* Egypt seeking investment from its Gulf Arab friends
* Business ties with Qatar hurt by political dispute
* Shift highlights wider tussle for influence
By Rania El Gamal and Amena Bakr
DUBAI/DOHA, Dec 2 With one notable exception,
wealthy Gulf Arab states are encouraging investment in Egypt to
help shore up its army-backed government: the absentee is Qatar,
rattled by the collapse of Islamist power in the biggest Arab
The contrast between Qatar's reluctance and the enthusiasm
shown by fellow Gulf financial powers illustrates the way
politics can shape investment between the Gulf and the poorer,
more populous countries of the Levant and north Africa.
The United Arab Emirates, in particular, is rallying its
companies to launch or resume projects in Egypt, an Arab
political heavyweight that has long received both Gulf Arab
state aid and flows of private investment.
An Egypt investment forum for Gulf Arab financiers in Cairo
on December 4 and 5 will shed new light on the readiness of the
hereditary monarchies of the Gulf Cooperation Council (GCC)
countries to prop up a government they regard as a firm friend.
GCC members -- Saudi Arabia, Kuwait, Bahrain, Oman, United
Arab Emirates and Qatar -- have historically sent aid and
investment to less moneyed fellow Arabs, and in return have
received diplomatic support, occasional military protection and
jobs for their nationals as Gulf migrant workers.
The Arab Spring uprisings complicated that relationship: it
brought to the fore the Muslim Brotherhood, long championed by
Qatar as the answer to the Arab world's socio-economic miseries
but despised by other Gulf Arabs as religious radicals.
The anti-Brotherhood UAE, home to around 380,000 Egyptian
expatriates and a major Arab investor in Egypt, withheld
billions of dollars in aid after the 2011 overthrow of President
Hosni Mubarak, a close ally of most Gulf Arab states.
Now that Mubarak's successors have themselves been deposed,
it is the turn of Qatar-Egyptian business ties to undergo a
period of disruption, and for other investors to step in.
One senior Dubai-based banker, who spoke on condition of
anonymity due to sensitivity of the matter, suggested the twists
and turns of regional politics had been a challenge.
"In the Middle East, politics plays a major role in
business, unlike most other regions and Qatar-Egypt relations
are a perfect example of that," he told Reuters.
"At the time of Mursi's rule, we were pitching several
investment options to the Qataris in Egypt and they were
receptive. Today, at least two of those transactions are on hold
because the relations have soured," he said.
"It makes it difficult for us as advisers. We now have to
pitch it to parties who are seen as friends. Who knows what the
equation will be in another few months," the banker said.
Despite the fall of a movement critics say Qatar is using to
project its influence in the Middle East, few expect
Qatar-Egyptian ties to remain in the doldrums indefinitely --
Egypt is simply too important a market.
But for the moment, said Michael Stephens, researcher at the
Royal United Services Institute based in Doha, "the relationship
is very cold."
"Obviously they are not going to provide financial support
to a government that doesn't like them."
Saudi Arabia, Kuwait and the United Arab Emirates pledged
more than $12 billion in aid to Egypt after the army toppled
Islamist President Mohamed Mursi of the Muslim Brotherhood on
July 3 following mass protests against his rule.
Now, Gulf Arab governments are indicating, it is the turn of
the private sector to lend a hand.
Egypt badly needs private capital. Foreign direct investment
fell to $3.00 billion in 2012/13 (July/June), compared with more
than $10 billion a few years ago.
Egypt's ambassador to the UAE, Ihab Hamouda, said the Gulf
state was spearheading a number of potential projects to be
discussed with Gulf investors at the Cairo forum.
Companies such as Al Futtaim Group, Taqa Arabia, Arabtec
Holdings, Almarai, Dana Gas, Emaar
Properties and DP World will participate.
"There is a drive by the UAE to encourage investors to
invest in Egypt in different sectors such as agriculture,
education, infrastructure, oil and also tourism," Hamouda said.
"Whoever supports the stability of Egypt, supports the
stability of the whole region," he added.
An informed source close to major Abu Dhabi investment
companies told Reuters nearly $5 billion had been committed in
loans and investment over the last four months and there was
still scope for further investment in Egypt.
The contrast with a year ago could not be starker.
Qatar was a firm supporter of Mursi, lending or giving Egypt
$7.5 billion in aid in his year in power and also promising
billions of dollars of investment.
Billions of those aid dollars have now either been returned
or cancelled by the new army-backed government.
Some of those pledges had already materialised during his
tenure, with Qatar National Bank, the Middle East's
largest lender by assets, agreeing to buy the Egypt business of
Societe Generale for $2 billion last year.
But after Mursi's removal, Egypt returned $2 billion that
Qatar had deposited with its central bank in late 2012, after
talks to convert the funds into three-year bonds broke down.
Egypt also returned a $500 million deposit to Qatar at the
start of November after Qatar refused to renew it upon its
maturity, a central bank official said. The bank expects to
return a further $500 million in early December, he said.
Egyptian authorities also refused a Qatari request to raise
the number of flights between the two states, according to
Egyptian airport sources, in a further sign of tension.
Banking sources aware of the matter said Qatar Petroleum had
backed out of talks to buy German utility RWE's oil
and gas unit DEA because of the latter's significant presence in
Egypt. Egyptian assets make up about 10 percent of DEA's likely
value of between 4 and 5 billion euros including debt in any
Industry sources said in September that Egypt and Qatar were
not negotiating further natural gas deliveries as supplies of
fuels from other Gulf states and the end of peak summer demand
had eased pressure on Cairo to reach a deal.
A Qatari industry source said the Egyptian army had to ease
pressure on Mursi's Muslim Brotherhood supporters before the two
countries could resume talks on more fuel.
While Qatar looks askance at the army-backed government in
Cairo, investment in Egypt evidently remains an aspiration.
In Doha, Ahmed Abou Hashima, chairman of Egyptian Steel and
vice-president of the Qatar-Egypt Business Council, said
business between the two countries was surviving.
"As Egyptians, 99 percent of us are born with a strong love
for the army," he said. "I imagine that very soon people will
start to understand this and the relationships between Egypt and
other countries will improve."
A source from Qatar's Foreign Ministry told Reuters it was
"only a matter of time" before Qatar-Egypt ties improved.
"Maybe we are not giving support because we see that there
is enough coming from the other Gulf states. We know Egypt is a
vital country in the region and we can't have bad relations with
the Egyptian people, even if the army stays in power."