Authors: Giuseppe Adamo, Bartosz Mirowski, Maciej Pawłowski
Thesis and Introduction
For several years, Egypt has been mired in an economic crisis and is an example of a state that is too big to fail. The EU is making a range of efforts to prevent it from falling into the sphere of influence of other countries, recognizing that, despite all the difficulties in cooperation, it is an important partner in countering irregular migration, supplying electricity, and stabilizing the region. The country also serves as a logistics hub between the EU and both Africa and the Gulf states. Its location is strategic for global trade.
Relations with Europe
On 17 March 2024, Egypt and the EU concluded a Strategic Partnership based on the 2004 Association Agreement. The partnership rests on six pillars: political relations, economic stability, trade and sustainable investment, migration and mobility, security, and people and skills. In addition, in 2024–2027 the EU will extend EUR 5 billion in loans to Egypt, invest EUR 1.8 billion in the development of the Egyptian economy, and provide EUR 600 million in grants, including EUR 200 million for migration management. The provision of these funds is intended to help the country emerge from its economic crisis and avoid entering the sphere of influence of the Gulf states, Russia, or China.
EU financing is also meant to transform Egypt into a destination country for migrants from Sub‑Saharan Africa. At present, it is a transit state for migrants seeking to reach the EU from the Horn of Africa and from Palestine. More than six million citizens of Sudan and South Sudan reside in Egypt. Other sizeable immigrant groups include Palestinians, Somalis, Ethiopians, and Eritreans. Egypt counters irregular migration to the EU under agreements with Germany, Italy, Greece, and Cyprus. Egyptian‑Italian cooperation has been ongoing since 2000 (with subsequent agreements in 2007 and 2009). The Egyptian‑Greek‑Cypriot agreement was concluded in 2015, and the Egyptian‑German one in 2017. Under these arrangements, Egypt’s coast guard prevents boats carrying migrants from departing its shores.
The EU is Egypt’s largest trading partner, accounting for 22% of the country’s foreign trade. The total value of merchandise trade amounted to EUR 32.5 billion in 2024, a decrease of 0.7% compared with EUR 32.7 billion in 2023. Exports are composed mainly of hydrocarbons, as well as agri‑food products, fertilizers, and textiles. Imports from the EU consist primarily of machinery, industrial goods, and chemicals. Egypt is also an important market for European capital. For example, German and French companies invest in the Suez Canal Economic Zone, and logistics facilities with international participation are in operation (e.g., the car terminal at East Port Said). Since 2021, the Katowice Special Economic Zone has cooperated with the Suez Canal Economic Zone.
Energy Interconnections with the EU
In 2025 Egypt remains one of the key energy players in Africa and the Mediterranean region. The country’s energy mix still relies mainly on natural gas, which accounts for over 80% of electricity production. Renewable sources, such as solar farms, wind farms and hydroelectric power plants on the Nile, provide about 12-15% of capacity, and the government announces further investments in cooperation with foreign partners and the European Union to gradually increase their share.
The priority is the expansion of cross-border connections. In 2024 Egypt and Greece signed an agreement to build a submarine power cable about 1,400 km long. The GREGY project will enable the export of up to 3,000 MW of green energy from Egypt to the Greek market and further to the EU. Cairo hopes that this connection will strengthen its role as an energy hub for Europe.
Equally important is the development of the gas market. Egypt is the host of the East Mediterranean Gas Forum, a cooperation platform that includes Cyprus, Israel and EU countries. The Forum coordinates the export of gas from the Levant basin to Europe, partly through Egyptian LNG terminals. The EastMed pipeline project, which has been discussed for years and was supposed to connect Israel, Cyprus and Greece, still remains at the stage of economic and political analysis, although Cairo actively supports the initiative.
Water issues remain as strategic as energy ones. Egypt suffers from a chronic water shortage, which is exacerbated by the construction of the Grand Ethiopian Renaissance Dam in Ethiopia. Commissioned in 2025, the hydroelectric power plant with a capacity of over 5,000 MW limits the flow of the Blue Nile, which Cairo and Khartoum consider an existential threat. Despite numerous rounds of negotiations, no binding agreement has been reached to regulate the filling of the reservoir.
Alternative concepts are emerging, including even the idea of building a water pipeline from Europe to Egypt, but experts point to their unrealism due to costs and distance. In practice, Cairo is investing in desalination and modernization of irrigation systems, as confirmed by the Ministry of Water Resources. These projects are intended to reduce the deficit, which already amounts to billions of cubic meters annually.
Additionally, in 2025 Egypt signed an agreement with BP that provides for the drilling of five new gas wells in the Mediterranean Sea, aimed at increasing local production and reducing the import dependence of the basin.
Thus Egypt faces a dual challenge: the modernization of the energy sector and the assurance of water security. The effectiveness of investments in renewables, the development of transmission infrastructure and water diplomacy will determine whether Cairo consolidates its position as a strategic partner for Europe in the coming decades.
Infrastructure Links
For the EU, Egypt remains a key partner in maintaining the fluidity of global supply chains. Control over the Mediterranean–Red Sea axis via the Suez Canal creates a natural bridge between Asia, Africa, and Europe, which is a logistics hub for global trade. The Suez Canal accounts for 12–15% of world trade and 30% of container traffic. In the first half of 2023, an average of 9.2 million barrels of oil per day transited the strait, accounting for 9% of global demand. How critical this chokepoint is was made clear by the incident involving the Ever Given container ship in 2021 and by Houthi attacks on cargo vessels in 2023.
Since 2016, the government has been implementing the Egypt Vision 2030 strategy, which treats the modernization of transport infrastructure as one of its priorities. The expansion of ports and logistics centers is intended to make the country less dependent on fluctuations in global trade and to reduce operational risks. Under the transport policy for 2024–2030, the development of inland back‑up infrastructure also remains a priority. Egypt is consistently developing a “port‑to‑hinterland” strategy based on a network of dry ports and logistics zones. These are intended to remove bottlenecks in cargo handling and shorten clearance times. The plan provides for the creation of 31 dry ports and logistics zones and the construction of seven integrated transport corridors linking major production centers with seaports.
In parallel, a 2,000‑km high‑speed rail network is being built; it will connect 60 cities and enable around 500 million journeys per year. The railway is to link the port of Ain Sokhna on the Red Sea with the Mediterranean coast and Upper Egypt. The project, worth more than USD 8 billion, is being delivered by Siemens. Ultimately, it will include 41 Velaro high‑speed trainsets, creating the sixth‑largest high‑speed rail network in the world. In 2024, progress on works and deliveries of the first trainsets were confirmed. The plan provides for full integration of the railway with the new capital in the future.
Tourism is one of the accelerators of change in Egypt’s economy and infrastructure build‑out. In 2024, the country was visited by a record 15.7 million tourists (14.9 million the year before). According to the assumptions, this number is to reach 30 million annually by 2030. This is to be supported by expanding the offer—opening of the Grand Egyptian Museum, modernization of the Giza area, and the expansion and upgrading of numerous resorts. It is estimated that the tourism sector accounts for around 8.5% of Egypt’s GDP and provides 2.7 million jobs.
Controversy was sparked by last year’s decision to sell the coastal locality of Ras El‑Hekma to the United Arab Emirates for USD 35 billion. Egypt retained a 35% stake in the venture. In addition, a UAE fund declared investments worth USD 11 billion in the real estate sector and other projects in the country. This is the largest foreign direct investment in an urban development project in Egypt’s modern history.
Covering 170 million m², the complex is intended to transform the seaside locality into a next‑generation city with a tourism base, a free‑trade and investment zone, and extensive residential, commercial, and recreational infrastructure. While Abu Dhabi presents the transaction as a strategic partnership, in Egypt it has aroused controversy and criticism regarding the transfer of a key region into the hands of foreign investors at the expense of local development needs and domestic entrepreneurs.
Conclusions
Egypt occupies a strategic position in global trade and plays an important role with regard to migration to the EU. It is important that the country remain politically and economically stable and oriented toward cooperation with the EU and the United States. In this respect, maintaining the rule of President al‑Sisi and the country’s military elite is particularly significant. Despite all shortcomings and inefficient economic management, they have been able to ensure internal security, conduct an effective fight against Islamist extremists, protect the rights of religious minorities, and be a predictable partner for the EU. If the al‑Sisi regime were to collapse, all these factors could change rapidly, as was the case in 2011–2013. At that time, Egypt, governed by the Muslim Brotherhood, was unstable, supported regional terrorism, and, through violations of citizens’ personal freedoms, contributed to increased migration to the EU.
It is in the EU’s interest to protect the Suez Canal and the Red Sea as areas that are critical for the global economy. At the same time, it is necessary to build additional trade routes and new infrastructure links. Large‑scale investments may also be a way out of Egypt’s economic crisis.
Egypt can be an energy supplier to Europe if it first satisfies its own needs in this area. In this respect, the development of the East Mediterranean Gas Forum and the continuation of extraction work in the Eastern Mediterranean are of particular importance.
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