IN EGYPT’S POCKET DEBTS TO RUSSIA HAVE NOT AFFECTED SADAT’S POLICIES

Press, Volume CXIII, Issue 33384, 16 November 1973, Page 8

IN EGYPT’S POCKET DEBTS TO RUSSIA HAVE NOT AFFECTED SADAT’S POLICIES

(Reprinted from the "Economist." bp arrangement.) Egypt now owes Russia something approaching £2OOO million, or 8-9 months of Egypt’s gross domestic product (an unimpressive level of £9O a head a year for its 33m people), or six years’ export earnings. If you owe your banker £lOOO you are in his power. If you owe him £lm, he is in yours. Egypt has the Russians in its pocket.

The past 18 months have, made it abundantly clear: I just how little leverage the ; Russians possess. Egypt’s of-1 ficer corps was becoming increasingly restless last yearabout what was called the alliance with the devil. Thatj I was the time when Russian experts and officials in 1 Cairo were publicly voicing! objections to Egypt’s policy of encouraging its private sector, welcoming private, capital and planning big' deals with capitalists, such as the huge Sumed pipeline project. Out, therefore, went the 15,000 Soviet advisers in July last year. Guesses about Egypt’s total indebtedness for Soviet military aid still vary widely. Most of them are based on disclosures in “Al Ahram” in the first half of 1972 that the debt was then s2ooom, equal to the value of all the agricultural land in Egypt, and piling up at. s2m a day. Around the; time of the expulsion of the advisers Egyptian sources were even talking of a figure of s3ooom apparently including economic aid as well. But there is some reason for thinking that these were exaggerations. President Saylat was keen to see anti-Soviet feeling whipped up, and “Al Ahram” has always been a mouth-piece of the anti-Soviet element ini the Egyptian leadership. The American State Department put the indebtedness figure much lower last year — at over slooom (for Russian military aid), and a further s32om for other Soviet block countries and China. These figures exclude sales before 1964, but pre-1964 sales could hardly explain all the difference. Adding on economic aid and some allowance for deliveries this year (including the missiles for the Sam launchers and the elaborate anti-tank systems), one arrives at a rough total I of about 2500 million now — rather than 18 months ago. Economic aid Any new arms are unlikely to be paid for, whatever the reports of Russian demands for cash. Egypt’s debt for economic assistance is another matter. It is much smaller. Soviet block countries and China offered total aid of sBoom in 1954-72, with ssoom from Russia itiself. But most of this has

■not yet been drawn: Egyptian sources give a figure of s2oom for total drawings up |to the summer of 1972 and the State Department gives is33om. The guess is that repayments of existing aid <roughly balance the inflow of new aid, and that Egypt lhas not got into India’s condition of making net repayments to Moscow year after [year. Russian terms for .economic aid are 21 per cent lover 12 years (China’s are interest-free and longer). Arms aid is reckoned to be on a longer-term basis: 20 years perhaps, but nobody can tell what rescheduling has been allowed so far. Egypt’s tiaditional form of repayment has been cotton. But the yield is minute. The Soviet block and China used to take 58 per cent of Egypt’s cotton exports, worth £TOOm a year in all. But their share fell to 434,000 bales, or bellow 50 per cent, last year; I and in the current season hard currency countries have probably bought 50,000 bales more than last year, meaningl that other buyers will be cut back again. They will also pay more. As usual the Egyptians opened the sales first to hard currency buyers only, then gradually raised the prices as Communist and soft currency countries were allowed in. And hard currency buyers were paying (50-125 per cent more than last year. So much for Russian leverage. New system The whole Soviet aid business has been so unsatisfactory for both sides that the Russians have been going over to a new system. Egypt and India together have about 25-30 per cent of the Communist total, and much more of the Soviet one. Russia now concentrates on straight credit barter, with factory equipment being paid for by the output of that factory wherever possible. This seems to be the system in use for the £3oom Helwan steelworks project now in partial operation, for the pro- j

-jjects planned for aluminium f and phosphorus plants, and >jfor the schemes for the 1 Russians to set up plants for ; making radios, refrigerators •'and shoes. Russia is not 1 noted for its expertise in 'lmaking any of these cont\ sumer goods. But it is miles •Ifrom meeting its own con ■'sumer demand for them, and ' now that the labour run- ‘ down from its farms has L levelled off, it has labour - shortages in several indus- • [tries. So it is glad to hive s off any available labour--intensive manufacturing to ■’■Egypt. Russia has even tried ! to get Egypt to start meshing in to the Comecon joint I planning system set up in • Bucharest in 1971. 1 : Canal subsidies Ji While the canal stays . (closed Egypt draws £l3oni a (year from Kuwait, Libya and • Saudi Arabia as their agreed [contribution, plus other , i unquantified help from [■various Arab sources. And ,|no doubt money was dis !(cussed at Mr Sadat’s meet- , ings with King Faisal and . President Gadaffi, just before [the war. Certainly Beirut ; iwas soon buzzing with talk I of a new arms programme [Tor Egypt (costing £soom) . financed by the Arabs. The ( money was certainly not for . settling old Russian debts. [ The Russians will have to - whistle for that. Then why not say no? As it happens this would be j awkward for both sides. If (there is one subject that -Russian public opinion does -'get worked up about t) privately, it is Russian money ; and goods being handed t over to ungrateful foreigners t who waste it, make Russia - look silly and lock up their ) local communists into the i bargain. But Russia has to tgo on pretending that its r military and economic aid r makes economic sense. Egypt -may have an interest now s(and again in sounding off t about how much it owes the II Russians. But that has never 11 stopped it from asking for ■|more.