Jordan’s King Abdullah Threatens to Shut Down Egypt’s Economy

The expulsion of Egyptian workers would be catastrophic for the disintegrating Egyptian economy

By David P. Goldman 

Speaking at a private meeting this week, Jordan’s King Abdullah warned that he had “bargaining chips” to use against the Muslim Brotherhood, which he denounced as a “new extremist alliance” in the Arab world. The news site AI-Monitor today translates a report from al-Hayat, citing sources from the meeting. “Rhe Jordanian monarch was full of reproach for Egyptian President Mohammed Morsi, who hails from the Muslim Brotherhood,” al-Hayat wrote. “The king added that the Egyptian leadership had ‘marginalized the Jordanian role during the Israeli-Palestinian negotiations to stop the recent aggression on the Gaza Strip.’”

The Muslim Brotherhood has targeted Jordan’s monarchy as the next domino to fall after Egypt. At the Dec. 10 meeting, King Abdullah accused Egypt of economic sabotage.

The king said that “Jordan was severely damaged as a result of frequent interruptions of Egyptian natural gas, which cost the state treasury about 5 billion Jordanian dinars [$7.04 billion],” stressing that the interruption of gas ”is the real reason behind the economic crisis plaguing the country.”

Under previous agreements with the Egyptian authorities, Jordan used to import 80% of its gas needs for the production of electricity, which equates to a daily amount of about 6.8 million cubic meters of imported gas. However, the pipeline which supplies gas to Jordan and Israel was subsequently the target of frequent bombings.

The Jordanian monarch warned that his country would retaliate:

King Abdullah II said that “Amman has bargaining chips through which it can send messages to Cairo, including the fact that 500,000 Egyptians are working in Jordan. Moreover, the kingdom is the only passageway for Egyptian vegetables being exported to Iraq, and tens of thousands of Egyptians working in the Gulf states are using the Nuweiba-Aqaba waterway in their travels.”

…Other official sources talked about the arrest of thousands of Egyptian workers who have breached the conditions of their residency in the past two weeks, as well as the deportation of about 1,900 of them to Egypt, according to Jordanian Minister of Labor Nidal Qatamin. He said his country is not targeting Egyptian laborers, saying that the deportation decisions resulted from “violations of the usual procedures and applicable laws.” Remarkably, according to official sources, of the 500,000 Egyptians working in Jordan, approximately 320,000 have violated the conditions of their residency.

It is unlikely that Jordan would take on Egypt without strong backing from Saudi Arabia. A further 1.7 million Egyptians work in Saudi Arabia and an additional 500,000 in Kuwait. The Egyptian diaspora is the last thing holding up Egypt’s economy. Workers’ remittances stood at $18 billion in 2010, according to the World Bank, or about half of Egypt’s present $36 billion trade deficit. The expulsion of Egyptian workers from the Arab monarchies would have catastrophic impact on the disintegrating Egyptian economy. Two million Egyptians worked in Libya before the civil war, but many fled the country earlier this year.

As it is, President Morsi was forced to postpone negotiations on a proposed $4.8 billion loan from the International Monetary Fund,  after scrapping a proposed tax increase that the IMF considered a condition for the package. With a government budget deficit at 11% of GDP and a trade deficit at 16% of GDP, Egypt must cut expenditures to survive financially. No Egyptian government, though, appears capable of persuading a population half of which lives on less than $2 a day to accept austerity.