Gulf States' $6 billion bail out of Egypt

Bale out includes huge quantities of benzene and diesel

Egypt spends 20% of its budget on fuel subsidies.
Egypt spends 20% of its budget on fuel subsidies.

The oil producing nations of the Gulf States have provided Egypt with over $6 billion of fuel relief as demand soars in the North African country.

Tarek El-Molla, head of the Egyptian General Petroleum Corporation (EGPC), told financial newspaper Al-Mal that the aid consisted of "huge quantities" of benzene, diesel, heavy fuel oil mazut, butane and crude oil, since last July.

The aid helps reduce the heavy costs of government fuel subsidies and the drain on foreign exchange reserves.

It came after Saudi Arabia, the United Arab Emirates (UAE) and Kuwait promised Egypt more than $12 billion in loans and donations days after the army deposed Islamist President Mohamed Mursi.

El-Molla said the Arab Gulf countries had agreed to rotate management of the support, with the UAE in charge for the first quarter of 2014 and Saudi Arabia taking over in the second quarter.

Aid in the form of refined oil products will continue until at least September, Finance Minister Hany Kadry Dimian has said.

Last year, Saudi Arabia pledged $2 billion in energy products with Kuwait and the UAE promising an additional $1 billion each.

Fuel subsidies cost Egypt's government $15 billion a year, a fifth of the state budget. The money keeps pump prices well below market values, giving Egyptians no incentive to curb their consumption.

Egyptians rioted over long lines at gas pumps just before Mursi's ousting following mass protests against his rule.

Foreign currency reserves reached $17.414 billion in March but are still nearly half the level seen before the 2011 uprising against Hosni Mubarak as political turmoil has hit tourism and foreign investment.

Egypt also requires liquefied natural gas (LNG) for power generation, in short supply due to declining domestic gas production, even as it cut into exports of LNG previously promised to foreign firms.

El-Molla said EGPC was owed 110 billion Egyptian pounds ($15.7 billion) from other government entities, including 35 billion Egyptian pounds each from the finance and petroleum ministries.

He said the petroleum ministry had not yet signed an agreement for gas imports but said it would select from among Russian Gazprom, Gaz de France and Sonatrach of Algeria.



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