Egypt’s transfer of two uninhabited Red Sea islands to Saudi sovereignty sparked street protests and a social media backlash: #Egyptissold.
Yet Tiran and Sanafir are pinpricks next to the much bigger land grab by Beijing onshore.
Granted, the twin islands guard the strategic shipping gateway to Israel and Jordan into the Indian Ocean and beyond. But their transfer is less of a sale as a handing back to the original owner.
The islands were controlled by Saudi Arabia until the Six Day War in 1967. Israel took over when Egypt blocked the strait to Israeli shipping, though without claiming sovereignty. Fearing an Israeli assault for a permanent takeover, and lacking a powerful navy, Saudi Arabia handed Tiran and Sanifir to Egypt for safekeeping.
Now, Egypt has formally returned them as part of a wider package of economic aid worth up to $16 billion.
While in 2013, cash flowed with Saudi jubilance at President Abdel Fattah el-Sisi’s suppression of the democratic outpouring during the Arab Spring, its latest rounds of economic aid have amounted to a series of investments.
It’s a sign that the collapse of oil prices means Saudis can no longer afford to dole out cash, but need make sustainable investments instead.
Clearing up the questions about the ownership of the islands also makes it easier to envisage the construction of a bridge over the Strait, estimated to cost $3-4 billion. This mega project would directly link Egypt and Saudi Arabia and potentially boost both nations’ economies.
Politically as well, it’s a handy way of papering over the differences that have grown between the two Arab nations, including the response to regional conflicts in Libya, Syria and Yemen. Egypt is looking toward a solution in Syria that includes President Bashar al-Assad, but the Saudis are opposed. In Yemen, Egypt seeks a political solution, but in Libya a military one – whereas in both these cases the Saudis take the opposite stance.
Egyptians are also nervous that Saudi Arabia may soften its attitude toward the Muslim Brotherhood or Islamist groups in general – who remain the military government’s most dangerous domestic foe.
For their part, the Saudi’s fret that Egypt isn’t putting up a united Arab front against Iran, who they fear will become bolder and more powerful as a result.
But a big part of the outcry from Egyptians comes down to the fact that the two countries are competitors for leadership of the Arab world. Dependency on Riyadh has relegated Egypt in this regard to second best.
While traditional relationships are under strain, Cairo has been looking farther afield for financial support.
The drift toward China began even before the Sisi took power. His predecessor, Mohamed Morsi, now languishing in jail, made Beijing his first foreign trip and viewed China as a key ally in contrast to the Saudis and Americans.
Unlike Saudi Arabia, China hasn’t offered much in the way of direct financial aid to Egypt. The Chinese generally prefer a return on their investment and tangible results – mainly through infrastructure development.
Fortunately for them, the Egyptian government has plenty to offer. It’s planning a new capital city between Cairo and the Suez Canal. Naturally, it has turned to the masters of quick, cheap urban development, namely the China Construction Company – at the forefront of urban development in China.
They, along with other Chinese firms, will build and finance vast swathes of administrative and government buildings in the new capital, as well as projects around the Suez Canal.
For Beijing, Egypt is a pivotal state. The Suez Canal is a vital trade route for Chinese goods en route to Europe.
That makes it a key plank in China’s Silk Road and Economic Belt strategy, a cornerstone of Beijing’s foreign policy of rapidly developing infrastructure and promoting economic integration across Eurasia.
The construction of the new capital city as well as other projects such as the Suez Economic and Trade Cooperation Zone will employ Chinese infrastructure firms at a time of slowing domestic growth and provide a tangible marker for the Belt and Road initiative.
The Saudis will continue with their military and financial backing, increasingly in return for assets.
But when it comes to buying influence, China is unmatched. After all, it’s offering support for infrastructure development, a promise of no interference in domestic policy and is a rising power untainted by the complex politics of the Middle East.
Saudi Arabia just can’t compete.
Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.