the man's defence. One woman uploaded a strong defiant video (See below) saying: “Oh president of the Arab Republic of Egypt, you are scared of us that much? (...) because the guy came out and said 'I want to eat and I want to drink?!'".

Another poor man from the rural Upper Egypt posted a video saying:

“This president is an employee like any other…we are tired…we have lost our breath…you want to leave peacefully leave, if not we will force you. (...) We will go on 11/11 ready to die (...) Our revolution demanded justice, freedom and bread and we've got none of it.”

After years of almost uninterrupted mobilisations and struggles, the revolutionary movement has ebbed and flowed in the past two years. Tired of the lack of change and disoriented by the rise of the Sisi regime, a certain tiredness crept in. Yet the pressures mounting on the living standards are pushing the masses back onto the arena of struggle once more. In the city of Port Said thousands of people took to the streets (See video below) on 18 October to protest against the rise of rent, shouting slogans such as “house us or kill us” and “we want our rights”.

The ruling class is afraid

A whistleblower within the intelligence agency spoke to Middle East Eye about a serious concern amongst the ruling class of an explosive situation developing. The website writes:

“A high-ranking person within al-Mukhabarat al-Amma (General Intelligence Directorate), the country’s top security service, told Middle East Eye that reports sent to the presidency late last month highlighted a sharp decrease in both the popularity of the leadership and public support for the state.


“ ‘An upheaval is feared in places where there is no awareness of the economic efforts the country is making and where basic services are zero,’ he said. He added that dissent, in the form of small angry gatherings, could also suddenly emerge if services promised by the government abruptly ceased.

“ ‘Look, for example, what happened in Port Said last month or at baby formula distribution branches [in August],’ he said.”

“In October, thousands of Port Said residents took to the streets, condemning a sudden rise in housing costs. The previous month, dozens of families gathered in front of state-owned pharmaceutical companies to protest against a shortage of subsidised baby formula. The official suggested that these protesters were driven not by political motives but by the sudden end to benefits they had enjoyed.”

As is often the case, the bourgeoisie, due to their overview on society come to similar conclusions to the Marxists - albeit from a different class angle. An explosive situation is developing amongst the masses which could burst out into a new stage of open struggle against the regime. Sisi came to power by posing as the defender of the revolution. He promised to solve the economic crisis, to bring stability and to represent the masses. But at each turn he has failed miserably. Far from that, he is now leading the most violent onslaught against living standards in modern Egyptian history. At the root of his problems is the crisis of capitalism which is in turn exacerbated by the parasitic nature of the Egyptian ruling class. With the decline of the economy any attempt to keep living standards afloat will lead to higher debt and a bigger backlash in the future. The IMF package promotes a “cold turkey” cure of getting rid of the debt by slashing subsidies and public employment. But this will only hit demand, thereby dragging the market further down and any end to the vicious debt circle further away.

The ruling class is not blind to the consequences of this. The mood of anger and desperation in the population has seriously alarmed the authorities. The Sisi regime is a counter-revolutionary regime, yet due to its weakness it could have only come to power by pretending to represent the revolutionary masses. The tiredness and relative demoralisation amongst the masses gave Sisi a bit more room to manoeuvre. Yet he has never been able to inflict a decisive defeat on the revolutionary masses. In fact Sisi’s first government administration, led by Hazem Al-Beblawi, collapsed under the pressure of a strike wave involving hundreds of thousands of workers. The ruling clique are very keen to crush any mass movements which disrupt the political and economic equilibrium. Yet they have not been strong enough to take such a decisive step. In fact the base of the regime itself has been wavering.

Capitalist Egypt is in a deep crisis. The ruling class is staggering from one disaster to another. It has lost much authority, even amongst its own traditional supporters. Pushed by the attacks on their living standards the masses are being forced to take to the path of struggle again. Yet the main problem remains the lack of a revolutionary leadership to galvanise the movement and lead it to its logical conclusion: the overthrow of the capitalist system.

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