The king and the field marshal

March 10, 2014

Months of intense repression carried out by the Egyptian military have mainly targeted the Muslim Brotherhood of former President Mohamed Morsi, but anyone who dares to criticize the regime is under fire, including the leading figures of the 2011 revolution that overthrew Hosni Mubarak. In this article published at the Revolutionary Socialists of Egypt website, Sameh Naguib analyzes the economic and political elements--both within and beyond Egypt's borders--that sustain the forces of counterrevolution.

A Necessary Introduction

THESE DAYS, a state of depression and pessimism prevails among revolutionaries in Egypt, especially after January 25 was transformed from a revolutionary celebration into a celebration of the army, police, counterrevolution and its main players and leader, Field Marshal Abdul-Fattah el-Sisi. Despite the mounting wave of labor strikes in the last two weeks and what appears to be the beginning of cracks in the ranks of the counterrevolution, the bigger picture still looks bleak and dangerous.

There is no doubt that we are experiencing the biggest setback that the Egyptian Revolution has experienced since its start. With such a setback, we cannot hide behind unwarranted optimism or try to reduce the size of the defeat. Yet we cannot even start to face this setback while we are wallowing in a state of frustration, confusion and nostalgia for the early days of the revolution.

The revolutionary process is similar to a long war that lasts for years and is punctuated by many battles, some of which end up in victory and others in defeat. We do not face up to defeat by either denial or surrender, as if the current battles are the final battles and as if the revolution has been irreversibly defeated and as if there remains no hope for the outbreak of new revolutionary waves, even if these waves are delayed for years.

Gen. Abdul-Fattah el-Sisi
Gen. Abdul-Fattah el-Sisi

The pressing question here is how do revolutionaries avoid this state of depression without falling into the clutches of denial and naive optimism, which in turn leads to more frustration when expectations collide with reality? How do revolutionaries benefit from the lessons of defeat in order to prepare for the battles to come?

Perhaps the most urgent task is that of comprehending what happened, and how the counterrevolution in Egypt has triumphed (albeit temporarily)? How was Sisi able to not only rebuild the Mubarak state with its corruption and organs of oppression, after a period of collapse and disintegration, but also win public backing for this process?

Reaching this understanding requires much study and debate, reading the lessons of the history of revolutions on the one hand, and the specifics of Egyptian history on the other.

There are many elements that intervened to enable the success of the counterrevolution, which all need a detailed analysis to allow us to understand their role, but also to prepare us for dismantling and neutralizing those elements at the outbreak of the next revolutionary wave, so that those same elements will not defeat us once again.

There is, of course, the contradictory role of the Muslim Brotherhood and their betrayal of the revolution via their alliance with the leaders of the army, police and the security services of the Mubarak regime and even his corrupt businessmen, in order to maintain the same economic and social policies of the old system.

Then there is the stunning transformation of a large segment of intellectuals, journalists and ex-revolutionaries--nationalists, leftists and liberals--who went from the ranks of the revolution to the ranks of the counterrevolution. This is a phenomenon that still needs to be analyzed and understood, despite its recurrence in many previous revolutions.

Then there is the essential role played by media organizations, whether those directly affiliated with the security services, such as the Armed Forces' Moral Affairs Agency, which orchestrated the comprehensive public awareness campaign to build support and public support for the counterrevolution, or the private media wholly owned by business leaders loyal to the old regime and their allies from the Gulf Arab capitalists, or to be more precise, the Saudi-Arab Emirate capitalist axis.

There is also the pivotal role played by the judiciary, whether in the spectacle of finding everyone "not guilty," including torturers and killers from the counterrevolution, or in the cases where harsh sentences were given, not only to the Muslim Brotherhood and the Islamists, but to everyone involved in the January revolution and those opposed to the counterrevolution. This is in addition to giving legal cover to the coup and counterrevolution. Here I do not only mean what Mubarak's corrupt judicial jokers have done, such as Al Zind and Al Gibaly, but also how the judicial system as a whole was set to serve the counterrevolution.

The King and the Field Marshal

But all of the above needs massive financing to feed the killing and deceit machine. So it is unimaginable that the leaders of the counterrevolution will embark on a coup adventure and attempt a counterrevolution without securing prior collateral from large financiers, led by Gulf capital, whose orientations are controlled by the kings and princes of Saudi Arabia, UAE and Kuwait (Qatar and its feisty and adventurous Emir represent the exception that proves the rule).

All of these countries, of course, revolve within the gravitational pull of American imperialism, which protects their thrones by armed force. Yet the capitalism of these countries no longer solely depends on oil revenues, as was the case until 1980s. The accumulation of great wealth from oil and gas revenues has enabled the transformation of these countries into huge financial and business centers.

These centers in turn have become an important source of investment, not only in the Gulf countries themselves in terms of large infrastructure and construction projects, but also on a global level, especially at the regional level. And here is where the objectives of Gulf investors, hungry for investment outlets for their accumulated wealth, converged with the need of Egyptian capital and the Egyptian state for a partner to supply the billions needed in exchange for exceptional profits and extraordinary influence.

It is not possible to understand the pivotal role of the Arab Gulf states in supporting the Egyptian counterrevolution without understanding these transformations and their impact on the capitalist economic structure of Egypt and its ruling class.

The transformation experienced by Gulf capital and its growing influence in the global economy and the Arab region is analyzed and its stages of development are explained by Marxist researcher Adam Hanieh in two important books, Capitalism and Class in the Gulf States and Lineages of Revolt: Issues of Contemporary Capitalism in the Middle East, and all the statistics in this article are sourced from these two wonderful books.

Mubarak, Privatization and the Incursion of Gulf Capital

Neoliberal policies, especially in the last two decades of Mubarak's rule, led to an unprecedented concentration of capital that left 100 families in control of the largest bloc of Egyptian wealth--in partnership, of course, with military leaders and senior statesmen.

But what we sometimes do not pay enough attention to is the role that massive amounts of Gulf capital played in this process. For example, in 2008, seven families controlled companies that represented more than 20 percent of the value of the shares of the Egyptian Stock Exchange. These families entered a partnership with general investment companies en route to privatization, and huge construction companies turned to real estate development companies, such as Bahgat Group, Talaat Mustafa and Oriental Weavers. Of course, this is in addition to giant Gulf companies such as Emaar, Solidaire, Barwa and Damac.

Gulf investments as a proportion of foreign direct investment in Egypt increased from 4.5 percent in 2005 to more than 25 percent in 2007 (that is to say in just two years). In the period from 2000 to 2008, Gulf capital accounted for 37 percent of the total value of privatization.

Gulf capital's penetration of Egypt's economy included investments in many sectors--from finance, banking, real estate and communications to manufacturing. The privatization process did not only lead to the concentration of wealth in the hands of big Egyptian businessmen, but it also led to a partnership between these players and a major chunks of capital from the Gulf, which has become an essential component in the Egyptian ruling class. Major companies, such as Saudi Savola and Kuwait's Kharafi, today have vital interests in the heart of Egyptian capital.

Agriculture and Food Industries

In the sector of food production, monopoly and concentration of capital have reached exceptional levels. Only seven companies control the export trade of fresh fruits and vegetables, and one company, for example, controls 30 percent of the exports of potatoes. In the case of canned foods (according to statistics from 2005), five companies control 26 percent of exports, and three of these companies are owned by Gulf capital.

The degree of control of Gulf capital in the agriculture and food industry (with, of course, domestic capital as a junior partner) is indeed surprising. Large food companies, like Dina Farms, Juhaynah, Farm Frites and Afia International, are either wholly owned or in partnership with the Gulf capital.

For example, Gulf companies control more than half of the production of Egyptian chicken. The largest of those companies, Cairo Company for Chicken, has been a branch of Americana Kuwait since 2007. This company alone controls 30 percent of the Egyptian market for the commercial production of chicken, and 45 percent of the market for frozen chicken. It controls all stages of production, from poultry farms to famous restaurant chains.

Neoliberal policies in agriculture since the late '80s of the last century have led to the control of the sector by big corporations. This alliance, which represents the interests of the ruling class in Egypt, is comprised of business leaders and their families; foreign companies, led by the Gulf; and senior state and army officials.

Financing of Investments as a Gateway to Industrial Capital

Private investment funds and corporate finance have provided major points of entry for Gulf capital into Egypt, and perhaps the most important companies are the UAE's Abraaj and the Saudi Company Amwal AlKhaleej. In 2007, Abraaj completed the largest regional investment in its history with its purchase of The Egyptian Fertilizer Company for $1.4 billion. The company had been the largest fertilizer production company in Egypt based on its exports through the port of Ain Sokhna. Abraaj then expanded to swallow up additional capital in Egypt in the sectors of construction, real estate, medicine and information technology as well as food and retail outlets.

As for the Saudi Amwal AlKhaleej, it quickly became a big player in Egyptian industry. In 2007, the company bought a majority of the shares in Arab Cotton Ginning, the largest company in terms of value in the textile sector. The company, which was privatized in 1996, is a massive conglomerate, controlling 25 percent of cotton ginning in Egypt and a similar proportion of cotton exports. Amwal AlKhaleej also controlled the giant AlSaeed Mills and became a major contributor to Oriental Weavers. This is in addition to huge investments in the petroleum industry and its derivatives.

We must emphasize here that this attack by Gulf capital occurred in close partnership with Egyptian capital, occurring mainly through private investment funds. Perhaps the most important example of this is the EFG Hermes company, which is an investment fund that started with Egyptian capital and soon merged with a larger Gulf partner. In 2006, Amwal AlKhaleej became the main shareholder after investing $500 million in the company.

The movement of these investments revolved around the Gulf. In 2007, Abraaj sold its shares, worth $1.1 billion, to Dubai Group and Abu Dhabi Authority for Investment. EFG Hermes kept swallowing more and more of the capital in Egypt in the largest and most strategic sectors, including building and managing water plants and power plants; imports of livestock; the commercial meat trade; petroleum services; the iron and steel industry; and agriculture and infrastructure.

Hermes was not the only firm engaged in mergers and acquisitions between Gulf and Egyptian capital. Two other companies--Citadel Capital and Beltone--played similar roles. Citadel comprises senior Egyptian capitalists as well as representatives of two large Saudi groups and Emirates International Investment. Beltone, on the other hand, is 17 percent owned by Amwal AlKhaleej.

Real Estate Capital

Perhaps the sector that proves beyond any doubt the extent to which Gulf capital has become a key component of the ruling class in Egypt is real estate. Here, we clearly see the overlap between the institutions of the state, local capital and Gulf capital in carrying out the privatization of state land during the last decade of Mubarak's rule.

This privatization opened two paths for the overlap and integration of these two sources of capital. The first path was direct sales of state land to Gulf real estate development companies. The second path was foreign investors purchasing major interests in Egyptian real estate companies. The most staggering example of the first path was one of the largest tenders in Egyptian history in May 2007, in which 18.5 million square meters of state land in Cairo was sold off, 90 percent of which went to companies in Saudi Arabia, Qatar and the UAE.

Real-estate development companies directly control 80 percent of the value of real-estate projects in Egypt (projects with value in excess of $100 million), but if we add projects that Gulf capital contributes to in Egyptian companies, the ratio reaches 90 percent.

The two largest companies in Cairo--Talaat Mustafa Group and SODIC (which is an acronym for Sixth of October Development and Investment Company)--benefit the most from state land sold at ridiculous prices in corrupt contracts with "the organs of sovereignty."

Talaat Mustafa Group, which was founded by the Talaat Mustafa family, controls 50 million square meters. Since 2006, is has been co-owned by the Bin Laden Group of Saudi Arabia. Two members of its board of directors come from this prominent family.

The same applies to SODIC, which was founded in Sixth of October City in 1996 controls vast amounts of territory in the west and east of Cairo and New Cairo. In the mid-2000s, EFG Hermes became the largest partner in SODIC, and thus SODIC came under the control of the UAE.

Some Conclusions

As you can see, dear readers, the absolute support given to the counterrevolution and its field marshal by the kings and princes of Saudi Arabia, UAE and Kuwait does not simply express their instinctive fear of the revolution in general, but it is also the outcome of Mubarak's neoliberal policies as well as the direct intervention of the ruling class of the Gulf monarchies into the Egyptian ruling class with its corrupt businessmen and its even more corrupt generals.

When the Saudi-Emirati axis finances the field marshal's bloody project to kill the Egyptian revolution to the tune of more than $20 billion, this reflects an interest in not only to burying the revolution, but also continuing the policies of the Mubarak regime, which has opened a fertile ground for vast profits for Gulf capital in search of profitable investment opportunities for its accumulated oil revenues.

Thus, military rule in Egypt today does not only represent the Egyptian ruling class, but a regional ruling class, in which the larger component is Gulf capital. This regional dimension of the counterrevolution leads to a number of important conclusions.

First, if it were not for massive Gulf support, the field marshal would not have succeeded so far in his counterrevolution, and the ruling class in Egypt would not have lasted in the face of successive revolutionary waves.

Secondly, the field marshal cannot deviate from the script dictated by his sponsors. As we well know, there is no such thing as unconditional financing, and Gulf finance wants to protect its huge investments that have been pumped into the Egyptian economy through neoliberal policies. In other words, Gulf capital wants to continue its participation in the looting of the Egyptian people and the exploitation of the working class in order to continue increasing its huge profits.

Sisi understands his role very well, which is why it is not surprising that he announced his position in relation to the presidential candidacy in a Kuwaiti newspaper. Nor is it surprising that he kisses the hands of his masters in the Gulf and unabashedly declares that his role is to market Egypt--in other words, offering it for sale to the Dinar and Riyal.

Perhaps all of this belies claims that Sisi will adopt actions that are of a populist nature or actions that have any degree of national autonomy.

Third, the relationship of the Sisi project to the Gulf axis is totally incompatible with any desire or ability to play a role independent of the United States for Saudi Arabia, UAE, Kuwait and even the adventurous Qatar are the world's closest allies of Washington (in addition to Israel). Of course, allies sometimes disagree with one another, but does anyone want to claim that Saudi Arabia is independent of its masters in Washington, or that it can dispense with U.S. military protection of its vital interests?

The Egyptian-American relationship is based on clear and shared interests, which are a commitment from the Egyptian side to provide military and intelligence services to the Pentagon and to preserve the peace treaty with the Zionists. This is the red line for Washington--a line that Sisi will respect at all costs, not only for the sake of U.S. financial and military aid, but also because it is in line with the interests of the Egyptian-Saudi ruling class.

Fourth, when Sisi goes to Russia, it is pathetic to imagine that he wants to or can change the fundamental shape of Egypt's alliances and the overall balance of the regional and global power. All this talk likening Sisi to Gamel Abdul Nasser and diversifying weaponry sources is just media spin by the Armed Forces' Moral Affairs Agency and its subsidiaries, namely privately owned media and television networks.

Even the $2 billion worth of arms that Sisi plans to buy from Russia (backed by financing from Saudi Arabia and the UAE) will only affect Egyptian-Russian cooperation to the extent that the masters permit is--not the masters in Mecca and Medina, but those in Washington and Tel Aviv.

Fifth, and this is probably the most important conclusion, if the success of the counterrevolution is dependent on generous support from the Gulf, and if this support is a matter of life or death for the Gulf's capitalist class which has been organically integrated with the Egyptian ruling class and military generals, then was it not a mistake that the Egyptian revolution gave insufficient attention to the regional dimension of the revolution and thus the counterrevolution?

Is it not clear that the overthrow of the ruling class in Egypt with its deep state necessarily requires the overthrow of the kings and princes of the Gulf? Is it not clear that the kingdom in Saudi Arabia stood and will continue to stand in the way of any possibility of the victory of the Egyptian revolution? Have events not proven that the king and the field marshal are part of one hand?

First published by the Revolutionary Socialists of Egypt.

Further Reading

From the archives