Economy

Egypt's Ever Delicate Relationship With Israel

Egypt's President al-Sisi shares with Israel a common enemy in Hamas, but Egyptians are outraged at the recent attacks in Gaza. Chronicle of a high-stakes diplomatic balancing act.

Netanyahu and Sisi, a complicated relationship.
Netanyahu and Sisi, a complicated relationship.
Doron Peskin and Danny Rubinstein*

TEL AVIV — The past weeks of fighting in Gaza has brought to light shared interests between the Egyptian leadership and the Israeli government, at least when it comes to Hamas.

Egyptian President Abdul Fattah al-Sisi — who has declared that the mother movement to Hamas, the Muslim Brotherhood, will be vanquished during his tenure — considers Hamas leader Ismail Haniyeh's Gaza rule a direct threat to Egyptian national security.

Sisi also understands that weakening Hamas, and perhaps even toppling it, is only possible through cooperation with Israel.

But discussing Sisi requires considering the overall picture in today's Arab world. Sisi is among the leading members of the so-called moderate stream now forming in the Arab world. Behind him are significant political and economic powers, predominantly Saudi Arabia and the United Arab Emirates (UAE). Sisi owes much of his political success to the two countries and is therefore wholly committed to them.

Beyond concern over the Muslim Brotherhood and Hamas and their hostility towards the groups, Saudi Arabia and the UAE are constantly working against Qatar, prime sponsor of the two movements.

Alongside this Egyptian-Saudi-Emirati alliance, there have been multiple Arab press reports about an alleged link between Israel, Sisi and Saudi Arabia. A comment by Israeli Prime Minister Benjamin Netanyahu has been interpreted as a hint to possible relations with Arab nations that do not maintain open bilateral relations with Israel.

In fact, despite the absence of formal relations, Israel and Gulf countries have been maintaining quiet trade relations for years. Bilateral trade, estimated at less than $50 million a year, is mostly done through a third party. Most attractive to Gulf buyers are Israel's advanced technologies.

Still, a limited relationship

But shared interests between Israel and the Gulf countries against Hamas or Iran aren't expected to bring about a breakthrough in commerce. At least not openly. The leaders in these countries are highly sensitive about disclosing Israeli connections, and that's unlikely to change.

And despite improved relations between Israel and Egypt, trade relations between the two neighbors are also expected to remain status quo. Following a 1979 peace treaty, bilateral trade stood at about $40 million to $50 million a year. Since then, Israeli-Egyptian commerce has gone up and down, influenced by the region's political developments.

The Oslo Accords brought a real spike in trade volume, and by the time the second Intifada broke in 2000 it was estimated at roughly $100 million a year.

The Intifada years have been used by the anti-Israel professional unions to increase their opposition to trade with the country. In turn, authorities also contributed to the effort by arresting Israeli businessmen. Consequently, between 2002 and 2004, Israeli exports to Egypt totaled $30 million a year.

Late 2004 saw another turning point in trade relations between the two countries, when a U.S.-sponsored agreement on Qualifying Industrial Zones (QIZ) was signed. According to the agreement, a product manufactured in an Egyptian factory with at least 10.5% Israeli input would be tax-free when entering the American market. This accord led to a hike in Israeli exports to Egypt.

In 2008, Israel began receiving natural gas from Egypt. The next year imports from Egypt reached about $270 million, not just surpassing Israeli exports to the country for the first time, but in fact doubling it. In 2010, bilateral trade reached a record of nearly half a billion dollars.

But while Egypt's Hosni Mubarak regime was involved in the gas deal with Israel, many Egyptian businessmen claimed they were interrogated by intelligence officials upon their return from meetings in Tel Aviv. To this day, Egyptian professional unions have been consistently rejecting normalization with Israel.

The 2011 overthrow of Mubarak and the ensuing political chaos weakened trade relations between Israel and Egypt. There was an 18% decline in trade volume that year, totaling $415 million. The trend has remained, and in 2013 bilateral trade was estimated at $200 million.

Even now, despite a shared feeling about Hamas, a significant breakthrough is unlikely — at any rate not publicly.

Politically delicate

Rapprochement, even in light of a common enemy, might not be seen favorably by the Egyptian public, and Sisi is undoubtedly taking some political risk. Most Egyptians oppose Hamas because of its Muslim Brotherhood connection, but they can't remain indifferent to the death and devastation in Gaza, especially when it's the so-called Zionist enemy pulling the trigger.

Despite harsh anti-Hamas comments by opinion leaders, Egyptians are largely united in their animosity toward Israel over the campaign against Gaza.

So in the Middle East, everything is fluid. Today's ally can be tomorrow's rival. The current alliance between Israel and Egypt is founded on common interests, but they can change over time.

For now, the Arab world's moderate axis is betting on Palestinian President Mahmoud Abbas. This political reality has incredible economic potential, and rebuilding Gaza could be a starting point. The Palestinian economy has been faltering for years, but Saudi Arabia and the Gulf emirates could help change that. They are, after all, among the world's richest. The current window of political opportunity can revolutionize the Palestinian economy.

But this positive scenario might remain merely a scenario. The Israeli-Arab conflict could be winding down, while the Israeli-Palestinian conflict is only intensifying.

According to recent reports, a broad new initiative of the Palestinian Popular Resistance Committees and the City of Ramallah seeks to facilitate a Palestinian boycott on Israeli goods. While the de facto Palestinian dependency on the Israeli economy means such attempts are effectively futile, many Palestinians perceive it as, in the words of one, "a national imperative."

*Peskin is the director of the research department at Info-Prod Research (Middle East).
*Rubinstein is an Israeli journalist and Arab affairs expert.

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File:Parsin Gas and CNG Station in Karaj-Qazvin Freeway, Iran ...

Gas stations in many Iranian cities had trouble supplying fuel earlier in the week in what was a suspected cyberattack on the fuel distribution system. One Tehran daily on Thursday blamed Israel, which may have carried out similar acts in past years, to weaken Iran's hostile regime.

The incident reportedly disrupted the credit and debit card payments system this time, forcing users to pay cash and higher prices, the London-based broadcaster Iran International reported.


Though state officials didn't publicly accuse anyone specific, they did say perhaps this and other attacks had been planned for October, to "anger people" on the anniversary of the anti-government protests of 2019.

Khamenei, where's our gas?

Cheeky slogans were spotted Tuesday in different places in Iran, including electronic panels over motorways. One of them read "Khamenei, where's our gas?"


Iran International reported that Tehran-based news agency ISNA posted, then deleted, a report on drivers also seeing the message "cyberattack 64411" on screens at gas stations, purported to be the telephone number of the office of Iran's supreme leader, Ayatollah Ali Khamenei.

A member of parliament's National Security Committee, Vahid Jalalzadeh, said the attack had been planned months ahead, and had inflicted "grave losses," Iran International and domestic agencies reported Thursday. The conservative Tehran newspaper Kayhan named "America, the Zionist regime and their goons" as the "chief suspects" in the attack.

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