Egypt’s $33bn Green Ammonia Deals with Europe Provide Economic Boost

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By 2035, the nation wants to generate 42% of its electricity from renewable sources like green ammonia.

On Sunday, four green ammonia agreements totalling up to $33 billion were inked by Egypt’s sovereign wealth fund with European developers.

According to a statement from the Egyptian cabinet, among the agreements was a $11 billion contract with Frankfurt-based DAI Infrastruktur to establish a green ammonia project in East Port Said.

Also, the Sovereign Fund of Egypt consented to collaborate with BP, Masdar, the United Arab Emirates, Hassan Allam Utilities, and Infinity Power in order to finance the establishment of a green ammonia plant at Ain Sukhna Port on the Gulf of Suez’s western coast. The project is anticipated to require $14 billion in investment capital.

Egypt, the third-biggest economy in the Arab world, is attempting to increase its solar, wind, and green hydrogen projects in order to combat dwindling natural gas production.

By 2035, the nation wants to generate 42% of its electricity from renewable sources.

As part of an updated strategy, Egypt intends to increase its aim for the share of renewable energy generation to 58% by 2040, according to Minister of Electricity Mohamed Shaker, Reuters reported on Saturday.

Aside from the EU-Egypt Investment Conference, several agreements were signed.

Over a thousand people attended the two-day conference at the New Administrative Capital, east of Cairo. Participants included ministers, officials, chief executives from various EU and Egyptian sectors, and representatives of European financial institutions.

This follows a historic agreement reached in March between Egypt and the European Union, which provides up to €7.4 billion ($8 billion) in support for Cairo’s business climate and economic reform agenda.

Egypt has pledged to help the EU with a number of important concerns in return, chief among them being the halting of illegal migrants.

A senior EU official stated during the event on Sunday that Egypt has an important economic and political role because of its strategic location at the intersection of Africa, the Middle East and Europe.

“We see Egypt as a stabilising force in the entire region. The conflict in Gaza, the situation in Sudan and difficulties in the Red Sea, so we see that it’s a very complicated geopolitical situation,” said EU trade commissioner Valdis Dombrovskis.

Egypt’s capacity to make investments in sectors that could boost the economy has been hampered by its high rate of inflation and significant public debt.

Egypt avoided a complete lockdown during the coronavirus epidemic, but the interruptions brought on by Russia’s invasion of Ukraine in 2022 had a substantial negative effect on the country’s economy. The nation is primarily dependent on wheat shipments from Ukraine and Russia.

Egypt obtained a $8 billion loan package from the IMF in March, subject to Cairo’s adoption of a flexible exchange rate regime, monetary tightening, a halt to infrastructure investment, and maintenance of debt sustainability.

During the same panel discussion, Egypt’s prime minister, Mostafa Madbouly, stated, “We count on the EU as our main strategic partner that will help Egypt to move ahead to achieve a stable and booming economy for the sake of the whole region.”

According to EU figures, the EU is Egypt’s largest trading partner, making up 24.5% of Egypt’s overall trade volume in 2020.

EU Commission President Ursula von der Leyen stated in a speech that forty per cent of Egypt’s foreign direct investments came from Europe.

Egypt has benefitted greatly from foreign financial contributions and pledges from the EU, the World Bank, the UAE, and the IMF this year.

This helped to resolve a protracted foreign exchange crisis and led to promises of reforms, such as curbs on off-budget spending, more flexible exchange rates, and a reduction in the size of the state and military’s economic influence.

In the past, these promises haven’t done much to stimulate the private sector. Egypt is facing persistent difficulties as evidenced by frequent power outages and production halts by chemical and fertilizer factories due to gas shortages.

Diplomats and businesspeople claim that the process of deciding on economic strategy is not very transparent. Almost four weeks after the present cabinet’s departure was made public, no new administration has been named.

According to Egyptian officials, they are making every effort to control outside demands and cater for the country’s 106 million residents.

In order to get the European Parliament’s permission for a second, five-year term as president of the Commission, von der Leyen travelled to Cairo.

On June 27, EU leaders decided to nominate the German, but many believe that the secret ballot vote in the parliament will be more difficult.