The Russian Industrial Zone in Egypt: An Integrated Vision for a Future Partnership

The world is awash with numerous challenges, multiple crises, and diverse repercussions on various countries, which calls for different visions and new approaches that explore the paths of change and the directions of transformation in the interactions of international relations in their economic aspect, as the global economy has become increasingly interconnected, through the development of international trade, transportation, and communication, which in turn contributed to the increase in information flows, transportation, digital infrastructure, and the growth of information flows. In this context, Egyptian-Russian relations stand out in various fields and at all levels, especially in light of the strategic partnership that brings the two countries together, as diplomatic relations between the two countries date back 81 years since 1943 AD, when the first Egyptian embassy in Moscow and a Soviet embassy in Cairo and a consulate in Alexandria were established. Since that date, they have become partners at the bilateral and international levels. This partnership has been reflected in the convergence of the two countries' positions on many regional and international files and issues of common interest on the one hand, and in the agreements and memoranda of understanding signed between them on the other. Among the most prominent of these agreements is the agreement related to the establishment of the Russian industrial zone east of Port Said, known as the City of the Sun, which embodies the strong and growing relations between them in vari¬ous aspects, as this project gained importance as it is the unique project of its kind that Russia is undertaking for the first time in an Arab country since the dissolution of the Soviet Union. It is hoped that this region will become an ideal model for establishing similar regions in the Arab region and the African continent, with the possibility of cooperating with Egypt in establishing such specialized centers. Needless to say, the project faced some challenges and obstacles to implementation with the start of the Russian military operation in Ukraine, as a result of the imposition of Western sanctions on Russia, which led to some complications in financing the project on the one hand, and the transfer of technology and materials necessary for the project on the other. However, the matter did not stop with the new breakthrough that took place with the issuance of the Egyptian presidential decree amending some provisions of this agreement in 2024, to revive hope once again in the launch of the Russian industrial zone, whether through amending the implementing party or allowing companies operating in the zone to sell their manufactured products in the Egyptian markets. Fr om this standpoint, the report sheds light on the importance of the Russian industrial zone in the course of Russian-Egyptian relations, in terms of its legal sta-tus, economic importance, logistical objectives, and its implications for the partnership between the two countries, through the following aspects: First — The Russian Industrial Zone^ The Regulatory Framework: The idea of establishing the Russian industrial zone in Egypt goes back to the vision of the political leaderships in the two countries, as the talk about this joint project began after the meeting of the Egyptian President Abdel Fattah El-Sisi and the Russian President Vladimir Putin, in the Russian city of Sochi on the Black Sea in 2014. The first sessions of actual negotiations began in August 2017 on the establishment of the zone. Thus, the serious steps in implementing this project began in 2018, when Cairo and Moscow signed an agreement to establish a "Russian industrial zone in Egypt," the Suez Canal axis, and the project was set to be a major industrial center, allowing Russian companies to establish factories and facilitate the export of their products to neighboring markets, which was confirmed by President Abdel Fattah El-Sisi in his speech before the Russian Federal Council in October 2018, in clear and explicit words, as he mentioned the following:” I look at the Russian industrial zone project in the East of the Suez Canal, as another example of the depth of our partnership, and a new starting point, in order to enhance Russian investments in Egypt, we are always looking forward to your experiences and investments, within the framework of integration between us, in order to contribute to the completion of what is being launched, of giant projects on the land of Egypt, and I would like to assure you, that the door will remain open to the Russian investor, to take advan-tage of the great advantages, offered by the Egyptian market, as a huge commercial and investment gateway, to many African, Arab, and Asian countries" . Today, the Russian industrial zone enters a new phase of development with the issuance of Egyptian Presidential Decree No. 184 of 2024, approving the agreement to amend some provisions of the agreement for the establishment and operation of the Russian industrial zone in the Suez Canal Economic Zone. The amendment aims to create the appropriate conditions for the operation of the zone. The original agreement and its recent amendments include a number of pro¬visions governing the work of the zone, the most important of which are: 1-Project Name and Its Structure: The zone is named "Sun City". This project takes on a Russian spirit, as the design of the industrial city is in the form of a semicircle, consisting of two sections: The first, eastern, is called "Moscow". And the second, western, is called "St. Petersburg", The land between the two regions will be called "The Urals", because it is located in the central region of Russia, and there will be a recreational area and a triangular park for the residents of this city to spend their free time. The Sun City Outline 2-Project Area: The project started, according to the first agreement signed in 2018, by allocating an area of 5.25 million square meters under the usufruct system, of which 2.8 square kilometers are industrial buildings and projects established on this area, to exploit the rest of the area in establishing residential, commercial and recreational complexes for workers in the region. An amendment was made to this allocated area in accordance with the amendment that took place on the agree¬ment in 2024, which included an increase in the area of the zone by 50 hectares, in addition to another 500 hectares that will be added to the main site later . 3-Project Implementation Period: It was agreed that the project would be implemented in three phases within 13 years since the signing, with the first pro-duction coming out in 2022 , wh ere work begins in the first phase during 2018 to develop and develop 1 square kilometer by the Russian industrial developer, during which 7,300 jobs will be provided in the fields of construction, provided that the Russian industrial developer works in parallel to attract Russian companies and investors during the two years 2018 and 2019. With the end of the implementation of the first phase, the development of an area of 1.60 square kilometers begins as a second phase of the total area of the zone and the provision of 10,000 jobs, which ends during 2022, then the development of an area of 2.65 square kilometers and the provision of 17,000 jobs in infrastructure projects, so that the implementation of the zone ends during 2031, i.e. after 13 years as agreed upon . The term of the agreement extends to 50 years, and is automatically renewed for 5 consecutive years if both parties agree . 4-Project Goal : The project aims to localize Russian industries in Egypt, and enhance the ability of Russian companies to access African and Middle Eastern markets through the vital Suez Canal location, while also benefiting fr om the cus-toms exemptions enjoyed by Egyptian products in African countries within the framework of the COMESA agreement and the Continental Free Trade Area. The idea of the project is based on strengthening the export orientation of the proj¬ects established in this region through the manufacture of joint Egyptian-Russian products in Egypt, which was clearly indicated by "Denis Manturov", the First Dep-uty Prime Minister of Russia, when he was Minister of Industry and Trade, that: "The Russian industrial zone project in Egypt represents an important pillar for strengthening industrial cooperation between the two countries, as this zone con-tributes to the localization of advanced Russian industries in Egypt and attracts more investments from Eurasian countries to work in the zone, in addition to enhancing the access of Russian products to global markets through preferential free trade agreements signed between Egypt and many countries and regional and global economic blocs" . 5-Joint Obligations of the Two Parties : The agreement stipulates that there are three types of obligations, as follows: A- Joint Obligations of the Two Parties, and the most prominent of which are: • Creating and ensuring the availability of the necessary conditions for the effective operation of the Russian Industrial Zone by developing the activities of existing projects in the zone. • Manufacturing competitive products that meet the demand of the Egyptian market and foreign markets for high-quality technological products. • Strengthening the potential of Egyptian-Russian industrial cooperation in the markets of other countries. • Creating new job opportunities in the Russian Industrial Zone. • Developing and implementing specialized programs for training and retrain-ing experts in various industrial sectors. • Exchanging experiences and specialists in the field of establishing and man-aging industrial cities and exchanging information on industrial and investment opportunities in both countries. • Integrating any industrial or service companies operating in the Russian Industrial Zone site into the activities specified in the zone. B- The obligations of the Egyptian Side (General Authority for the Suez Canal Economic Zone), and the most prominent of which are: • Providing complete geological and geographical data on the site of the Rus-sian Industrial Zone to assess the possibility of establishing and constructing the industrial facilities and infrastructure specified therein. • Providing one-stop shop services regarding the issuance of permits and licenses. • Providing consultations on the laws and regulations in force in Egypt. • Defining, allocating, and making available a plot of land in the East Port Said area of the Suez Canal Zone for the benefit of the Russian Industrial Zone Manage¬ment Company with an area of 5 million and 250 thousand square meters under the Leasehold Interest. • Providing the required infrastructure for unhindered access to roads, sea-ports, and railways, as well as extending electricity and gas distribution networks to the Russian Industrial Zone specified at the site. C- The obligations of the Russian Side (Russian Ministry of Industry and Trade), and the most prominent of which are: • Preparing a project plan for the Russian Industrial Zone and its master plan in coordination with the Egyptian Ministry of Industry and the General Authority for the Development of the Suez Canal Economic Zone, including the most effec-tive alternatives for equipping the Russian Industrial Zone with industrial infra-structure, as well as plans for accommodating existing projects in the zone and expected usage indicators of the infrastructure by the occupants of the Russian Industrial Zone. • Attracting projects to the Russian Industrial Zone and organizing their work. • Organizing the process of manufacturing industrial products, completing work, and providing services within the site of the Russian Industrial Zone. • Using advanced Russian technologies, materials, and equipment. • The contribution of Russian scientific, research, development, and construction organizations in the establishment and operation of the Russian Industrial Zone. 6-The Project Size: The investments of the zone amount to about 7 billion dollars , wh ere the financing of the projects to be established is carried out through the Russian Direct Investment Fund and a number of Egyptian banks. It is mentioned that the Russian government has issued a decision allocating an amount of 9.5 billion rubles to support this project until 2026 . Section Two - The Russian Industrial Zone... The Strategic Importance: The zone occupies great importance, whether in strengthening relations between the two countries or providing the Egyptian economy with many returns and gains, as is evident in the following: 1- Strengthening economic cooperation between Egypt and Russia, as it pro-vides an encouraging investment environment for Russian investors in the Suez Canal Economic Zone, with the aim of increasing the volume of Russian invest-ments in Egypt, which does not exceed 70 million dollars. 2- Contributing to the achievement of industrial development and creating new job opportunities, as it is expected to provide about 35 thousand job opportunities. Supporting the Egyptian economy by localizing advanced technology industries. 3- Strengthening the position of the Suez Canal as a global center for logistics and industrial services. 4- Increasing the volume of trade exchange between the two countries, as the establishment of this zone aimed to raise the volume of trade exchange between the two countries, which at that time amounted to 5 billion and 500 million dollars, with Egypt's imports from it amounting to about 5 billion dollars, while its exports amount to half a billion, which constitutes a major gap in trade between the two countries. The establishment of a free trade zone in the Suez Canal axis will help to promote Egyptian products in Russia significantly, and all of this will help to increase the volume of trade between the two countries, as the zone will become a launching pad for expanding the business of Russian companies in Egypt, the Middle East, and Africa. 5- Making Egypt's strategy in attracting foreign investments and stimulating economic growth a success by providing a stable and stimulating business environment for investors , as the success of the zone will open the appetite of many companies to invest in Egypt and expand in it, as it is considered the main gateway to the African continent. On the other hand, the establishment of the industrial zone is of importance to Russia as well, as it is a strategic opportunity to strengthen its economic presence in the Middle East and Africa, as it grants Russia a strategic location in a promising region close to the most important international shipping lane (the Suez Canal, through which 20% of global trade passes), in addition to the availability of ports ready for exporting and importing various goods and products, which allows it to communicate with African, regional, and international markets as well. This is in addition to its role in expanding the areas of work of the Russian economy and opening new outlets for its exports, which contributes to compensating for a large part of its economic losses incurred as a result of Western sanctions . Section Three — The Russian Industrial Zone... Future Vision: In the midst of the two countries' endeavor to strengthen their bilateral relations in various fields, in implementation of the vision carried by the Egyptian president and the Russian president regarding the future of their relations in light of the many transformations the world is witnessing at various levels, and the challenges facing the Middle East that are redrawing the maps of its countries, Egyptian-Rus¬sian relations emerge as an important model of how to work together within the framework of protecting mutual interests and the multiple benefits of the two par¬ties, which will undoubtedly be reflected in the success of the Russian industrial zone with its goals and objectives that deepen the relations of the two countries and expand the areas of their bilateral and international cooperation as well, as the zone is expected to start operating in the next few days after the agreement signed between them was amended, This amendment, which addressed many of the obstacles and impediments that hindered the start of work in establishing this zone, especially with the expansion of the implementing parties of the project by Russian institutions, and all that remains is for Russia to take serious steps in providing the necessary funding and technology to build factories and develop the required infrastructure. Finally, the Russian industrial zone project in the Suez Canal axis is a stra¬tegic opportunity for both Russia and Egypt, and the recent amendments to the agreement confirmed the two parties' keenness to complete the project and move forward in strengthening their joint economic cooperation, taking advantage of the geopolitical developments in the future.