Egypt-Russia Trade and Investment Summary, (YTD) 2022

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By Constanin Duhamel 

Egypt and Russia are historic partners, inheriting from a rich tradition of cooperation between two anti-colonial powers – one Arab Socialist, the other Soviet. Trade here is almost a matter of worldview and positioning, rather than just short-sighted opportunism, explaining Egypt’s exposure to Russia on strategic elements of its basket of goods, investment needs and services. In other words, Cairo and Moscow share similar global views.

As a result, Egypt and Russia are making joint strategic inroads. While the Eurasian Economic Union (EAEU) is currently negotiating a Free-Trade Agreement (FTA) with Egypt – the fourth round of negotiation took place in early 2021 – the landmark 2018 Strategic Cooperation Agreement currently structures Egypt and Russia’s political and economic relationship. This was signed in the run-up to the Russian government’s attempt to make its return to the African continent, eventually culminating in its 2019 Summit in Sochi.

Key to this policy is the news that Rosatom will furnish Egypt’s first nuclear powerplant at Dabaa, 85% of which will be financed by Russian banks. The agreement also planned a re-organization of Egypt’s historical economic backbone: its beleaguered rail transport sector. Russian behemoths TransMashHolding and RZHD have teamed up to provide 1300 train carriages and USD 900 million worth of tracks, respectively. Russia is also creating a 1300-acre industrial zone near the Suez Canal that will attract investments of up to USD 7 billion.

Data for 2022 appears to show Egypt has deployed an equidistant trade policy. Quite literally at the crossroads between Europe and Asia with the Suez Canal, just under a quarter of trade can attributed to both continents. On top of this key horizontal vector, Egypt appears to balance its trade with a vertical axis pitting the USA against countries of the former Soviet Union (where Russia pulls most of the weight).

2022 Egypt-Russia Investment Summary

There has been a welcome with open arms for Russian investors. Neutral on the political front with regards to the Ukraine conflict, certain Egyptian interest groups have pushed to actively tap into the potential windfall generated by Russia’s need to communicate with the wider world despite now having limited instruments to do so. The Egyptian political party Nidaa Misr has called on Egypt to facilitate Russian businessmen’s implantation in the country and capitalize on the potential of Egypt’s growing but impoverished population.

Labour-intensive Foreign Direct Investment (FDI) would be particularly welcome (see Fig. 2) and Egyptian president Al-Sissi has recently reaffirmed its commitment to the ‘mega-projects’ it is undertaking with Russia.

Egypt needs to recover from negative trends. With important outflows on portfolio investments this year and FDI yet to return to pre-Covid heights (Egypt is currently -20% to end 2021, though figures for H2 2022 will be interesting), Egypt is in no place to compromise on its economic interests and join Western economies in shunning Eurasia from its commercial picture – and that includes Russia.

Egypt is key to Russia’s order book. With imports from Russia worth US$5 billion for 2021 and a positive trade balance of over US$1 billion for Q1 2022 alone, the Egyptian market is certainly a cornerstone of Russia’s foreign trade. The importance of trade with the region is gaining traction in the Russian government – foreign chambers of commerce in Russia have started leading delegations to MENA countries and flights with Egypt have recently been restored – as it seeks to adapt to a world without the West.

The YoY figures are less optimistic. Perhaps bloated by a post-Covid boost in 2021, 2022 turnover is 25% lower than in 2021 along with lower imports from Russia (-27%) though Egypt’s export numbers have risen (+8%). This has led to a corresponding 29% reduction in Egypt’s current account deficit YoY, though it has yet to break the US$1 billion boundary.

Should these deficits worry Egypt? Though a net loss in the short-term, Egypt’s positioning as a raw-material oriented exporter explains much of this result. Today’s deficit is covered by lending and Egypt benefits from the good graces of cash-rich Saudi and UAE. Russian goods are excellent value-for-money, the result of cheap labor costs for a highly qualified population. Alternatives such as China, and India are far, incur higher shipping costs and are therefore more expensive if not more volatile given the current shipping and maritime insurance issues.

Egypt sources mainly arms, grain (wheat) and metals from Russia. Security is a long-standing Russian export, and Egypt has signed contracts worth US$ 2 billion (13% of export agency Rosoboronexport’s portfolio, 2017-2021). Russia’s heavily subsidized agricultural complex is no less present on the back of record harvests over the past five years. Wheat imports from Russia alone accounted for US$ 2.6 billion in exports as of the end of 2021. Russia’ top imports from Egypt includes other agricultural produce – namely citrus and vegetables.

Future Trends

Russian trade however is set for lower results. Base case estimates for Egypt-Russia trade taken from 2022 YTD figures estimate a -24% YoY reduction in turnover by the end of this year with a non-negligeable reduction in current account surplus for Russia (-30% YoY). Sanctions have meant Russia’s exchanges with the world have been slowed down with a corresponding negative impact on Russia’s trade balance. That said, a renewed Russian tourist stream to Egyptian resorts this year may add to Egypt’s deficit as demand locally outweighs supply.

Because of the importance of Russian imports, the Egyptian government has announced a return to barter agreements is on the cards until national payment systems can catch up and national currencies used.

Pros: (i) as former socialist economies both Egypt and Russia are used to such a framework; (ii) notional trading system and discretionary settlement means no reliance on USD or EUR and respective clearing centers for transactions.

Cons: (i) As price formation will still likely be in USD there is still FX exposure; (ii) state-led trade means frequency of exchanges will be slower than the banking sector, and accounts settled almost immediately – with a corresponding impact on liquidity.

Exchange rates will be a persistent problem. On top of the problems besetting the ruble, the Egyptian pound is not faring well this year, having lost 17% to the USD in late March to “safeguard foreign exchange liquidity and the confidence of foreign investors”. The Egyptian Pound is a free-floating currency ever since it accepted IMF conditionality in exchange for loans in 2016.

There is a need to watch Egypt’s rising debt burden in a tighter cycle. Egypt is reaching high levels of state debt-to-GDP otherwise manageable but that will require fiscal discipline if it is to tackle rising inflation and continue funding large state-led infrastructure projects with international partners – including Russia – at reasonable rates. Market actors should take note of this.

Tourism is back

Egypt’s cash-strapped economy is awaiting a return of Russian tourists that used to visit Sharm-el-Sheikh in droves until terror-related issues (a downed charter plane) ended direct flights between Moscow and Egypt resorts in 2015. Flights resumed in 2021 with 1 million Russian tourists (40% of total visitors) recorded last year.

There is the potential for historic 2022 numbers. Numbers posted for 2021 indicate the government raked in US$13 billion – a solid post-Covid recovery. Nevertheless, Egypt already boasts almost twice as much revenue YoY and there is clear room for improvement. The recent EU enforced difficulties for Russian citizens to visit the EU will only direct Russian tourists to resorts destinations elsewhere. Both Egypt and Turkiye stand of benefit.

Egypt is also ready to join Russia’s Mir payment system. In order to cater to Russian tourists, Red Sea resorts are planning to include Russia’s national equivalent to Visa and Mastercard – cards issued in Russia by the latter two providers are unusable abroad. This should make Egypt the 11th country to join the system, with another 3 countries expected to join by the end of this year.

These developments show that while bilateral trade has taken a hit for 2022, the changing attitudes of the EU towards Russia has meant that Egypt can be expected to enjoy a tourism boom, while Egyptian exports of agricultural commodities can also be expected to increase in wake of the banning of many EU products to Russia.

When the Port Said Special Economic Zone kicks in, manufacturing imports and exports between the two countries can also be expected to rise – Moscow seeing Egypt also as a gateway to the African continent due to Egypt’s membership of the AfCFTA free trade agreement which is set to delete duties on 95% of all intra-African trade. That means that countries such as Egypt and the facilities at Port Said can source from across Africa, consolidate products at one processing facility, marry them to Russian components and either resell back onto the African market or export back to Russia and the Eurasian Economic Union.

Constantin Duhamel is an analyst covering Eurasia. Please get in touch with any enquiries at  

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