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- Corridor of opportunities: the administration of the Suez Canal announced plans for cooperation with the Russian Federation
Corridor of opportunities: the administration of the Suez Canal announced plans for cooperation with the Russian Federation
Russia can establish a partnership with the Suez Canal Administration. This proposal was made by its head Osama Rabia. Today, cooperation is carried out only through the project of the Russian industrial zone on the territory of the facility. Experts believe that joint work can bring Russia a number of political, economic and logistical benefits. Cooperation will also be useful for Egypt, which is seeking to diversify the channel's sources of income and strengthen its position as an important transport hub. What is needed to conclude a partnership agreement is in the Izvestia article.
The course of cooperation
The Suez Canal Administration intends to conclude a partnership agreement with Russia. The hope for this was expressed by its head Osama Rabia. He stressed that the authorities of the waterway treat all states equally, not allowing the channel to be politicized.
"Currently (in Russia. — Izvestia) There is no partnership with the Suez Canal, there is a partnership with the Suez Canal Economic Zone in the east of Port Said. We hope for this (partnership agreement with the Russian Federation. — Izvestia)," Rabia said in response to a question about cooperation with Russia in an interview with RIA Novosti.
The Suez Canal Authority is a legal entity with administrative and financial autonomy. At the same time, it still operates according to the rules of the Constantinople Convention of October 29, 1888, according to which "the Suez Canal will always be free and open, in time of war and in peacetime, for any vessel, for trade without distinction of flag."
The Russian Industrial Zone (RPP) is currently being created in the Suez Canal. The intergovernmental agreement on its creation was signed by the Russian Federation and Egypt in May 2018. The RPZ is expected to be divided into two sections. The first one will appear in the Ain Sokhna area, near the entrance to the Suez Canal from the Red Sea. The second one is located in the eastern part of Port Said near the Mediterranean coast. The area of this site is 525 hectares.
Russia and Egypt continue to strengthen cooperation in the Suez Canal. In March 2023, an additional agreement was signed allowing resident companies from the Russian Federation operating in the Russian industrial zone to sell products not only in third countries, but also on the Egyptian market.
In October of the same year, the Ministry of Industry and Trade announced that the project was going according to plan: until 2026, a total of 9.5 billion rubles would be allocated to support the RPZ.
Russia generally pays great attention to cooperation with Egypt. As the Minister of Industry and Trade Anton Alikhanov noted earlier, this state is the largest foreign trade partner of the Russian Federation on the African continent. In five years, the trade turnover between the two countries has increased 1.5 times, the head of the department emphasized. In 2024, in particular, mutual trade grew by almost 32%, breaking the $9 billion mark.
The editorial board of Izvestia sent a request to the Ministry of Industry and Trade of the Russian Federation, the State Corporation for the Development of Russia, VEB.Russian Federation" and the administration of the Suez Canal. No responses had been received at the time of publication.
A promising route
The Suez Canal is one of the most important transport hubs in the world, believes Alexey Zahudalin, Head of Logistics at the Service Logistics Company. About 1 billion tons of cargo pass through it annually.
The benefits of cooperation with the Suez Canal administration are enormous for any company in the world, as it is one of the most profitable and stable monopolies, Said Gafurov, an Arab orientalist and associate professor of the Department of Foreign Regional Studies at Moscow State Linguistic University.
— The United States paid many billions of dollars in the 70s of the last century to gain control over the work in the Suez Canal, intercepting it from Soviet organizations. This happened after the Camp David Agreements between Egypt and Israel, when the United States acted as an intermediary, financed the project and received the right to service the canal. First of all, we need to open it after the military operations, carrying out repairs, mine clearance, and so on," the Izvestia source explains.
In this way, the United States managed to oust the USSR from all work on the water facility. And now Russia has very little presence on it. Even fragmentary participation would be extremely beneficial for the Russian Federation, since the administration of the Suez Canal is rich and solvent, says Gafurov.
From the point of view of logistics, the Constantinople Convention continues to operate in the Suez Canal, guaranteeing free navigation for all ships, regardless of their nationality, Alexey Zahudalin emphasizes. This is important for Russia, because all exports from the ports of the Black Sea basin and the Baltic Sea going to India, China and other Asian countries are carried out through the Suez Canal today, adds Mikhail Zvyagintsev, founder of the logistics company TEK Operator.
— The canal provides a significant advantage for Russian carriers, as Western logistics companies and transport lines cannot use it due to the conflict in the Middle East. This creates a competitive advantage for the Russian Federation, and we can get additional benefits from the Suez Canal administration," he is convinced.
This is relevant because today Russian ships pass through the Suez Canal on a general basis, paying standard fees, says Nadezhda Kapustina, professor at the Department of Economic Security and Risk Management at the Financial University under the Government of the Russian Federation. Russia currently does not have a direct partnership with the administration, but it is actively involved in the development of the adjacent economic zone, explains Vladimir Chernov, analyst at Freedom Finance Global.
At the moment, the practical stage of the project implementation has begun, provided for in the agreement on the creation and provision of operating conditions for the Russian industrial zone in the Suez Canal economic zone, recalls Alexander Rudoy, an expert at the Department of International Cooperation at the State University of Management. The work is being carried out following the ratification by the Egyptian side of the protocol on amendments to this agreement and the signing of an agreement on the establishment of a usufruct (a document on the right of use), fixing the conditions for the transfer and operation of the site.
Mutual benefit
The statement by the head of the Suez Canal administration, Osama Rabia, about readiness for partnership with Russia reflects Egypt's pragmatic approach to international economic relations, Nadezhda Kapustina points out. In her opinion, such a position is quite understandable from the point of view of geo-economic interests. Egypt is interested in diversifying the channel's revenue sources and strengthening its position as an important transportation hub.
"Russian cargo flows can compensate for possible fluctuations in transit volumes from other countries, ensuring the stability of budget revenues, as well as the unhindered supply of Egypt with products imported from Russia, which are vital for the country, in particular, grain," the expert lists.
The Suez Canal is one of the world's key transport routes, through which up to 12% of world trade passes, Vladimir Chernov recalls. Partnership with his administration may mean simplification of procedures for Russian courts and joint infrastructure projects. Russia will be able to participate in the development of logistics hubs located in the canal's infrastructure, which will strengthen its global position in maritime transportation to Asia, Africa and Latin America, adds Alexander Rudoy.
"This is especially important in the context of the restructuring of logistics chains and the reversal of Russia's foreign economic strategy towards friendly countries,— Chernov draws attention.
Investments in the canal's infrastructure, in turn, will reduce customs and logistics costs and localize production (including those created to circumvent sanctions), Ore does not exclude. Cooperation can also stimulate the construction of transport terminals and storage facilities for oil and LNG.
In addition, the practical benefits of cooperation may include individualized tariff conditions, priority in transit cargo services, and simplified access to port infrastructure, says Alexey Zahudalin.
Constructive approach
Vladimir Chernov believes that the intensification of negotiations on cooperation may begin against the background of the expansion of commodity flows and interest from Russian business in transit routes through the Suez Canal.
The mechanism for concluding an agreement between Russia and the Suez Canal administration may be similar to the agreement on the Russian industrial zone, admits Alexander Rudoy.
— It provides for the preliminary signing of an intergovernmental agreement, for example, in the format of a memorandum of understanding concerning this project. Then it will be necessary to agree on the terms of the contract, including the terms of access to the Suez Canal infrastructure, the rights to lease the site, construction of facilities, use of ports, terminals, and reflection of all these points in the legal documentation, the expert explains.
It will also require an agreement on tariff policy, possible preferential terms for Russian goods and mechanisms for long-term cooperation, Nadezhda Kapustina lists. An important aspect will be the coordination of positions with international financial institutions and compliance with the requirements of the global banking system.
A full-fledged partnership agreement with the channel's administration will require a political and economic study of the terms of cooperation, Chernov agrees. This includes clarifying the format of cooperation from the use of infrastructure and ship maintenance to joint logistics hubs.
— Guarantees of the neutral status of the channel and its non-politicized use are also important, as Osama Rabia explicitly stated. In addition, coordination of interests with the Egyptian authorities will be required against the background of the already existing agreement on the RPZ," the analyst clarifies.
A key factor in the success of the negotiations will be the ability of the parties to find a balance between commercial interests and geopolitical constraints, Kapustina is sure.
"The prospects for such cooperation largely depend on the overall dynamics of Russian—Egyptian relations and the willingness of both sides to make long-term commitments in the field of transport logistics," the economist concludes.
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