After Saudi Détente, Iran Edging Closer To Egypt
Iran is looking towards mending fences with Egypt in the wake of Tehran signing a China-brokered deal for détente with Saudi Arabia.
Iran is looking towards mending fences with Egypt in the wake of Tehran signing a China-brokered deal for détente with Saudi Arabia.
Iranian lawmaker Fada-Hossein Maleki, a member of the parliament’s National Security and Foreign Policy committee, said in an interview with Tasnim news agency published Sunday that talks to bolster ties between Iran and Egypt are being held regularly in Iraq.
It comes amid recent reports of Oman hosting Iranian and Egyptian officials for talks.
Maleki said: “Restoring relations between Iran and Egypt is very important... In the near future, bilateral relations will be restored, and we will witness the opening of embassies in both countries.”
Egypt has maintained diplomatic representation in Tehran since the Islamic revolution. However, the countries have only chargés d'affaires running the missions.
Malekei said that after the mooted reestablishment of ties Iranian President Ebrahim Raisi will hold a meeting with his Egyptian counterpart Abdel Fattah El-Sisi.
Also on Sunday, Iranian Foreign Minister Hossein Amir-Abdollahian told IRNA: “We have always welcomed the improvement of relations between Tehran and Cairo.”
Tehran and Cairo’s history of on and off relations predates the establishment of the Islamic Republic. Iran’s relations with Egypt, a close ally of Saudi Arabia and other Persian Gulf nations, have been fraught since the Shah fell in 1979. His subsequent refuge in Egypt, where he died and was buried in 1980, then ruled by President Anwar Sadat, damaged relations.
Iran named a street after Khaled Eslamboli, the man who assassinated Sadat because he gave asylum to the Shah. The name was changed following the resumption of ties with Saudi Arabia in anticipation of further extending the regional rapprochement.
Relations improved after President Hosni Mubarak resigned in 2011. In April 2012, Iran appointed an ambassador to Egypt weeks before then-president Mohamed Morsi visited Iran. However, continued tensions between Iran, Saudi Arabia and allied Western nations have long proven to be an obstacle.
After years of bad relations, Iran and the Kingdom recently reached an agreement to end a seven-year diplomatic rift. Upon the visit of Iran's Minister of Economy to Saudi Arabia, Riyadh on Friday introduced its new ambassador to Tehran.
After Foreign Ministry spokesman Nasser Kanaani welcomed the Tehran-Riyadh détente, he added: “Egypt is an important country and the two countries value each other in the region. The region needs the synergy of Tehran and Cairo.”
In May, Hojjatollah Joudaki, a former Iranian diplomat in Egypt, said Tehran may be replacing idealism with pragmatism to end the long-standing impasse in its foreign policy, noting that a recent trend of changing tens of street names in Tehran could be the first move.
Qatar-affiliated media outlet Al-Arabi Al-Jadeed reported in June that Cairo and Tehran had agreed on “gradual expansion of Tehran-Cairo relations as well as coordination on the situation in the Gaza Strip and Syria.” The London-based pan-Arab daily also reported that Egyptian and Iranian intelligence official held a meeting in which Egypt warned Iran not to target Israelis on its territory.
In the third annual gathering of officials to discuss the National Development Fund (NDF), the chairman of the National General Inspection Organization, Zabiollah Khodayan finally came up with general but clear figures about what the fund represents.
The fund collected $150 billion over the years from saving a portion of Iran’s oil export revenues, but successive governments dipped into the fund and spent $100 billion, while another $40 billion “was borrowed” by state entities, Khodayan said. So, in short, Iran has only $10 billion saved, which is negligible compared with other oil-exporting countries.
In contrast, the United Arab Emirates has more than one trillion dollarssaved in several sovereign wealth funds, an even Oman, the poorest of Persian Gulf oil exporters has $17 billion.
Khodayan argued that the main reason why NDF has not been successful is lack of transparency by the government. While governments dip into the fund to finance their deficits or projects, the public is usually kept in the dark.
Since its establishment in 2000 as a currency reserve to supplement the Oil Stabilization Fund, successive governments dipped into the NDF for current spending, including the withdrawal of billions of dollars for military spending. The administration of President Mahmoud Ahmadinejad (2005-13) borrowed heavily from the fund, which contained $24 billion when he was elected, even though Iran earned an estimated $700 billion from oil exports during his presidency.
This was the highest amount the country had earned during 100 years of oil production. The populist president withdrew $2.7 billion to pay New Year cash handouts to all Iranians in 2013.
In the last three years of Ahmadinejad’s presidency, Iran’s oil exports declined because of international sanctions imposed to force Tehran to accept limits to its nuclear program. After a brief respite in 2016-2018 when the JCPOA nuclear deal was in effect, the United States imposed fresh sanctions in 2018, which slashed oil exports by as much as 90 percent in 2019-2020.
This brief overview of the past shows that although sanctions had a major role in limiting the growth of Iran’s sovereign wealth fund, financial and budgetary mismanagement has also played a role. Otherwise, with saving 20-30 percent of oil export revenues since 2000 should have made the fund worth at least $250 billion.
Another factor is the inefficiency of Iran’s state-controlled economy, which has made the state largely dependent on crude oil exports to finance government budgets.
Khodayan in his remarks also argued that wealth funds should not be considered as instruments for stabilizing the foreign currency markets. He was referring to efforts by successive Iranian governments to dip into the fund to defend the ever-declining national currency, rial. From Ahmadinejad’s time, the rial has declined 50-fold from 10,000 rials to the dollar to more than 500,000.
Although sanctions were the main reason for the disastrous performance of the national currency, capital flight in the past 15 years has played a major role. Government officials have indicated that capital flight has been well over $10 billion a year.
Both Iran’s inefficient economy and its constant confrontation with the United States and its allies eroded investor confidence, which led to people investing in other countries.
Khodayan also complained that although NDF has lent $40 billion for various projects, it has no control over how the money is spent. “The fund has no role in studying projects that receive financing. Also, the Central Bank fails to properly manage eight foreign currency accounts holding the funds.”