Consequences of Egypt’s summer coup will be, and already have been, devastating. That is one thing most people, apart from the Egyptian military, agree on. However, while commentators view consequences through the lens of religious clashes, political views and death tolls, a thought must be given to the economic consequences because, after all, a coup isn’t cheap.
Take a quick look at the figures: A graph showing Egypt’s stock market looks like the course of a turbulent plane. Before it was forcibly closed under a state of emergency, the plane was about to crash – it was down 1.7 per cent. The Egyptian pound has also fallen 2.35 per cent since Morsi was over thrown.
Things look even worse according to the FT: General Motors, Toyota, royal Dutch Shell and Electolux have closed their factories. “Yesterday we just felt it was a bit too messy in the streets” commented Electolux. Banks are also closed, including Citigroup and HSBC as they express concern over a “further significant deterioration in the security situation”.
Things look bad now, but will be even worse if the game of political check-mate continues, and blacker still if the US cuts all aid to Egypt, as argued by Senator John McCain. “The law is very clear that if there is a coup that aid is cut off”, he said to the BBC.
So who will pay the bill for the 3 July coup? There are more lenders than you may think. Critically, $12bn has already been secured by the military backed government from coup-supportive Gulf countries, notably Saudi Arabia. Then there are always the Wonga’s of the world: the IMF and World Bank.
But a third source of funding has opened up: China. Trade volume between China and Arab countries has surged from less than $36bn in 2004 to nearly $200bn in 2011. An article this week in Your Middle East explains how: “The ravages of unrest in MENA [Middle East and North Africa] have enabled China to tap into major infrastructure projects because supply routes have been disrupted and electrical installations have been dilapidated”.
The consequences of Egypt’s summer coup could well be shaped by economic choices as much as political.