* Saudis halted fuel aid shipments on Oct. 1
* Sisi says Egypt will "not bow to anyone but God"
* Egypt angered Saudis by backing Russian UN resolution on
By Lin Noueihed and Asma Alsharif
CAIRO, Oct 14 A halt to shipments of Saudi fuel
to Egypt under a $23 billion aid deal shows that a rift between
the Arab world's richest country and its most populous may be
deeper than previously thought, which could leave Egypt
desperate for a new sponsor.
Under the deal, signed during a visit by the Saudi king in
April, Riyadh was meant to send 700,000 tonnes a month of
refined fuel to Egypt. The agreement threw a lifeline to Cairo
and was meant to bury suggestions that the relationship had
unravelled. But sources say the fuel stopped flowing on Oct. 1.
A week later, Sisi bit the hand that has fed him since he
took power in 2013: Egypt voted in favour of a Russian-backed
U.N. resolution on Syria, which Saudi Arabia strongly opposed.
Amid the feud, the Saudi ambassador has boarded a plane to
travel temporarily back home to Riyadh. Sisi referred to the
dispute in a speech on Thursday, denying that Egypt's position
on Syria was the reason for the fuel cut-off.
He also struck a defiant tone unlikely to endear him to the
Gulf Arab kings and princes that have kept his country afloat.
Egypt "would not bow to anyone but God", he declared.
Saudi Arabia has no shortage of reasons to hold back on the
aid shipments: Egypt agreed in April to turn over two Red Sea
islands to Saudi control, but this has been held up by an
Egyptian court which blocked the move in June.
After years of low oil prices, Saudi Arabia itself is no
longer as rich as it once was; it is cutting investment at home,
making it more difficult to be generous to its allies abroad.
Riyadh has hardly abandoned its client. It came through with
a $2 billion deposit in the Egyptian Central Bank in September
that helped Cairo secure a $12 billion loan package from the
International Monetary Fund.
But sources in both countries say a rift between them is
deepening, and stems from disagreement about regional politics.
Even before last week's vote at the U.N. Security Council, Egypt
had been courting warmer ties with Russia, Saudi Arabia's foe in
the Syrian conflict.
If Riyadh intended to send a message that it was running out
of patience with Cairo, the message now seems to have been sent.
"It is about Egyptian policy... that very much contradicts
the Saudi policy with regard to regional strategic threats. So
Saudi Arabia is very much against Iranian expansionism in Iraq
and Syria and obviously the Egyptians do not see it that way,"
said Jamal Kashoggi, a leading Saudi commentator.
"Unless Egypt re-evaluates its position I foresee more
differences... that could lead eventually to a very cold
Gulf monarchies led by Saudi Arabia have given billions of
dollars to Egypt since mid-2013, when Sisi, then army chief,
overthrew a president from the Muslim Brotherhood, a common
But with the Brotherhood threat diminished, Gulf rulers have
grown disillusioned at what they consider Sisi's inability to
reform an economy that has become a black hole for aid, and his
reluctance to back them on the regional stage.
In Yemen, Riyadh wanted Cairo to play a central role in its
war against the Houthi group that controls the capital. Cairo
contributed naval forces but, haunted by a previous Yemeni
quagmire, was reluctant to commit ground troops.
In Syria, where Saudi Arabia is a leading backer of rebels
fighting against Bashar al-Assad, Sisi has supported Russia's
decision to bomb in support of the president.
Egyptian sources and Saudi commentators told Reuters the
last straw came on Saturday, when Egypt, the only Arab state now
holding a rotating seat on the U.N. Security Council, endorsed a
Russian resolution that excluded calls to stop bombing Aleppo.
Sisi has long been keen to revive ties with Russia, despite
Egypt's dependence on generosity from Arab states that consider
Moscow an enemy in Syria.
Cairo is desperate to lure back Russian tourists to its Red
Sea resorts after the bombing of an airplane over the area last
year killed 224 people and prompted Moscow to suspend flights.
In a sign of warming relations, Russia and Egypt announced
this week they would hold joint military exercises on Egyptian
soil for the first time this month. Russia is building Egypt's
first nuclear plant, and a row over a rejected Russian wheat
cargo prompted Cairo to rapidly resolve confusion over trade
terms that had hampered its ability to import for months.
Meanwhile, the nearly six years of political volatility and
economic decline that followed the fall of Egypt's president
Hosni Mubarak have eroded Cairo's central role in Arab politics.
To Egypt's chagrin, its non-Arab rival Turkey - about as
populous as Egypt and far richer - is growing in influence, led
by Tayyip Erdogan, a foe of Sisi who backed Sisi's overthrown
predecessor, the Brotherhood's Mohamed Mursi.
A meeting of the Gulf Cooperation Council Countries in
Riyadh on Thursday included Turkey and talks focussed on the
creation of a free trade zone. At an international oil
conference in Istanbul this week, Saudi state oil company Saudi
Aramaco signed deals with 18 Turkish firms.
Egyptian security sources said contacts were underway to
patch things up with the Saudis, involving high-ranking military
and intelligence officials.
The Saudi ambassador to Cairo flew home on Wednesday.
Sources in his delegation said he would spend three days there
to lay the groundwork for an Egyptian visit to discuss another
potential Security Council draft on Syria.
The foreign ministries of both Egypt and Saudi Arabia said
they were not aware of any such visit. Though the ambassador has
not been officially recalled, his departure was read by many
Egyptians as a diplomatic slight.
The Egyptian security sources said Cairo is considering
possible responses should back channel contacts falter,
including a reduction in Egyptian pilgrims visiting the Muslim
holy sites of Mecca and Medina. Egypt could also withdraw what
support it had offered the Saudi-led coalition in Yemen.
In an unusually combative editorial, the editor-in-chief of
state-owned Al Ahram newspaper said it was time end foreign aid
that sees Egypt addressed in the "language of subjugation".
"It is better for us to face the situation and announce the
review of everything that could present a burden on
decision-makers," he wrote.
For now, the interruption in the oil flows appears to be
temporary, perhaps partly linked to the fate of the two Red Sea
The Egyptian government has appealed the court ruling that
blocked the transfer, and a judgment is expected on Oct. 22. An
Aramco source said flows were likely to resume by November.
But as Saudi Arabia embarks on its own austerity drive and
seeks to issue sovereign bonds for the first time, it can no
longer afford to give something for nothing, analysts say.
"It looks weird if you are trying to raise $10 billion and
you give Egypt $2 billion. Gulf partners are really annoyed with
Egypt over the fact that it has not undertaken reforms that were
expected after 2013," said Angus Blair, Chief Operating Officer
at Pharos Holding. "And then there is the issue of the UN
Security Council vote and is Egypt supporting its allies in a
(Additional reporting by Ahmed Mohammed Hassan; editing by