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Egypt - The Secondary Victim of the Israel-Gaza Conflict

Verena Youssef | Middle East Fellow

Rafah border crossing - Entering Gaza strip from Egypt. Image credit: Gloucester2Gaza via Wikimedia Commons.


It has been six months since the October 7 attacks, and despite its name, the Israel-Gaza conflict has become more than just a battle between two forces. 


The fighting has sent tremors across the region, impacting some countries more than others. As the only country except Israel to share a border with Gaza, Egypt has inescapably found itself closest to the epicentre, making it a secondary victim to the war.



National Security Concerns:


Since the events of October 7, Egypt’s shared border with Rafah has sparked national security concerns, rendering the country vulnerable to violations of sovereignty by its Jewish neighbours. 


The first significant threat to Egyptian sovereignty arose at the end of October, when an Israeli minister released a wartime proposal to transfer “the Gaza Strip’s 2.3 million people to Egypt’s Sinai Peninsula.”  For the Egyptian people, the threats ignited flashbacks of the loss of Sinai in 1967, and its subsequent reclamation in the Arab-Israeli 1973 war. Such fears extended to Egyptian President El-Sisi, who re-emphasised his rejection of any efforts that would displace Palestinians, and eliminate the Palestinian cause. Though Israeli Prime Minister Benjamin Netanyahu downplayed the report by labelling it as a “concept paper”, the threats nevertheless revived the historic Israeli-Egyptian tug-of-war over Sinai, heightening Egyptians’ concerns toward the Peninsula, and their Palestinian brothers and sisters. 


Moreover, Netanyahu’s ‘de-escalation’ was short lived,  with further threats towards Egyptian land emerging throughout the war. Shortly after the Sinai threats, Netanyahu proclaimed aspirations to demilitarise the Gaza-Egypt border zone, so as to prevent an October 7 resurgence. During a press release, he demanded the seizure of the Philadelphi Corridor, a 14 km-long strip of land bordering Egypt and the Gaza strip. A clear threat to Egypt’s sovereignty, Diaa Rashwa, the Head of State Information Services described Netenyahu’s ambition as a “violation of the[ir] security agreements and protocols” including the Philadelphi Accord. Not only would such a move sever diplomatic ties, but it would also dismantle Egypt’s border control, spiking concerns of unchecked terror and drug movements. While Netanyahu’s remarks ultimately served as an empty threat, Egypt’s shared border with its Jewish counterparts continues to cause national angst, exposing it to the threats and aftermath of surrounding military activities. 


Such angst has been further fuelled by Netanyahu’s March announcement of an impending Rafah invasion.  Igniting security and displacement concerns within Egypt, Netanyahu’s office described the invasion necessary to achieve “total victory” through its intended elimination of four remaining Hamas battalions in Rafah. Egypt has since  intensified its military presence along the border. Many attribute this move to fears of a mass deracination into Sinai, which could place the Peninsula in the crossfire between Hamas and the Israeli Defence Force. For now, Netanyahu’s vision remains on paper.  Nevertheless, Egypt’s geographic proximity to the conflict remains a catalyst for threats against the country’s soil. 



Economic Woes:


As the conflict continues, the nature of Egypt’s national security concerns has extended beyond the territorial to the economic. The October 7 attacks and following disruptions  struck Egypt at a financially troubling time, amidst heightened inflation and foreign currency shortages. 

 

Such disruption is observed in the onslaught of Red Sea attacks by the Iran-backed Houthis. In its support for the Palestinian cause, the Yemeni rebel group has persistently targeted Israeli-backed, owned, or associated vessels navigating through the Red Sea. Since then, many vessels have diverted from the Suez Canal route, dropping Red Sea traffic by 22 per cent, and marking a record-low flow of vessels since the 2021 Ever Given blockage. With ships re-navigating, the Suez Canal has lost 50% of its revenue, in comparison to January 2023. Considering that the Canal’s revenue accounts for 2 per cent of Egypt’s GDP, the sudden drop has not only interfered with one of the country’s lifelines, but also worsened foreign currency shortages and trade relations. 


The impact of such attacks is evident in recent shadow economy figures and worsening foreign currency shortages. Immediately after the October 7 incidents, the Egyptian pound plummeted to EGP E£47 against the U.S dollar on the black market, allegedly due to the war’s impact on the country’s balance of payment. The national currency continued to spiral, plunging to EGP E£68-70 per dollar this January on the black market, almost double the official rate of EGP E£30.9.  Economists at Goldman Sachs have attributed these figures to the spike in oil prices and drop of tourism revenue as a result of the conflict.  


Arguably, the subsequent scarcity of foreign currency has prompted a snowball effect, indebting Egypt to international loan programs in an attempt to narrow its currency shortages.  This is evident in the International Monetary Fund’s (IMF) provision of an USD $8bn loan to Egypt, a substantial increase from the intended USD $3bn. The Middle East IMF Division’s chief attributed the loan to the “significant macroeconomic challengesheightened by the conflict’s impact. She recognised the economic security concerns posed by both the Suez Canal revenue and the likely drop in tourism rates.  Not only is the package aimed toward promoting sustainable debt, but also recognises the financial predicaments faced by the country during the conflict. 



Conclusion


Without a doubt, the Israel-Gaza conflict has morphed into a regional conflict, impacting neighbouring countries to varying degrees. Nevertheless, Egypt’s geographical disposition has left the country bearing the brunt of the war’s ripple effect. The shared Egyptian-Rafah border has placed the country under Israel’s iron fist, subjecting it to threats of land loss and incoming displacement. Furthermore, the conflict struck Egypt at an economically sensitive time, piercing through key GDP contributors such as the Suez Canal and tourism sectors, due to regional instability. These challenges, combined with Egypt’s close proximity to ongoing military campaigns, undeniably make it a secondary victim to the Israeli-Gaza conflict.




Verena Youssef is the Middle East Fellow for Young Australians in International Affairs. Verena is a final year Law/Arts student, set to complete her studies early this year. She has a strong passion for international law and is particularly interested in Middle Eastern policy.  


A proud Egyptian/Australian, Verena enjoys applying her degree in a manner that increases education about the flourishing region.


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