By the Blouin News Business staff

Geopolitics drive Russia-Egypt economic initiatives

by in Europe, Middle East.

Russian President Vladimir Putin (L) and Egyptian President Abdel Fattah el-Sisi (R) shake hands at Presidential Palace on February 10, 2015 in Cairo, Egypt. Anadolu Agency/Getty Images

Presidents Vladimir Putin and Abdel al-Sisi shake hands in Cairo, Egypt, February 10, 2015. Anadolu Agency/Getty Images

Tuesday saw the presidents of Russia and Egypt make strides to greatly expand economic ties between their two countries. In a joint press conference in Cairo, Egyptian President Abdel al-Sisi stated that his country will create a free trade zone with the Eurasian Economic Union (E.E.U.), an economic bloc that is one of President Vladimir Putin’s signature post-Soviet accomplishments. The two leaders also agreed to set up a Russian industrial zone near the Suez Canal, and said that a memorandum of understanding had been signed for Russia to help Egypt build its first nuclear power plant. Putin also said both countries seek to deepen cooperation in energy, agricultural products, infrastructure, autos, and chemical industries, besides strengthening tourism, educational, and scientific exchanges.

Bilateral trade between the two countries reached $4.5 billion in 2014, which was an increase of over 80% from the year before. Russian businesses have stakes in more than 400 Egyptian companies, and Lukoil, Russia’s second largest oil company, produces more than 16% of Egypt’s oil. A nuclear power plant would cover Egypt’s need for electricity, and Putin said that “if final decisions are made, they will relate not only to the construction of a nuclear power plant but also to the creation of a whole new nuclear power industry in Egypt.”

This is an opportune time for both leaders to advance their respective geopolitical agendas, in addition to facilitating favorable economic results of these initiatives. Egypt is following its Cold War history of courting both the U.S. and Russia as strategic partners who vie for influence, with Cairo switching sides when it feels necessary. Though, since Sisi overthrew the Muslim Brotherhood president in July 2013 and instituted a crackdown on all domestic opposition, Egypt’s ties with the U.S. have been strained. In the coup’s aftermath, Washington froze an arms deal to provide Egypt with attack helicopters, which greatly angered Cairo, but later the U.S. changed its mind and allowed the deal to go through. The sense of America as an unreliable and halfhearted partner has made alternative arms suppliers very appealing to Egypt, and Russia has been eager to step in. The two countries reached a preliminary arms deal worth $3.5 billion in September 2014, which included MiG-29 fighters and attack helicopters.

For its part, Russia is keen to expand its economic links outside of the West, which is almost universally hostile to Moscow after it seized Crimea and fomented violent rebellion in eastern Ukraine. Increased influence in Egypt, a formerly close U.S. ally, is an attractive prize for Moscow. And Russia’s solid support for Assad in Syria, so inflammatory to other Sunni Arab nations, is unimportant to Sisi, who claims to support neither the regime nor the opposition in Syria. Furthermore, Putin and Sisi claim to be waging a common war on terrorism, and the jihadist insurgency Egypt is facing in the Sinai is escalating. On Tuesday Reuters reported that 15 suspected Islamist militants had been killed in air raids there, while suspected Islamist militants bombed three police stations in Alexandria.

Terrorism in the Sinai peninsula might jeopardize the prospects of building and operating a Russian industrial zone by the Suez Canal, which borders Sinai. Or it could provide the justification for direct Russian counterterrorism assistance, which would strengthen Putin’s hand in the region even further.