As Egyptian State Decays, Peace with Egypt Becomes Ever More ‘Cold’

By Hugh Fitzgerald | Nov 16, 2025

President Donald Trump welcomes Egyptian President Abdel Fattah Al Sisi, Monday, April 3, 2017, at the West Wing entrance of the White House in Washington, D.C. ( Photo by The White House from Washington, DC – Foreign Leader Visits, Public Domain, Wikipedia)

The Egyptian state is a stratokleptocracy — that is, the rule of thieving military officers. Those military men, with General Abdelfattah el-Sisi himself leading them, are busy helping themselves, through sweetheart business deals with the state, to much of the nation’s wealth, and are driving legitimate businesses that lack such connections into bankruptcy. More on the Egyptian state’s cracking can be found here: “The Cornerstone Is Cracking: Why Egypt’s Internal Decay Threatens the Middle East’s Longest Peace,” by Amine Ayoub, Algemeiner, November 10, 2025:

The 1979 Peace Treaty between Egypt and Israel has long been the geopolitical cornerstone of the Middle East, establishing a stable southern flank for Israel and a cooperative, if “cold,” relationship with its largest Arab neighbor.

Today, this cornerstone is under unprecedented threat. The danger doesn’t primarily come from a hostile external power, but from within the Egyptian state itself. The internal, non-cyclical fragility of Egypt is rapidly dissolving the “cold peace” into a state of volatile strategic dissonance.

The regional crises of the past two years — the Gaza War and the Houthi maritime attacks — acted as catastrophic accelerants, instantly translating Egypt’s deep structural decay into geopolitical instability along the shared border. The stability of the Middle East’s longest peace now depends on the rapidly deteriorating economic and social health of the Egyptian state.

The core of Egypt’s fragility is the fiscal collapse of President Abdel Fattah el-Sisi’s “Second Republic,” a system defined by military-led state capitalism….

Beneath the economic crisis lies a massive, alienated youth surge. Egypt’s young population (Gen Z) harbors profound political disillusionment and distrust. With over 60% of workers in the informal sector, and a university degree no longer a reliable pathway to employment, economic despair is widespread. The resulting legitimacy crisis compels the regime to adopt an aggressive foreign policy to ensure its own survival. Adopting a hostile, nationalist stance toward Israel — especially over Gaza — functions successfully as a surrogate for anti-regime politics, diverting popular resentment away from domestic failure.

The regime has managed to deflect popular anger over its corruption and the general economic mess by focusing on the putative sins of an “aggressive” Jewish state that is merely trying in Gaza to defend itself, and to ensure that Hamas will never again harm the people of Israel as the terror group did on October 7, 2023. Israel has become for the Sisi regime the “panem et circenses” — a way to divert the angry populace’s attention, just the way that the Roman rulers provided bread and circuses to divert the populace of Rome.

This fragile domestic foundation collided with the regional shock of the Houthi attacks. The resulting trade diversion caused Suez Canal revenues to plummet by 61.2% in the first quarter of the 2024–2025 fiscal year. This catastrophic loss of foreign currency instantly translated the structural fragility into geopolitical volatility….

The Houthis have caused more harm to Egypt than to Israel. Its missiles have done very little damage to the Jewish state. But in firing them in and over and around the Red Sea, they have caused many ships to change their trajectory, no longer taking the Red Sea-Suez Canal route to Europe, but instead going round the Cape of Good Hope, and up the west side of Africa to Europe. That has meant a colossal loss of revenue — $6.1 billion in 2024 alone, with the same loss predicted for 2025.

The dispute over control of the Gaza-Egypt border, the Philadelphi Corridor, is the most volatile point of tension, as Israel’s security interest in stopping smuggling conflicts directly with Egypt’s existential fear of mass displacement into Sinai. Furthermore, Egypt suspended high-level security coordination channels following the Gaza conflict, removing a crucial lubricant from the “cold peace” and elevating the risk of tactical misunderstandings.

The Philadelphi Corridor runs just inside southern Gaza, where the Strip meets the Egyptian border. Egypt wants to control it in order to prevent Gazans from infiltrating into Sinai; the Egyptians do not want any Gazans in their country. Israel has a different desire; it wants to prevent the smuggling of weapons from the Sinai into Gaza. Each side wants to control that border for different, and important, reasons.

The Americans have to condition their aid to Egypt — now some $1.3 billion a year — on the government in Cairo controlling the rapacity of its military, ending the officer corps’ grip on major companies, and opening up much more of the Egyptian economy to privatization. The U.S. wants the Egyptian government to spend more money on the development of the economy in the Sinai and on the social inclusion of its people, as a way to prevent them from listening to the siren song of either ISIS (that has fighters in the Sinai) or Hamas. Washington wants Israel and Egypt to jointly monitor the Gaza-Egypt border, which presumably means joint patrols. This might work, if the Egyptians are as wiling as the Israelis to take on Hamas.

The Americans can threaten to withhold the $1.3 billion in annual aid to Egypt if General El-Sisi does not put a stop to his military appropriating so much of the nation’s wealth for themselves, by controlling companies that benefit from government contracts, enjoying an unfair advantage over companies that have no such connections.

Meanwhile, with Egypt having moved more troops farther north in the Sinai than is the Camp David Accords allow, the Israelis are naturally worried about an Egyptian military threat on their southern border, should the El-Sisi regime fall and one even more hostile to Israel replace it. The Americans, who brokered the Camp David Accords and are their guarantor, ought to demand that Egypt pull its troops back from northern Sinai to the line they were allowed in the 1979 Annex to the Camp David Accords, or face a complete cutoff of American aid. That should get El-Sisi’s attention, and if he does as has been demanded, will let the Israelis breathe more easily.