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follow up
whither wheat?
["egypt stays out of market," august 1999]
the resignation of samir el shakankiri, egypt's longtime government
wheat buyer and one of the most powerful players in the industry,
rattled world wheat markets in late march. for weeks following his
resignation, rumors flowing out of the ministry of supply and in-ternal
trade about possible changes in the way the government imports wheat
kept grain traders from chicago to sydney focused on egypt.
nnel shakankiri was widely considered one of the most savvy wheat
importers in the world, and his high regard for the american wheat
industry ensured that the united states remained the largest supplier
of wheat to egypt for many years.
nnel shakankiri's replacement at the helm, mohamed abdel razek,
moved swiftly in his new post, but not in the direction us wheat
traders wanted to see. within two weeks of moving into the large,
bright blue second-floor offices of the general authority of supply
com-modities, abdel razek issued two public tenders and spent $64.8
million to buy 180,000 metric tons of amer-ican wheat, plus 360,000
metric tons of australian wheat and 60,000 metric tons of french
wheat.
nnthat lopsided proportion of australian to us wheat seemed to support
the fears of the marketing group us wheat associates. paul dickerson,
a washington representative of the group, worried that "new
leadership in the supply ministry" would lead egypt to change
its buy-ing tactics in favor of the australian wheat board. in the
meantime, local papers reported that egypt might be diversifying
its wheat buying in search of better prices.
egypt's general authority usually buys 4.5 to 5 million metric tons
of wheat a year to be milled into flour for the country's subsidized
bread program. most of the wheat has come from the united states,
with some smaller quantities from australia and france. at a rough
cost of about $100 per metric ton, egypt's wheat import bill comes
to around $500 million. the minister of sup-ply and internal trade,
hassan khedr, has said he is looking for ways to reduce costs.
a week after his first tender, abdel razek said in a brief interview
that he wasn't seeking to make major changes in egypt's wheat buying
practices and that he would continue to use public tenders on the
international market. "i have been working in the general authority
in wheat for 34 years," abdel razek said. "i am old,"
he added, sounding remarkably like his predecessor.
but he confirmed that his boss, khedr, is looking at procedural
changes and has implemented one change already. abdel razek said
that a 10-member purchasing committee would be set up by the ministry
of supply and internal trade in cooperation with the minister of
economy and foreign trade to review prices and bids submitted after
wheat tenders are announced to the public. "there will be a
discussion before we announce the results of the tender," abdel
razek said. participants in the industry said the additional layer
of bureaucracy would work only if all the members were familiar
with the fluctuating wheat futures market. otherwise, the committee
approach could turn messy.
khedr has also hinted to foreign traders that egypt might be willing
to guarantee buying 1 million metric tons of wheat from them annually
- provided that they help egypt build new metal grain-storage silos.
hassan abdelghaffar, senior marketing specialist and program manager
at the cairo office of us wheat associates, said khedr's idea was
proposed to us wheat traders and the australian wheat board in mid-march,
and that they were given one month to respond. their replies were
not known as of business mon-thly's press time.
the french wheat export promotion agency, export cer-eales, however,
said it would soon send a team of technicians from france's national
grains agency and the tech-nical institute of cereals and fodder
to egypt to study khedr's plan - which involves building a network
of metal silos all around the country.
sources said that the silo proposal would present difficulties for
us wheat traders, who aren't in the silo building business and aren't
geared up to sell wheat on long-term contracts. it would favor the
australian wheat board, which has a monopoly on australian wheat,
isn't bound to wheat futures, and can more easily deal in long-term
contracts.
el shakankiri, at age 67, was overdue for retirement. but a rift
between him and khedr over some of the new proposals regarding wheat
procurement was said by many sources to have sparked his decision
to get out now. "i must keep my reputation," el shakankiri
said in an interview as he confirmed his retirement.
indeed, a week after el shakankiri left, his reputation came under
public fire. egyptian papers reported that a shipment of us wheat
that el shakankiri had purchased was "unfit for human consumption"
because it was contaminated with iron filings. the newspapers said
the cabinet would review newly proposed procedures for importing
wheat, in-cluding an increase in the number of suppliers egypt deals
with. one report even asserted that el shakankiri would be turned
over for prosecution.
el shakankiri told business monthly that all of the us wheat he
imported over the past 12 years was inspected in the united states
before loading, and that without proper health certificates and
other documentation, egypt wouldn't have paid for the wheat. he
accused the new minister of trying to impugn his reputation. aides
to the minister said that khedr was not available for comment.
susan postlewaite
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a tentative puff on the peace pipe
["new gas discoveries a mixed blessing?" march 2000]
plans to sell egyptian natural gas to israel via the long talked-about
"peace pipeline" crept another step closer to reality
in mid-april when ministers from the two countries discussed the
project with two international oil and gas companies and with the
egyp-tian company that would actually build the pipeline.
following the meeting, officials of bp amoco and ieoc - the egyptian
branch of italian gas company eni - said they were optimistic that
gas sales to israel would go forward, possibly by the end of 2001.
bp amoco and ieoc are waiting now for the israel electric co. (iec)
to start negotiations with the pipeline builder, a company identified
as emg, run by egyptian businessman hussein salem.
according to participants in the meeting, the plan under discussion
calls for emg to extend a branch pipe-line from al arish, in north
sinai, across the border into israel. ieoc is currently building
a pipeline to al arish, and expects to finish the work later this
year. the peace pipeline concept involves a line which will eventually
run from egypt to israel, then on through lebanon and syria, all
the way to turkey. the idea for now, however, is to enable salem's
company to buy gas from ieoc, bp amoco, and possibly other suppliers,
and resell it to israel.
the time frame for getting the agreements negotiated and the pipeline
built will be determined by "the internal needs of israel,"
said filippo capurso, general manager of ieoc, who attended the
meeting. "they need gas in the second half of 2001," he
said.
also at the meeting were egyptian petroleum minister sameh fahmy
and israeli infrastructure minister eli suis-sa, as well as david
nagel, general manager and president of amoco egypt oil co., and
emg's salem.
many of egypt's oil and gas companies are currently looking into
various mediterranean markets in hopes of striking new deals to
export egyptian gas, either by pipe-line or as liquid natural gas
(lng), and israel now ap-pears to be the market most ready to buy
it. major natural gas discoveries in the past year have put egypt
in the position where it must line up export markets because the
domestic market will be unable to consume the new production. according
to petroleum ministry spokesman ham-di abdel aziz, the government
will make sure domestic gas needs are covered for at least the next
25 years.
bp amoco has been trying for "five or six years" to get
a deal to export egyptian natural gas to israel, says samir abdel
moaty, an official from the company. although "nothing was
signed" at the april 13 meeting, the event was significant,
abdel moaty says. "this is another as-surance from the government"
that the companies are free to negotiate a sales contract.
salem could not be reached for comment. but according to capurso,
salem indicated at the meeting that it would take between 14 and
19 months to build the pipeline ex-tension to israel. before beginning
construction, salem's company will have to talk with iec about price
and terms. "emg and israel electric co. have to negotiate themselves,"
capurso says. once the two companies agree on price, he adds, negotiations
between emg and the egyp-tian gas suppliers "won't take too
long."
reuven azar, israel's commercial attache in cairo, says the negotiations
will also involve a third entity, israel gas co., which has not
actually been formed yet.
azar says the mid-april meeting was significant from israel's point
of view because suissa, the israeli minister, gave a "clear
message that iec will purchase the gas," even though israel
has recently made its own natural gas discoveries. "it was
a very successful meeting," azar says. "we got what we
wanted - the political green light from egypt and the mandate to
the iec to buy the gas."
azar says israel's gas needs are estimated at 2.5 billion cubic
meters by 2002, rising to 5 billion by 2005. israeli of-ficials
announced late last year that egypt had agreed to sell its gas,
but later the israelis appeared to renege, saying new gas finds
in israel made imported gas unnecessary.
"these are political games that israel is playing," says
abdel-aziz. "they obviously need natural gas because they asked
us to start the negotiations again."
susan postlewaite
top
fatwa in aisle 5
["sainsbury's buys into food market," august 1999]
loyal customers of sainsbury's supermarkets in britain might have
been surprised to see the seemingly harmless retail chain being
referred to as an instrument of evil. nevertheless, as an april
13 article in the guardian newspaper reported, sainsbury's grand
en-trance into the cairo market appears to have ruffled the feathers
of a few religious leaders as well as some local merchants threatened
by the new competition.
the massive 24-hour sainsbury's pyramids road anchor store which
opened on jan. 27 has so far been a big hit with consumers, who
have crowded the gleaming landmark at all hours in search of the
ultimate bargain. but neighboring shopkeepers aren't nearly as enthusiastic.
owners of the traditional storefront ba'als - from which most egyptians
usually purchase their basic staples - are predicting disaster.
"this is the beginning of the end for us," lamented one
pyramids road ba'al owner in the guardian article.
local shopowners have complained that they simply can't compete
with the resources and marketing muscle of the british mega-chain.
resentment has led to sains-bury's being painted as a symbol of
evil western influence encroaching on egyptian society. some pyramids
road mosques have even taken to preaching against sainsbury's and
its customers, with some imams equating shopping at the food store
with adultery, theft and drug trafficking.
the guardian article quoted one imam as saying: "those unbelievers
plan to send hundreds of our muslim retailers to bankruptcy. they
aim to force retailers to lay off their employees and close their
stores."
many of the items sold at sainsbury's are high-end luxury goods
more likely to be available at competing super-markets such as abc
than at the local ba'al. but low-cost staples such as pasta or rice
can also be found - sometimes for less than the local grocer's price.
sainsbury's officials, meanwhile, remain nonplussed by what has
become known as the "sainsbury's fatwa." a store spokeswoman
quoted in the guardian said business had not been adversely affected,
and that the store had received no direct negative input or criticism.
the chain already has six other, smaller sainsbury's stores operating
in cairo, and owns an 80-percent stake in the local edge market
chain - whose 100 stores in egypt may eventually be converted into
sainsbury's outlets.
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