A Nuclear Nile? Energy as a Resource for New Strategic Alliances in Egypt

Egypt has deeply changed after the 2011 uprisings. In a few years, two different regime changes conditioned the economic and social development of this country. However, we have to start analyzing the economic issues to understand how the most populated country of Middle East is changing its policies. For sure these policies show the intentions of president al-Sisi and how he want to rule the country.

My work starts with an updated analysis of the energetic troubles of Egypt, trying to explain its new interest on the nuclear power. The nuclear energy is not a brand-new idea in Egypt, but it seems to fit perfectly within an on-going renovated network of allies.

The Awareness of the Energy Problem

The first official information about the dramatic energetic shortage came from the prime minister Hesham Qandil, appointed during the Morsi presidency. In August 2012, he invited all the citizens to wear cotton clothes for saving energy during summer, when Egypt suffered power crisis because of the increasing consumption of air conditioning. It was not a new data, but it was the first time a public officer talked about that problem. The Egyptian power system is aged and all the official plans imagine an yearly 10% growth, instead of a real rate of 12%. During the Muslim Brotherhood administration, the power outages were a clear sign of the inability of the ikhwan to rule the country. They tried to make energy conservation as a matter of faith, but they have not convinced the Egyptians. Morsi argued that the blackouts were caused by the terrorist attacks of his enemies, but it is also true that the Egyptian electrical system is unsuitable for a country of 90 million inhabitants.

On 2015, the Egyptian network reached a 31.45 gigawatt capacity, but it is just more than needed. According to the data from the Central Agency for Public Mobilization and Statistics, home consumptions cover more than 40% of total, while industrial activities take one third of the entire. The whole system is basically state-owned: despite an attempt of privatization at the end of the 90s, under pressure of the World Bank to use the BOOT structure (build-own-operate-transfer), private companies only reach 9% of the entire network. So, energy distribution in Egypt is not efficient and a lot of its power is lost and wasted. The government should approve an updated plan every ten years, but in recent years the schedule did not appear among the executive’s priorities. The international loans have not been used to renovate existing facilities or to build new power plants. Furthermore, because of the growing demand, the scheduled interruptions for maintenance have been deleted, causing inefficiencies and shortening the plant life. A great part of energy, around 70%, comes from natural gas, while only a tenth comes from hydro-power, especially from the Aswan Dam. Because Egypt is a net importer of oil and it has frequently gas supply shortages, this way of producing energy is very expensive and feckless.

For all these reasons, the incumbent presidency has new plans for the Egyptians. President al-Sisi want to show himself as a resoluter, putting first the power production, under a strong sense of nationalism in time of austerity. His government worked on a new power plan, converting one-fifth of its energy production to renewable sources until 2020: 12% from wind, 6% from hydro, 2% from solar, according to NREA, the local New and Renewable Energy Authority. Firstly, there are two wind farms in Egypt: the biggest in Zafarana, in the western coast of the Gulf of Suez, with a capacity of 545 megawatts, and one in Hurghada. The expected plans expect to increase wind energy production to 7.2 gigawatt by 2020. Secondly, a tenth of total power generation comes from hydroelectricity, generating 13.7 billion kilowatt-hours in 2013. Most of that uses the water on the Nile, from the Aswan High Dam and the Aswan Reservoirs Dams. Egypt is mediating with Ethiopia and Sudan about the Grand Renaissance Dam on the Blue Nile, which could reduce the amount of water of the river. Thirdly, NREA is working to improve Egypt’s solar-thermal power plants. The only center in operation is in Kuraymat, near Cairo, and produces 40 megawatts. On the Red Sea coast there will be a more powerful system, while a 100 megawatts is almost ready in Kom Ombo. The national plan wants to reach the limit of 3.5 gigawatt by 2017. Egypt is also developing a new project to connect its network to Saudi Arabia. After a 1.6 billion contract in 2015, the construction of the connection project will end in 2018, for providing extra power to both countries. Indeed, Egypt and Saudi Arabia have two different peak demand times, the Saudi is between noon and midnight, the Egyptian is after sunset. The more efficient use of its power grid is as desirable, and in this sense it is also useful the Nile Basin Initiative, to link the countries of the Nile region.

The president al-Sisi ordered to put the spotlight on energy production in gas distribution plan, cutting more than half of electricity for the industry of cement and fertilizer (from 940 to 350 million cubic meters per day), reducing the gap between demand and supply of 1,800 megawatts. However, this solution was temporary. The minister Ibrahim Mehleb said that energy subsidies cost 130 billion EGP year, about 10% of GDP, and the government has begun to review these grants. The government cut one third of the subsidies and electricity prices increased from 30% to 55%. Even petrol prices rose: diesel and natural gas for vehicles from 40% to 175%, while natural gas for cement and metallurgical industries from 30% to 70% . In response to the needs of these industries, in april 2014, the Government also passed a law to allow the use of coal at industrial level. The public debate was unexpectedly public about the environmental risks of this choice, especially by the environment minister Laila Iskandar, who suggested to increase industrial efficiency, which consume a third more energy than Europeans. The new law made possible to import and use coal to reduce the energy shortage in the country. The government should increase gas imports from Algeria and Israel, but the gas situation in Egypt has improved dramatically last summer, when the Italian oil company ENI announced the discovery of the largest gas field in the Mediterranean, within the area of jurisdiction Egyptian. The Zohr field should restore Egypt to a net exporter status, until all of the oil field will end in thirty years.

As we have seen, Egypt needs a long-term plan to increase and diversify its energy production. The Fukushima disaster in 2011 was the occasion for many European states to give up their nuclear policies. Germany arrested any atomic activities, and Spain and Switzerland stopped the ongoing building of nuclear sites. Italy abdicated to have a nuclear power within its borders since 1987, after a similar event in Chernobyl. However, in these years we are witnessing a revival of nuclear power in the Middle East, or that is better to describe as a race to the atom. Jordan has a constant lack of resources and it is trying to solve it, signing an agreement with Russia for a 10 billion nuclear power plant. Saudi Arabia has a plan for the construction of 16 stations by 20 years, working together to France, South Korea, Chile, and Argentina. The only Arabic state with a nuclear plan in progress is the UAE, which is building a new nuclear power plant with the technical assistance of South Korea, to be completed by next year. As we know, the Gulf countries do not demand extra energy, but they need to diversify their power sources. Even if the result of an intentional policy, the oil price lowering is starting to cause some effects on the regional economies. Finally, we can not forget two states whose nuclear activities are well-known, Iran and Israel, of which respectively Steven Miller and Ali Diskaya will speak after me.

Journey without Goal: the Nuclear Energy in Egypt

Anyway, how did the idea of a nuclear Nile start? Egypt is a supporter and member of the Weapons of Mass Destruction Free Zone (WMDFZ) initiative, it has no nuclear facility neither commercial or military for nuclear energy, but its scientific research is one of the most advanced in the Arab region. Two research reactors are in Egypt, and they are small fission reactors, which require a lower amount of uranium. Egyptian scientists have developed a small nuclear irradiated fuel and have implemented the technology to separate plutonium, but they not yet possess the useful skills for enrichment and reprocessing. Therefore, we can not say that Egypt is autonomous about the full cycle: so, it is possible, but unlikely, that this country will take nuclear weapons in the short and medium term. As we have seen, Egypt suffers considerable structural weaknesses. These sufferings have their roots in the failure of the past energy planning. Yet the idea of creating a nuclear program in the land of the Pharaohs began in 1953. I will try to summarize briefly this journey without destination.

The first idea about nuclear power in Egypt came out after the Eisenhower’s Atom for Peace speech at the United Nations General Assembly in December 1953. Two years later, some Egyptian delegates took part at the following conference in Geneva on the peaceful uses of atomic energy. In the same year, in 1955, the Egyptian president Gamal Nasser founded the Egyptian Atomic Energy Commission (AEC), which a year later became the Atomic Energy Establishment (AEE, which is now an Authority). We can not determine whether the intent was to produce nuclear weapons, since the war of 1967 put an end to this project. The first secretary of AEE until 1958 was Ibrahim Himly Abdel Rahman, who signed many bilateral agreements, notably with the Soviet Union in 1956. The Soviet allies built the first light-water reactor for research purpose at Inshas, in Al Sharqia Governorate, which started to be operative in July 1961. ETTR-1 never produced significant amounts of plutonium for nuclear weapons, but the scientists were able to develop the first atomic tests. In 1958, two new personalities took over the management of the agency: El Sayed Amin al Khashab as secretary general and Salah Hedayat as director general. The following years, between 1960 and 1967, were the most intensive period for nuclear development in Egypt.

All started on December 21st 1960, when the Israeli prime minister, David Ben Gurion, announced the construction of a nuclear power plant in Dimona for peaceful purposes. For this reason Egypt tried to produce nuclear weapons in every way, strengthening its image as leader of the Arab world, even as the warranter for regional security. Nasser seek the help of the other non-aligned countries, especially India and China, also entering the topic in the pan-Arabist rhetoric of the Arab League. However, he did not achieve any success. The failure was due to lack of financial resources and political capital. It should be noted that a specific item of the state budget for nuclear research was never established as a priority. The 1967 war freeze any aspiration: the oil leak from the Sinai, the closure of the Suez Canal, the foreign financial assistance’s reduction weakened the Egyptian economy. The EEA’s activities were limited to theoretical research, until 1968, when Egypt signed the Non-Proliferation Treaty. In 1970 the succession of Answar al-Sadat and the peace with Israel put an end to the nuclear dream. In fact, in 1974, Sadat signed a deal with the United States to receive eight reactors, but the conditions imposed by the Americans were considered unacceptable and the 1979 peace changed all the Egyptian security priorities.

The Egyptian Parliament ratified the NPT on February 26th 1981, putting the national nuclear activities under the supervision of the International Atomic Energy Agency in accordance with the Comprehensive Safeguards Agreement. Egypt became one of the most transparent countries in the area, because even Hosni Mubarak lost all interest in any nuclear weapons. As I mentioned earlier, in April 1986 the Chernobyl disaster made use of nuclear energy less popular. A few years later Egypt bought a second light-water reactor from Argentina. ETTR-2 is operational since 1997 at Inshas and it uses uranium enriched to 19.75%, not suitable for nuclear weapons without further enrichment. Since 1990, Egypt has been supporting the WMD Free Zone, but it criticized the lack of universality of the NPT. Egypt refused to sign the IAEA Additional Protocol, the Chemical Weapons Convention, to ratify the Comprehensive Nuclear Test Ban Treaty, the African Nuclear Weapon-Free Zone (the Pelindaba Treaty), and the Biological and Toxic Weapons Convention, showing a ambiguous attitude on the armaments.

In 2004, the IAEA investigated Egypt for failing to notify certain irradiation experiments between 1990 and 2003, in addition to uranium imports. These activities are not prohibited, but they must be notified to the Agency. The government answered that the mistakes was caused by a different interpretation of the Treaty. However, the IAEA appreciated the following transparency on reporting. Two years later, the Egyptian government showed a new interest in nuclear development: in September 2006 Gamal Mubarak spoke at the National Democratic Party conference about nuclear policy as a key step in the national development. In March 2007, the energy minister Hassan Younis announced a plan of ten brand new reactors for nuclear power, but it was not implemented. In 2010, president Mubarak announced el-Dabaa as the selected site. The 2011 revolution did not stop the plans and the new energy minister announced that the plant will be completed in 2025, while the first will be operational in 2019. In January 2012, hundreds of residents vandalized the el-Daaba site, asking for fair compensation for their expropriated lands. On that occasion the radioactive material was stolen from the plant during the protests. Often the Egyptian leaders opposed to a nuclear weapon, but it is interesting to note that, before it was removed, the president Morsi went on official visit to Russia to start cooperation.

An Unexpected Change of Scenery

However, the entire energy policy has changed with the 2013 regime change. The end of Morsi’s presidency was also caused by the evident inability to solve the most pressing problems of the population. In this sense, the power outages have offered strong evidences to the opponents of the Muslim Brotherhood. Both to demonstrate their political differences and to solve actual deficiencies in the national energy supply system, president al-Sisi has accelerated the energetic plans, which I have already mentioned at the beginning. But energy policy is an opportunity to create a new system of alliances. From a certain point of view, Egypt seems to return to its ’60s foreign policy. Al-Sisi’s highly authoritarian system led the suspension of the yearly aid which United States provides to Egypt since the end of the ’80s. The Foreign Military Financing worth 1.3 billion dollars a year and it is an important item within the Egyptian state budget. This aid has been frozen for eighteen months, but the American Congress also reformed this economic tool. Since 2018, the FMF will be divided into four tools, divided by jurisdiction: counter-terrorism, border security, Sinai security, maritime safety. The Egyptians will get money with a cash-flow financing, that is they can sign new agreements for military equipment on credit. This is the most evident reason of the new Egyptian approach to Putin’s Russia.

Egypt’s approach to Russia began in June 2014, when al-Sisi had his first official visit to Moscow, that president Putin countered in February 2015. From 2014 the trade exchange increased by 86% and Egypt has taken part to the free-trade agreement of the Russian-led Eurasian Economic Union. Egypt is the world’s leading importer of grain and the larger part comes from Russia. This cooperation is also pursued at military level: a new agreement provides for joint military exercises. The Egyptian military has purchased weapons for 3.5 billion dollars from Russian companies. This interchange has significant benefits for both countries: Russia has a new and wider market in which export their goods, after its relations freezing with the European Union, at the same time Egypt receives new capital that traditional investors no longer wish to keep in the country. The new al-Sisi foreign policy doctrine also concerns the energy sector.

On November 19th 2015, president al-Sisi has signed two agreements with the Russian president to build the first nuclear power plant in Egypt, after signing a memorandum of understanding on February. The plant will be built in Daaba, along the northwest coast of the Mediterranean sea. The construction will be completed in 2022 working with Rosatom, the Russian state company for nuclear energy. The plant will be the third generation and will contain four reactors of 1,200 megawatts each, which cost is divided along 35 years with an initial loan, paying off with revenue from the electricity supply. Egypt considers to build there a nuclear power plant since the ’80s, but this idea was resumed only in 2006 with an announcement by president Mubarak. The details are not clear and all the data are provided from the press conference by Sergei Kiriyenko, head of Rosatom. As we have seen, a nuclear power plant of this type could significantly improve the country’s energy supply. Although the government has to face many risks to gamble on a project of such complexity, it seems to be absolutely willing to carry it forward. What are the main reasons?

The first reason is an external strengthening. President al-Sisi is working to restore Egypt as a regional hegemon in the Middle East, taking part in major political crises, especially in Libya and Yemen, and Syria in the background. Participating in the nuclear club should give prestige to the country and its leader. Egypt needs to diversify not only its own energy production, but also its political relations: the economic aid coming from the Gulf demands in return the adjustment of the Egyptian foreign policy to the needs of his Arabic partners. The Gulf allies are changing their priorities and Egypt tries to compensate for their absence.

The second reason is an internal strengthening. In opposition to the failed experience of the Muslim Brotherhood, al-Sisi has to show himself as the strong man able to revive the fortunes of the country. The parallel with Nasser is evident in many aspects and we should not underestimate some popular symbolic elements, as the inauguration of the Suez Canal and the new capital project. The Egyptian President must mediate between a populist statalism that feeds 6 million public employees along with an economy that reflects its structural weaknesses. Al-Sisi knows he has to build and maintain a very strong, and very authoritarian, state to save his power, and he can not go wrong as his predecessor.

Conclusions

In conclusion, the choice of a nuclear Nile seems to be an obvious part of the reorganization of the Egyptian energy system. Despite the programs and objectives are ambitious, it is possible that most of these will be delayed because of the absence of an economic system that could calm the investors, especially the foreign ones. The construction of the new plant in Dabaa could be a permanent solution to national energy problems and it could give more guarantees to the investors. The economic crisis has affected the ability of European investors and has brought down the Egyptian revenues. The crisis of tourism, the decline of traffic on the Suez Canal, the reduction of Gulf states funding, and the depletion of foreign exchange reserves, show the drama of Egyptian economic situation. The devaluation of 5% this week seems to demonstrate the inherent weakness of Egypt’s economy, after thirty years of “autumn of dictatorship” as Samer Soliman wrote.

The vicious circle of the this economy is well known: since the ’90s, the budget cuts can not effort to make economy more efficient, but they just generate discontent and very few reforms. For this reason, the improvement of energy facilities are a must, and nuclear energy seems a useful expedient to do it. So, the new approach to Russia and the foreign policy change show mainly an economic implication. We have to wonder if this change will allow Egypt to continue along the road of authoritarianism in the absence of its Western partners, which instead affect their aid to Egypt’s democratic progress.

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