Saudi Arabia halts oil shipments to Egypt in spite of aid deal

Saudi Arabia has informed Egypt the oil shipments under a $23 billion aid deal agreed to in April have been halted indefinitely. The action suggests a deepening rift between the two countries.

Since President Abdel el-Sisi took power in Egypt in 2013, Saudi Arabia has been a major donor helping prop up Egypt's ailing economy. There may be a number of reasons behind the action. Some claim that the Saudis are frustrated with Egypt's lack of economic reforms. However, Egypt has accepted reforms required to obtain a loan from the IMF for $12 billion. Another reason may be Egypt's reluctance to be drawn into the Yemen conflict.

However, Saudi Arabia may be even more angry at Egypt's moves for a great rapprochement with Iran and warming relations with Moscow as a recent Al-Monitor article points out. This will lead to Egypt taking a less aggressive view toward removing Assad in Syria. All of this is counter to Saudi positions.

During a visit to Egypt in April, the Saudis agreed to provide Egypt with 700,000 tonnes of refined oil products per month for a period of five years but the shipments stopped in early October. Egyptian officials said that since the contract with the Saudi state oil firm Aramco is still valid they expected the shipments to begin again. However, yesterday Tarek El Molla, the Egyptian oil minister confirmed that shipments had stopped indefinitely. A ministry official said: "They did not give us a reason. They only informed the authority about halting shipments of petroleum products until further notice." This announcement comes just after a source in Molla's delegation said that he would visit Iran to try and negotiate new oil deals. A deal with Iran would represent a significant shift in relationships in the Middle East.

However, Molla, speaking to reporters in Abhu Dhabi, insisted that he was not going to Iran. An Iranian oil official also said that a report in Iranian media suggesting Molla would meet with his counterpart in Tehran yesterday was incorrect. Egyptian PM Sherif Ismail also confirmed that Egypt was not negotiating with Iran on importing oil products. However, two security sources and the source in Molla's delegation claimed that the minister had been scheduled to go, but when the news became public the visit was delayed. The Saudi's would be extremely angry if Egypt were to negotiate an oil deal with Tehran.

Saudi Arabia may also be somewhat miffed at the Egypt's State Council's decision that el-Sisi could not hand over two Red Sea islands to Saudi Arabia as he had agreed to earlier.. President Sisi's decision was met by rare protests with many being arrested.