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The Tightening Bond Between Saudi Arabia and Egypt

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The new economic bond between Saudi Arabia and Egypt in which petroleum is a key aspect marks a sharp contrast to the previous rivalry between the two countries. Those conflicts over generations were most recently on display during the Arab Spring revolt in 2011 that toppled Egyptian leader Hosni Mubarak.

However, the two countries have seen continued growth in trade deals, with the amount rising from $5 billion in 2014 to $6.3 billion last year. In April, they finalized a deal worth $24 billion, with $22 billion of that focusing on the Saudis supplying petroleum products for the Egyptians.

One of the differences with this deal changes the dynamic of previous financial support by Saudi Arabia that required no paying back of the money. That’s been adjusted to instead offer easier terms of payment. The change is connected to the severe drop in oil prices over the past two years.

Prior to this deal, the Saudis had been infusing billions worth of petroleum into the country, which has staggered to gain its previous foothold in the Arab world. This new deal will offer a 15-year span to repay the loan, only charge two percent interest and offer a grace period of three years.

Each month, Saudi Arabia’s government-run oil company, Saudi Aramco, is expected to provide the Egyptian General Petroleum Corporation with 700,000 tons worth of petroleum products. This includes 400,000 tons of oil, 200,000 tons of benzene and 100,000 tons of Mazut.

In the first few months since the agreement was announced, approximately $650 million worth of petroleum products have been sent to Egypt. In May, it was $300 million worth and had a value of $350 million in June. The contract terms state that the price at the time of shipment will be the price charged.

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