Static in the Air

Disputes over a binational venture in cell phones scramble the Syria-Egypt connection

As Egypt's President Hosni Mubarak prepared for his second meeting in three months with his U.S. counterpart, President George Bush, a member of the Egyptian delegation accompanying him on the U.S. visit observed that Thursday is apparently the American government's "Arab day." Saudi Arabia's Crown Prince Abdullah also met with Bush on a Thursday, as did Jordan's King Abdullah, the Egyptian official points out [not entirely accurately, as one of these meetings was held on a Wednesday - Z.B.]. The discussion topics on this Mubarak visit will probably be the same, and will apparently bring to a close the current round of Arab visits to the White House.

Mubarak will not have much to add to what has been said to Bush during the previous discussions. Egypt's original idea advocating a theoretical declaration of Palestinian statehood prior to the resumption of diplomatic negotiations will not take hold in the White House as long as Israel opposes any form of talks while Arafat remains head of the Palestinian Authority, and as long as Arafat is unwilling to demarcate borders for the state.

Since the resolution adopted by the Arab summit in Beirut enjoins Arab leaders to promote the Saudi initiative in the international arena, Egypt's President Mubarak will have to deal with the details of the Saudi plan. Very little leeway is left to Mubarak for his own political initiatives and ideas - the main thrust of which is to preserve Arab unity and perhaps encourage Syrian involvement.

Early in the week, Mubarak met with Syrian Vice President Abdul Halim Khadam - the relationship between the two men cannot be described as a lovefest - and relayed a message to Bashar Assad, apparently calling on the Syrian leader to tone down his rhetoric and support the convening of an international peace conference. Syria, which continues to hold unofficial talks with U.S. representatives under the auspices of James Baker's research center (after a round of talks at Houston's Rice University, there will be more discussions in Damascus), is not thrilled about Egypt's proposal. Syria has its own reasons for its lack of enthusiasm about the Egyptian regime.

The current round of leaders' visits to Washington, and the headlines in Arab newspapers, might create the impression that the only thing Arab rulers have on their minds at present is the peace process. When a three-way summit between Saudi Arabia's Crown Prince Abdullah, Assad and Mubarak was held three weeks ago at Sharm al-Sheikh, a private talk between the Egyptian and Syrian presidents attracted little notice. The diplomatic statement issued after the summit, emphasizing that the three leaders denounce the use of violence, won attention; but alongside this display of unity, the meeting featured a stormy discussion about a matter that troubles Egypt deeply.

The issue involves a huge Egyptian telecommunications company, Orascom Telecom, which does business throughout the Middle East, Africa and India and which stands to lose close to $40 million, which it invested in Syria in the establishment of a cellular phone network. Orascom purchased 25 percent of the shares of Syriatel, one of the two companies that hold concessions to erect a cell phone network in Syria (the other is the Lebanese-owned Investcom). Two months ago, the Syrian government designated two Syrian judges to serve as acting directors of the Egyptian-Syrian cell phone enterprise. This step precipitated a major battle between Egypt's Orascom and the Syrian government.

Egypt's Orascom, established in 1950 by Onsi Sawiris, is involved in telecommunications, infrastructure works, industry and tourism. Among other things, it has worked on the Suez Canal suspension bridge project and built the opulent Le Meridian Hotel. It has cooperative ventures with international giants such as Bechtel, Morrison-Knudsen, and Besix, and it holds investments in Egypt's oil and gas industry. Orascom is building Taba Heights, in the Taba region, a huge resort city, and it has built sections of other Egyptian tourist areas. Orascom also distributes products manufactured by Microsoft, Hewlett-Packard, and other international software and communications companies. It is also the major Internet supplier in Egypt.

In an interview with Onsi Sawiris published two years ago, the Al-Ahram newspaper described him as "Egypt's Rockefeller or Rothschild." Sawiris owns a valuable collection of art works, particularly from Dutch schools, and one of his hobbies is backgammon, played for very high stakes to ensure that "only good players turn up to try their luck against him."

Sawiris' father was a lawyer, and he grew up in Egypt's south; he was sent to study agriculture in order to prepare him for the supervision of his family's lands, but he decided to focus his energies on the contracting business. In 1966, Sawiris moved to Libya, where he lived for 12 years; he returned to Egypt only after the signing of the Camp David accords, which left Libya hostile toward Egypt and its citizens. Sawiris' sons have studied in Zurich, Berlin and Chicago; today, they run Orascom together with him. The huge firm gives scholarships to promising Egyptian students who want to enroll in prestigious universities abroad; the grants include full tuition, living expenses, and the possibility of working with Orascom later on.

The subsidiary Orascom Telecom, run by a son, Naguib Sawiris, has become embroiled in a controversy with the Syrian company and Syria's government as well. In an interview published last week by Al-Hayat, Naguib Sawiris explained how he had developed the cellular phone project with the Syrian company, and how all the revenue from the first trial year of the project ended up in Syria's state coffers, despite the fact that most of the costs were borne by Orascom.

"Without Orascom's abilities, technologies and means, the Syrian partner would never have been able to meet the terms of the government's tender offer," Sawiris stated. In a year's time, he added, the joint Egyptian-Syrian project managed to recruit 120,000 cell phone subscribers.

Asked repeatedly in this interview about the identity of Orascom's Syrian partner, Sawiris demurred, saying only that the partner "is a very well-known personality in Syria, and his company had no alternative other than to agree to what he ordered." Sawiris noted that the terms of the original cell phone partnership agreement stipulate that all financial agreements are to be reached mutually between the two sides.

After a year, when the time came to reap profits from the project, the Syrian partner decided to take control of the company and seize exclusive power over accounts and checks. This maneuver was a flagrant violation of the Orascom-Syriatel agreement.

The Syrian partner gave Sawiris two options: Orascom could continue to provide capital needed for the project, depositing it in accounts controlled exclusively by Syriatel, or Orascom could withhold continued capital investments needed to complete the project, and thereby infringe the partnership contract, and pull out of the whole affair. Its hands tied, the Egyptian partner chose the first option.

Meantime, the Syrian government rushed to appoint the two judges to direct Syria's interests in the joint company. This step was aimed at creating the illusion that officials in Damascus genuinely wanted to resolve the Orascom crisis; in reality, of course, the judges take marching orders directly from the Syrian government.

Orascom wants Syrian President Bashar Assad to straighten things out, put the joint project back on its original footing, and create a climate in which the Egyptian company has an incentive to invest in the Syrian firm. "We are prepared to accept any decision reached by Syria's president, even if he tells us to leave the country without a penny," Naguib Sawiris stated in the interview.

This interview was conducted about two weeks after the meeting between Hosni Mubarak and Bashar Assad. The fact that the newspaper ran the interview suggests that President Mubarak was unable to persuade his Syrian counterpart to resolve the dispute amicably.

Last week, Syrian authorities announced that they were seizing assets deposited in local banks by the joint Syrian-Egyptian conglomerate until the crisis is resolved.

"This is a problem that can only be solved by the leaders of the two countries," an Egyptian businessman told Ha'aretz. "In a country of monopolies like Syria, you can't win a huge concession bid, one that is eventually supposed to yield annual revenue of $3 billion, without having those who have connections with the leaders of the state putting their hands on the profits. I wouldn't be surprised if it turned out that important ministers in the Syrian government, or people in the military or intelligence leadership, are involved in this [cell phone affair]. It's country in which everyone takes a percentage. An affair on this level is definitely a subject that needs to be addressed in a private meeting between the president of Syria and the president of Egypt."

In fact, Egyptian sources say that much of the discussion between the two leaders at Sharm al-Sheikh was devoted to the cell phone project dispute. Mubarak and the Egyptians hoped that the terms of a compromise had been worked out during this meeting; but they were subsequently disappointed.

For Syria, the affair is liable to have major repercussions. Syria is currently making a huge effort to attract foreign investment, or at least to bring back overseas investments by Syrian businessmen, worth more than $80 billion. A key element in this campaign is an attempt to persuade the International Monetary Fund to release a positive report regarding prospects for foreign investment in the country.

Trying to encourage the release of such a report, the Syrian leadership has projected a positive image toward the U.S. government. U.S. Secretary of State Colin Powell asked Damascus to help mediate contacts between the Americans and Iran; the Syrians agreed. But last week, Iran's President Mohammad Khatami announced that he was suspending all contacts with the U.S., ostensibly because the "American government continues to humiliate Iran," but mainly in an attempt to ease domestic struggles between conservatives and reformers in Tehran who want to promote connections with Washington.

Although the Middle East peace process is a major topic in talks between Arab leaders, there is an array of local issues of equal import, as the Orascom dispute suggests.

"It's doubtful that Egypt or Syria would back down from its position on the cell phone issue, even if making such a concession would resolve the Israel-Palestinian dispute," the Egyptian businessman says, sarcastically. "Or maybe they would back down, if they were promised a share of the Palestinian cell phone company. If you want to talk about a `New Middle East,' maybe some profitable shares can supplant suicide terror attacks."