Egypt warms up to Russia’s customs union

MOSCOW — Egypt has resumed talks about the creation of a free trade zone with the customs union of Russia, Belarus and Kazakhstan, Egyptian and Russian officials said on Wednesday.

Russia is increasing efforts to strengthen relations with large importers of its products as the United States and European Union (EU) threaten steeper sanctions over Moscow's intervention in the crisis in Ukraine.

In the biggest East-West confrontation since the Cold War, the US and EU have imposed visa bans and asset freezes on some of President Vladimir Putin's closest political and business allies after Moscow annexed Ukraine's Crimea.

"There were talks about this [creation of the free trade zone with Egypt] before 2011... Now we have agreed to resume these negotiations and to discuss sectors of cooperation," Russian Agriculture Minister Nikolai Fydorov said.

"The final decision will be made after the [presidential] election campaign in Egypt, official documents will be appearing after it," he told reporters in Moscow after the meeting of the Russian-Egyptian commission for trade development.

Egyptian Industry and Investment Minister Mounir Fakhry Abdel Nour said the agreement on free trade with the customs union could contribute to expanding cooperation between two countries.

He added that the officials have also discussed a number of joint projects, including supplies of Russian liquefied natural gas and other commodities.

Russian state nuclear firm Rosatom is considering taking part in the construction of a nuclear power plant in Egypt, according to officials.

They have also agreed to revive Russia's participation in modernisation of assets dating back to the Soviet era, Fyodorov noted. 

He mentioned an aluminium plant, a hydro power plant, and projects related to the light metro in Cairo and grain storage. He did not specify what form Russia's involvement could take.

Wheat supplies

Egypt is already the largest importer of Russian wheat, buying one fifth of the country's exports of this commodity so far in 2013/14. It bought 2.6 million tonnes of Russian wheat between July 1 and the end of February.

"You [Russia] have expressed your wish to expand exports, primarily of wheat... and we want to develop exports of vegetables and fruit. It would help widen our cooperation," Abdel Nour told the meeting.

Officials did not provide any other details on how Russian wheat exports could be increased.

It is unlikely that the countries will reach a major long-term wheat supply deal — a possibility the market has repeatedly speculated on, although there might be other ways of a deeper cooperation, a trader said.

"Egypt has often talked about these long term wheat deals before but no one believes anything practical will come out of it as it doesn't make sense. Why would you lock yourself into a deal with certain prices and what if market prices go down after that, you are stuck paying the higher price?" the trader added.

"What is more realistic is that they discuss together whether or not the Russian government can perhaps encourage Russian firms to participate more directly in GASC [Egyptian state wheat buyer] tenders to increase the amount of Russian offers," he indicated