Russia-Egypt “contract of the century”: NPP project to be launched soon

The talks on Russia’s biggest energy project in the Middle East are near completion. The multi-billion contract for the construction of Egypt’s first nuclear power plant is expected to be finalized in Mar 2017.

On Nov 19, 2015, Russia and Egypt signed an intergovernmental agreement for the construction of four 1,200MW nuclear reactors in El Dabaa. In May 2015, Egypt approved an agreement for borrowing from Russia $25bn for the project. As of today, the estimated cost of the construction is $30bn. So, the loan will cover just 85% of the cost, while 15% will be Egypt’s own resources or other loans. The Russian loan is to be repaid in 2016-2028. The first tranche is to be provided in $247.8mn. The interest is 3% (1).

Last month, Rosatom coordinated 90% of the deal. “The current stage of the talks is very sensitive and is being held in strict secrecy because it concerns the security of the reactors. So, any measure must be coordinated. Nothing can be ignored here,” Al Bursa reported in Dec 2016, quoting governmental sources.

One of the key reasons why the talks are so long is that this is a complex project. In fact, the Russians are going to establish a whole nuclear industry in Egypt (2), this implying fuel supplies, removal of nuclear waste, training of personnel (3). All this requires coordination.

But behind all the technical and financial details, there is one political nuance: the Egyptians want to restore their air communication with Russia. They first mentioned that in Nov 2015, after the crash of a Russian plane in Sinai – an accident that claimed the lives of 224 people.

On Nov 16, 2015, Director of the Federal Security Service Alexander Bortnikov reported to President Putin on the causes of the crash. It was a terrorist act. After that, the Egyptians could no longer hesitate. After all, not each nuclear power would have agreed to cooperate with a country where security was not very good. The Russians had all grounds for going away as they did in Sharm el Sheikh. After having lost so much in tourism, the Egyptians could not allow such an outcome.

Now they are waiting for Putin’s decision to restart flights to Egypt and thereby to reanimate Russian tourism in that country.

Mar 2017 is the most probable date for both decisions. The Egyptians have already spent as much as $42mn on their air security. More specifically, they are installing biometric control access systems at the airports in Cairo, Hurghada and Sharm el Sheikh (4), with the Cairo system to be installed by the end of Jan 2017.

According to Egypt’s Civil Aviation Authority, a group of Russian experts visited the Cairo airport in Dec 2016 and was satisfied with the work done there. Later, Egyptian Civil Aviation Minister Sherif Fathi said that the experts were going to come back in Jan 2017.

In the meantime, Russian and Egyptian nuclear experts will be holding consultations on the NPP project.

If implemented, this big long-term project will give a strong impulse to Russian-Egyptian economic relations (5).

One more stimulus here is the active contacts on the major Middle East problems, particularly, on Syria.

From coordinated statements, the sides are moving to closely coordinated efforts (on Oct 8, 2016, Egypt supported Russia’s resolution on Syria at the UN Security Council). In its turn, Russia has nominated Egypt as one of the parties to the forthcoming Astana talks on Syria. Turkey’s nominees are Saudi Arabia and Qatar.

This Russian-Egyptian alliance may potentially involve Iran (due to the Syrian platform, Iranian-Egyptian relations have become much less tense) and may grow into an efficient force against extremism and terrorism in the Middle East. The sides are consistently moving to this end unlike the Turkish-Saudi-Qatari camp.

The Russian-Egyptian “contract of the century” is expected to be signed in early spring, with the construction to be started this year. This year, we also expected the comeback of Russian tourists to Egypt as this summer, the Egyptian airports are supposed to be much safer.

Over the last three years, Russia and Egypt have gone through hard times and have jointly opposed many common challenges. The Dabaa project is supposed to cement Russian-Egyptian political relations and to catalyze economic contacts.

(1) Egypt, Russia agree on bank guarantees and credit packages for El Dabaa nuclear power plant ∕∕ Daily News, January 10, 2017.

(2) In 2018-2030, due to the El Dabaa NPP, the share of nuclear energy in Egypt’s energy mix is supposed to grow to 9%.

(3) Egypt’s Electricity and Renewable Energy Ministry is going to send to Russia over 1,700 nuclear energy specialists for retraining.

(4) One of the key points of the Russian-Egyptian air security agreement is to install biometric control access systems at Egyptian airports. The Russians also insists on installing video surveillance at all Egyptian airports and creating preflight inspection zones.

(5) According to Rosatom, the El Dabaa project will connect Russia and Egypt for 100 years: the construction will take 12 years, the operation 60 years, the prolonged life 20 years.

EADaily’s Middle East Bureau