Why India and Egypt are forging a new strategic relationship

When Prime Minister Narendra Modi visited his Egyptian counterpart Abdel Fattah al-Sisi in Cairo last week, it marked the first trip to Egypt from an Indian head of state since 1997.

The summit between the two leaders focused on boosting economic and diplomatic ties at a time when emerging markets are moving closer together to tackle the fallout of global rising interest rates, rampant inflation, and the political vacuum left by the US retreat from foreign policy.

Egypt is at a critical stage in its economic recovery plan and needs to build on momentum with new markets to bring in much-needed investment. India is seeking to cement its status as the voice of the Global South ahead of the G20 Meetings in New Delhi in September.

A closer relationship between the two powers is also symbolic of Egypt’s interest in the BRICS expansion.

"In terms of politics, India wants to leverage Egypt's diplomatic position in the Arab League as well as its position in Africa, as part of India’s drive to be the voice of the global south"

The importance of the bilateral relationship was underlined by Sisi awarding Modi the Order of the Nile, Egypt’s highest civilian honour. In return, Modi tweeted: "The talks with President @AlsisiOfficial were excellent. We reviewed the full range of India-Egypt relations and agreed to further augment economic and cultural linkages".

Aliasger Bootwalla, Manager for Media and Outreach at Gateway House: Indian Council on Global Relations, believes both sides intend to work closely together in future. “The fact that India has invited Egypt as an observer to the G20 presidency, speaks about the importance of this bilateral relationship.”

While the renewed relationship may be a recent development, Egypt and India have traded together for thousands of years. In the 1950s, Nehru and Nasser famously worked together to found the Non-Alignment movement, before relations cooled in the 1970s and 1980s as both nations focused on domestic affairs amid the Cold War.

Last year, India was Egypt’s fifth largest trading partner and Sisi visited Delhi in January.

Money talks

“President Modi’s visit was business oriented as both countries seek to cooperate on a plurality of fields,” Matteo Colombo, a researcher at Clingendael Conflict Research Unit, told The New Arab.

The ramp-up in relations comes at a time when Egypt is suffering from an economic crisis and is seeking new trading partners to bring in private investment. Egypt expects its current account deficit for the upcoming fiscal year to reach EGP 848.8 billion ($27.4 billion) and one of the most effective ways to close the gap is to bring in new investment and increase exports. 

Egypt’s exports to India dipped to $1.7 billion last year, from $3.5 billion the year before, according to statistics from the Egyptian government agency Capmas. A return to strong trading with India could ease Egypt’s deficit. 

“Economically, both countries are seeking to increase bilateral ties from $7.26 billion to $12 billion,” Bootwalla said. 

India views Egypt as a target market for its burgeoning defence industry. “In terms of defence, the two countries are working together at a time when India is transitioning from a defence importer to an exporter,” Bootwalla told TNA.

Modi and Sisi discussed food security and signed a memorandum of understanding (MoU) for cooperation in agriculture. As the world’s largest wheat importer, Egypt turned to India following Russia’s invasion of Ukraine last year and agricultural imports from India have risen in recent years.

“India is looking towards Egypt for renewed agricultural exports. When the Black Sea blockade came into play, India found Egypt as a viable market for its agricultural produce,” Kabir Taneja, a fellow at the Delhi-based Observer Research Foundation, said.

Further afield

In addition to direct bilateral trading with Egypt, India eyes an opportunity to work with Egypt to improve its infrastructure links to European markets and harness its routes through the Suez Canal.

“One of the main topics under discussion is infrastructure. Egypt is in a strategic position as it holds the Suez Canal and India needs to improve its infrastructure links to trade better with Europe,” Colombo said.

Over 12 percent of global trade passes through the Suez Canal and the 193 km long canal has become increasingly more important since the Black Sea blockade last year. 

“Egypt is an important partner because of its strategic location. It connects to Africa, Asia and Europe making it essential for trade and investment as India is trying to increase its footprint in West Asia and Africa,” Bootwalla said.

"Egypt is an important partner because of its strategic location. It connects to Africa, Asia and Europe making it essential for trade and investment"

Diplomatic ties

India regards Egypt’s physical location as crucial for diplomatic as well as economic matters.

According to Taneja, “India is trying to lead a very strong global south consensus and is building on those platforms of South-South cooperation that it initiated during the pandemic. India views Egypt as a gateway to Africa”.

India is taking up an opportunity to revive relations with Cairo at a time when Egyptian politics are more palatable to Modi’s government, Taneja added. The wider regional de-escalation, including the end of the blockade of Qatar and closer ties between Cairo and the GCC, have also paved the way for Delhi and Cairo to deepen relations.

In the run-up to September’s G20 meetings in Delhi, Modi has told the world of his ambitions to amplify the concerns of the Global South. India’s leader has highlighted the need for an overhaul of the current political system to allow Global South countries to better face contemporary challenges such as climate change, the COVID-19 pandemic, terrorism, and financial crises.

Egypt holds an unrivalled position of influence in North Africa as well as the Middle East, catalysing India’s potency in the region.

“In terms of politics, India wants to leverage Egypt's diplomatic position in the Arab League as well as its position in Africa, as part of India’s drive to be the voice of the global south,” Bootwalla said.

Building BRICS

Egypt has largely been frozen out of dollar-denominated international markets in recent years and has explored alternative financial systems by issuing YEN-denominated Samurai bonds last year and renminbi-denominated Panda bonds this year.

India, along with BRICS members, is in the process of discussing a potential alternative currency to dollars in international trade, effectively proposing an end to dollar hegemony. Egypt would welcome such a move and has allegedly applied to join BRICS, according to the Russian ambassador to Egypt.

“The improved relations between Egypt and India comes at a time when BRICS members are working increasingly together and there is discussion of an alternative system to The World Bank, which would clearly benefit Egypt,” Colombo commented.

Lara Gibson is a Cairo-based journalist closely following Egypt's economic and political developments.

Follow her on Twitter: @lar_gibson