The Egyptian “Energiewende“: A window of opportunity for an EU policy shift?

Maersk Drilling via Flickr

The Egyptian energy sector is in transition – with massive support by European companies.

The billion-dollar deal between Egypt and the German enterprise Siemens concluded in June this year, as well as the recent discovery of one of the world’s largest natural gas fields by an Italian energy company off the Egyptian coast are just two examples for the scale-up of EU member state activities in Egypt’s energy sector. Officially, they aim to facilitate the country’s energy transition towards a more efficient use of existing resources and a stronger promotion of renewable energies. However critical voices in research and practice alike are calling for an end to a European approach that appears to be trading off democratic values and human rights for economic interests. But European support for an Egyptian energy transition can equally provide a massive opportunity. It could bring about the long-needed shift away from the EU strategy of promoting a Western-style democracy by means of conditional support. EU support for the Egyptian energy sector can then form the basis for a more legitimate and effective European approach, democratizing not just the way Egypt is governed, but EU-Egypt cooperation as well.

The need for an Egyptian “Energiewende”

Egypt’s energy sector is a particularly striking example for the lack of transparency, accountability and participation, pervading the country’s public sector and increasingly fueling tensions among society, as severe power shortages and rolling blackouts continue to plague the country and engender social unrest. In order to keep energy prices low, the sector is highly and artificially subsidized (in 2014, Energy subsidies constituted 20% of total government spending). This contributes to an increasing public budget deficit on the one hand and insufficient incentives to increase energy efficiency on the other. But in light of the country’s massive increase in energy consumption at a rate of up to 10 % per annum, mainly due to rapid population growth, progressive electrification and growing urbanization, a more efficient use of energy in Egypt is more important than ever. This also appears much easier to achieve than the tapping of new sources of energy, considering that final energy consumption per unit of output in the most important industries in Egypt is up to 50 % higher than the international average.

Egypt’s current energy crisis equally implies that the country is losing energy exports as an important revenue source. For years, Egypt was able to both satisfy domestic demand and to export oil and gas, with the EU as one of the most important export markets. At the same time, Egyptian energy exports are becoming increasingly important for the EU in its attempt to lessen energy dependence from Russia against the background of the pending risk of major interruptions in the supply of Russian gas.

EU and Egyptian officials’ interest in a successful energy transition is hence strong, leading to several joint projects under the roof of the official EU-Egypt Strategic Partnership on Energy.

From conditional support to sectoral cooperation?

However, expanding cooperation in spite of lacking democratic reform progress signifies a move away from the conditionality principle, according to which support in areas such as the energy sector is tied to the fulfillment of economic and political reforms. This mechanism has at least officially dominated Brussels’ approach towards Egypt as part of the European Neighborhood Policy in the past. Today, it is widely accepted as one of its major flaws. In the Egyptian setting, the fundamental conditions for the functioning of “more (support) for more (reform)” are not fulfilled. Above all, sufficient leverage for the EU to pressure Egypt into reform is lacking. Compared to the extensive unconditional support by its regional neighbors Saudi-Arabia or the UAE, the European rewards on offer are simply not credible enough and too small compared to the costs democratic reforms would imply for the Egyptian regime. And even if the EU managed to enhance its credibility as a partner and implement the conditionality approach more strictly, the underlying mechanism of conditional Western support would fail in a setting as sensitive to Western interference as Egypt.

Instead of slowly but steadily undermining this official approach and, thus, the EU’s credibility, a deliberate and clear change away from the conditionality mechanism is urgently needed. An EU-Egyptian partnership on equal footing, aimed not at imposing a Western-style democracy, but at strengthening democratic governance as a side-effect of sectoral cooperation, appears to be the most promising alternative in a setting, where massive restrictions placed on various civil society actors make bottom-up democracy promotion virtually impossible. Strengthening governance norms such as transparency, accountability and participation through close cooperation and support in sectors in urgent need for reform (e.g. the field of energy), can help to, at least partly, democratize the way Egypt is governed. Specifically, EU support for a more liberalized energy sector with public tenders, corresponding appeal mechanisms and, overall, a narrowly defined role of the state can form the basis for a broader change in Egypt’s governance culture, with potential spill-over effects into other sectors as well. Finally, by moving away from the blatant donor-receiver relationship to joint problem-solving as equal partners, EU-Egypt cooperation can equally become more democratic.

The potential of this “governance approach” has inter alia been shown in a recent study which analyzed the impact of two EU Twinning projects in Morrocco. – a form of cooperation that can be classified as especially institutionalized, fostering close cooperation between a public institution in the EU neighborhood and the equivalent institution of a Member State. The Twinning projects resulted not only in the incorporation of democratic governance norms into Morocco’s domestic law code. It also positively shaped the attitudes of state officials towards democratic governance, which in turn is likely to have translated into their administrative practices.

The energy transition as a rare window of opportunity

Particularly with regard to Egypt’s energy transition, this change in approach can pave the way for both a more legitimate and more effective form of EU support. Any way out of the energy crisis will only be successful in the long run, if it relies not only on the development and promotion of new energy sources, such as wind and solar energy, but on a successful change in energy governance as well. In practice, this means that EU support through large orders for Western companies such as the Siemens deal will clearly be insufficient. Instead, assistance in the energy sector needs to extend beyond financial support to joint implementation, i.e. through the previously mentioned Twinning projects, and hence the direct posting of EU civil servants into Egyptian ministries.

With its high dependence on the EU, and pushes for reform by the Egyptian government itself, the energy sector is a rare case indeed. All the more, it provides a unique opportunity for the EU to start moving away from its previous strategy of conditional support towards a more legitimate form of cooperation on equal footing, promoting democratic governance while equally helping to effectively master the Egyptian energy challenge as a basis for the country’s future stability.

Lisa Marie Ullrich is Policy Advisor and Communications Manager at the Munich Security Conference. She has studied International Relations and Public Policy in Dresden, Berlin and Washington D.C., focusing on the MENA Region.

The opinions expressed in this blog contribution are entirely those of the author and do not represent the positions of the Dahrendorf Forum or any of its hosts Hertie School of Governance, London School of Economics and Political Science and Stiftung Mercator.

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