Oil price cut may bring Egypt's problems home to roost
Clutching portable radios and bundles of clothes, scores of Egyptian men queue up each hour in the departure lounge of Cairo airport. They are not going very far, most of them: a few hundred miles to nearby oil countries to work on projects made possible for the past decade by the windfall of petrodollars.Skip to next paragraph
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There are well over 2 million Egyptian workers, more unskilled than skilled, in the Arab oil world. In Iraq there are believed to be more than 1.5 million Egyptians; in Saudi Arabia 250,000; in Libya 300,000. Each year these workers send home more than $2 billion.
Besides this much-needed money flowing into the Egyptian economy, the 2 million-plus Egyptian expatriates serve to vent the pressure-cooker population problem of Egypt.
This is an important way Egypt is dependent on oil. There are two other, more direct ways:
1. The Suez Canal in 1982 earned $800 million as the key route for oil passing from Orient to Occident.
2. Egypt pumps from its own sands and seas 800,000 barrels of oil per day, earning the country close to $3 billion in 1982 - and Egypt has been counting on pumping more.
Though most of the world will benefit from an impending drop in oil prices, Egypt is one country that will face serious problems. Remittances from workers abroad, canal tolls, oil exports - three of the pillars of Egypt's otherwise creaky economy - are likely to begin to crumble.
Put simply: One day soon Cairo airport's arrival lounge may be more crowded with Egyptian laborers than the departure lounge. Without oil money as a cushion , Egypt's problems of overpopulation and underproduction will have come home to roost.
In addition, decreased demand for Middle Eastern oil in the West means fewer supertankers will transit the Suez Canal, income will drop, and it may be difficult to recoup recent investment expanding and modernizing the canal.
Lower world oil prices mean that, though Egyptian production is approaching 1 million b.p.d., ever-increasing output will be needed just to keep income even. Yet lower oil prices almost certainly will diminish the incentive to explore for more Egyptian oil.
Though the Egyptian government is monitoring the currently unsteady international oil market, a Western diplomat in Cairo says, ''There is no sense of panic or great concern.'' This is because Egypt sells little oil on the spot market. Most is sold (currently at $31 per barrel) on three- to six-month contracts to Israel and Europe. It, therefore, would be several months after a price collapse that Egypt would feel the fiscal drain.
But when it comes - given Egypt's structural economic problems - it will cause major difficulties.
The most troubling possibility is that ever-decreasing oil revenues in neighboring countries will mean fewer Egyptian workers queued up at the airport - or worse, Egyptians, many Egyptians, coming the other way. Some of the skilled workers, particularly those in Saudi Arabia, could help Egypt. But they most likely will be the last to return. First would come the unskilled.
Simultaneously, the possibility of employing a major portion of the projected 400,000 new workers a year who enter the Egyptian marketplace will vanish. In a recent Monitor interview, Egyptian President Hosni Mubarak pinned the hope of employing many of these new workers on their ''leaving to the Arab world, to Africa, and everywhere in the world.''