4. War within “the War”: Business-Group Conflict in Egypt, 1939–1945

During World War II, Egypt’s business oligarchs escalated their private war over markets, contracts, concessions, subsidies and related state-mediated opportunities for accumulation. This conflict among the Misr, Yahya and ‘Abbud groups for dominance over Egypt’s expanding industrial sector converged with the continuing constitutional struggle between King Faruq and the Wafd party, and with the Churchill government’s attempts to redefine and secure the former colonial power’s national interest in Egypt. Using the ongoing conflict over the Aswan project as an example, I will detail the role played by these local investors in the precipitous collapse of the British neocolonial project.

During the 1920s and 1930s, an Egyptian national political elite and closely linked groups of Egyptian landlords and capitalists came to exercise growing influence over the levers of state power and the private economy. As we have seen, they were the primary beneficiaries of a contested and protracted though nonetheless substantive transfer of power. This argument draws heavily on the more recent debate about the postcolonial state in Africa (Boone 1992 and 1994). The importance of this transfer of power can be judged by the British state’s need to negotiate what amounted to a neocolonial pact with these forces, symbolized by the 1936 treaty. In this chapter, we will see how these same domestic elites used the war (or the war permitted them) to undermine these arrangements, in part, by turning to American capital.

British bureaucrats among others liked to draw a simple analogy between the two periods when they and the leaders of the Wafd party found grounds or necessity for cooperation—in 1936–1937 and again in 1942–1944. In the grand, Anglocentric accounts of Anglo-Egyptian relations these are two bright moments in the highly pragmatic diplomacy of a hegemony in decline, designed to help stem that decline. By contrast, in exceptionalist accounts these are two formative moments in a neocolonial project that allowed British statesmen and capitalists to maintain if not tighten their grip over Egypt until the mid-1950s. In both these versions of the wartime Anglo-Egyptian problematique, though, Egyptian investors play the same unchanging and supportive role in securing British economic objectives through the war and beyond.

In fact, British economic interests in Egypt were steadily undermined during World War II. British policymakers had realized as much, which I argue is a key to understanding both their abandonment of the Wafd again in late 1944 and their increasingly desperate search for institutions and doctrines that would preserve the postwar Egyptian market; their desperation led, for instance, to the sudden and remarkable portraits of King Faruq as a force for “serious social reform in Egypt” (Louis 1984: 232).

The analysis begins by trying to account for a basic and yet unfamiliar difference in the 1936–1937 and 1942–1944 Wafd governments: the identities of the investors who backed and benefited from them. Tal‘at Harb and friends formed a core part of the bloc behind the Wafd government that in 1936 concluded a historic pact with the ex-colonial power, but at least two specific conflicts unfolded within this new order. The first involved factions within the bloc itself—namely, the Misr and Yahya groups—and is illustrated most powerfully in the overthrow of Harb as chairman of the bank in 1939.

The second conflict is equally implicated in the Yahya group’s triumph, which was a further setback to the competitive position of ‘Abbud, who was representative of a group of firms and investors that were aligned against the Anglo-Egyptian bloc and that since 1935 had been essentially excluded from feeding at the state’s resource trough. Yet, by 1944 American intelligence agents were following the footsteps of the British in describing ‘Abbud as one of the most powerful and influential men in Egypt. The key factor in explaining ‘Abbud’s renaissance is the pragmatic alliance he negotiated in 1942 with the leaders of the Wafd, fourteen years after they had expelled him from the party.

This political realignment, sanctioned and underwritten for equally pragmatic reasons by Churchill’s war cabinet, buttressed the ‘Abbud group in the war of position with rival investors for control of postwar markets, sectors and resources. As the details of the 1944 Aswan bargaining round reveal, these Egyptian investors had all come to see American capital as vital to their future—a shift that both foretold and assisted in the collapse of neocolonialism in Egypt.

We should not lose sight of the irony in the developments to be traced below. The original impetus for the Aswan nitrate project was provided by British colonial officials in World War I as a way to secure the strategic position of the empire. The resurrection of the project by local Egyptian capital during World War II reveals how tenuous the British position in postcolonial markets had grown.

The War of Position

At least three new and distinct coalitions of Egyptian investors had established themselves in and shaped the leading sectors of the economy by the mid-1930s. One of the most enduring and consequential form of business-interest conflict turns out to be what I have called the war for competitive position among these rivals. This war, which steadily intensified during the 1930s, is important in explaining ‘Abbud’s audacious play between 1942 and 1944 to become the country’s self-styled industrial czar.

As can be seen in Table 2, the cross-industry investment strategies of the three main Egyptian business groups reproduced a pattern of direct rivalry for access to and control of virtually every one of the country’s oligopolistic sectors. The only sectors not contested by at least two of these groups in the 1930s—tourism and insurance—became new arenas for competition soon after the war’s end.

‘Abbud’s own efforts to enter or remain in many of these markets—the power-sector conflicts of the late 1920s and early 1930s, the bus-route wars of the mid-1930s, the scandals over shipping routes and subsidies in the late 1930s and, of course, the Aswan fertilizer scheme—were effectively undermined by the Misr and Yahya groups, together with their political allies. ‘Abbud responded by seeking alternative investment possibilities, leading in 1938–1939 to his takeover of the Commercial Bank of Egypt as well as the Egyptian sugar company.

The opposition to ‘Abbud is itself evidence for what I am calling a bloc built around the business empires of the Cairo-based Misr group and the Alexandria-based Yahya group, rival investors who had nonetheless negotiated cooperative cartel-like arrangements in various economic sectors. Such arrangements did not, however, prevent the outbreak in 1939 of one of the most divisive conflicts of the wartime Egyptian political economy. At stake was the ownership and control of the Misr group’s factories, information networks and rent circuits. Between 1939 and 1942, the Yahya group overthrew Harb, took control of Bank Misr and laid the ground for a new phase of economic expansion. During 1942–1944, ‘Abbud organized against his rivals with the help of the Wafd.

Hafiz ‘Afifi: The Path from Doctor to Pirate

A remarkable series of business-group conflicts unfolded in the months just prior to the outbreak of the war, in which it became clear, once the dust had settled, that the Yahya group had made enormous gains. One of the key figures in these interlocked affairs was Hafiz ‘Afifi, who coldly helped engineer the overthrow of his original patron, Harb, to advance his own fortunes and those of an apparently more attractive patron, ‘Ali Amin Yahya.

‘Afifi was an ambitious doctor turned politician who had bolted from the Liberal Constitutionalist party to serve as the Sidqi government’s representative in London. During this period, he took the side of Sidqi and the Foreign Office in the growing dispute with ‘Abbud and his palace allies, a stance that the Foreign Office believed eventually cost ‘Afifi his post. Upon his return to Cairo, ‘Afifi embarked on a new career, thanks to Harb, who offered him the directorship of the Misr group’s new Anglo-Egyptian insurance joint venture.

In his new guise as a corporate executive, ‘Afifi quickly became a pivotal figure in the Anglo-Egyptian trade bloc that backed the Wafd’s return to power in 1936–1937, and he was rewarded with an appointment as Egypt’s first ambassador to London following the signing of the Treaty of Alliance in March 1937. According to Davis, Harb convinced ‘Afifi to return to Cairo one year later, following the sudden death of Ahmad ‘Abd al-Wahhab, the powerful former finance minister and close ally of the Misr group. In April 1938, ‘Afifi rejoined the board of Misr Insurance, and took ‘Abd al-Wahhab’s place on the boards of four other Bank Misr subsidiaries as well (Davis 1983: 162). Harb and his coinvestors undoubtedly turned to the well-connected ‘Afifi as a way of increasing their political support, given the group’s perilous finances and an increasingly desperate need for funds to prevent a collapse of the bank.

The Misr group’s uncertain future perhaps explains ‘Afifi’s apparent risk-adverse investment strategy because in the same period, 1938–1939, he extended his support to the Misr group’s industrial competitor, the Yahya group. ‘Ali Amin Yahya, the grandson of the family firm’s founder, succeeded his father Amin Yahya (d. 1936) as head of a group that had ridden the crest of economic nationalism after 1919 to become a powerful force in cotton export, shipping, insurance, textiles (viaYahya’s ties to Filature Nationale), mining, food and chemicals.

The Yahya group’s involvement in mining, food and chemicals was through the Egyptian Salt and Soda Company, the London-registered firm that was created to operate the state’s salt-mining operations at the turn of the century. Tignor (1989: 85) demonstrates that control of the company was nonetheless in the hands of local capital by the 1930s. The same group was the sole domestic producer of phosphate fertilizers and sulfuric acid until the 1940s, through a chemical plant at Kafr al-Zayat, near Alexandria (est. 1937), held under a subsidiary, Société Financiere et Industrielle d’Egypte.

Yahya and the family’s coinvestors, which included members of the resident foreign community like Alfred Lian, Silvio Pinto and Ladislas Pathy [Polnauer], enlisted ‘Afifi in their proposed Aswan mining and Delta fertilizer joint ventures, which, as we have seen, emerged on the eve of the war at the top of the government’s development agenda. In addition, they would cooperate in bringing Coca-Cola to Egypt.

Looting the Ships

‘Abbud gained first-hand knowledge of the potency of this partnership between a bitter personal adversary, ‘Afifi, and two sets of competitors, when he lost his bid in 1939 to obtain a financial subsidy for his shipping joint venture: the old Inchcape subsidiary, the Khedival Mail Line. ‘Abbud bought the ships from the Inchcape interests, but he had to raise the capital for their transfer by mortgaging them and was heavily in debt to the National Bank of Egypt. At the same time, the venture was running at a loss. He naturally turned to the state to bail him out, claiming that his ships deserved the same level of support as the heavily government-subsidized companies that the Yahya and Misr groups had launched with foreign capital in the early 1930s.^[1]

Though Ahmad Mahir, the minister of finance and one of ‘Abbud’s closest allies, fought hard for the subsidy, Mahir’s enemies in the Wafd joined with ‘Abbud’s business rivals in attacking both Mahir and the subsidy plan.^[2] Saba Habashi, the minister of commerce and industry, spearheaded the opposition inside the cabinet, pitting himself against his fellow Sa‘dist party member, Mahir. The attack focused mainly on the firm’s historic links with Lord Inchcape, the long-dead British shipping baron. But in attempting to discredit the nationalist bona fides of ‘Abbud’s shipping company, the opposition’s hand was strengthened by ‘Abbud’s penchant for indiscretion, which in this case linked Mahir’s name too closely and prominently to the ‘Abbud group. Mahir was finally forced to retreat in the conflict with Habashi, allowing his opponents to bury the subsidy question.^[3]

‘Abbud’s sinking fortunes in the shipping business were salvaged only by the beginning of the war, when he successfully leased his fleet to the British state (after threatening to sell them to Italian buyers). Habashi meanwhile rather quickly overcame his objection to foreign investment (real and imagined) in the local economy. Immediately upon leaving office, he and two of his colleagues took up positions on the boards of a number of the Yahya group’s joint ventures. Mahir, though, remained loyal to ‘Abbud, a fact which may have cost him his position in the cabinet formed by his brother in August 1939. He and his undersecretary of finance, Amin ‘Uthman, another partner in ‘Abbud’s expanding commercial empire, attempted a last-minute intervention on behalf of ‘Abbud’s Aswan scheme, though by this time the government had lined up solidly behind the rival project of the Yahya group.^[4]

Once again, the business conflict in Egyptian political life that I have been highlighting tends to complicate conventional accounts of another key period in Egypt’s history. As is usually noted, the new ‘Ali Mahir government and the British authorities were involved in a series of escalating confrontations, which led both to Mahir’s downfall by June 1940 and to the subsequent interpretations of his policy as one guided by an overarching and “long run” objective of weakening British “influence” (Morsy 1989: 66). The purges at the Finance Ministry are conventionally interpreted in this light. However, while “pro-British” figures like Ahmad Mahir, the former finance minister, and his deputies lost their positions, equally staunch pro-British figures were appointed to these same strategic sinecures. They included Hushamza Sirri, who took over at Finance, where he helped the country’s leading spokesman for Anglo-Egyptian commercial cooperation, ‘Afifi, take over the country’s most important national economic institution, Bank Misr.

The Hijacking of Bank Misr

There is no more graphic example of the Yahya group’s ascent to the commanding heights than its assault on Harb’s massive, teetering monument to economic nationalism, Bank Misr. The management’s questionable financial practices combined with a general economic downturn to weaken the commercial position of Bank Misr in the late 1930s. A run on the bank as the war broke out forced Harb to seek additional subsidies from ‘Ali Mahir’s government. The premier and his finance minister, Sirri, forced Harb off the board as the price for the government’s support. ‘Afifi took over as chairman of the bank in September 1939.

While nationalist historiography has tended to frame the Bank Misr crisis and Harb’s overthrow as an example of foreign capital’s continuing hostility to Egyptian industry, the explicitly revisionist accounts by Davis (1983) and Tignor (1984) have effectively undermined the view of the crisis as a British plot. Davis concludes that rival investors and their political allies had taken advantage of the bank’s financial crisis. “At the center of the conspiracy to oust Tal‘at Harb was Dr. Hafiz al-‘Afifi” [sic]. In addition, both the premier, ‘Ali Mahir, and his finance minister, Sirri, also sought Harb’s dismissal, according to Davis, because “he was closely associated with Ahmad ‘Abbud” (Davis 1983: 162, 166).

Though Sirri gradually moved closer to ‘Abbud late in the 1940s, I have uncovered no evidence linking him to ‘Abbud at the time of the Misr crisis. More tellingly, no act served ‘Abbud less than appointment of his unswerving personal, political and commercial rival, ‘Afifi. While Davis places ‘Abbud in the thick of the multisided conspiracy, this interpretation is incorrect. ‘Abbud’s efforts to take control of the bank took place during 1942–1944, in response to the successful coup by ‘Afifi and the Yahya group.

One of the most important results of the 1939 leadership change at Bank Misr has been overlooked. As the auditors were trying to make some sense of the bank’s tangled finances, ‘Afifi brought his partner and head of a major rival business group, ‘Ali Amin Yahya, onto the bank’s board. These investors in effect created a new institution for private regulation of markets through what at the time would have been called a combination, a form of common control over otherwise independent firms. At the same time, the original coalition of investors behind the founding of the bank and its subsidiaries was being forced to surrender its exclusive rights to appropriating and distributing the rents generated by Bank Misr’s factories, firms and branches.

World War II and the Restructuring of the Postcolonial State and Economy

The intensifying conflict among these Egyptian investors is an unknown facet of the war years in Egypt. The details of economic policymaking and interest conflict generally have been ignored in the Anglocentric narratives of British efforts to secure loyal governments in a country vital to Allied defense plans, as well as in the nationalist counter-narratives of the war as a neocolonialist project and catalyst of the upheavals of the 1950s. The intersecting point of these alternative narratives is 4 February 1942, when, with the Germans pressing toward El Alamein, British armor surrounded the ‘Abdin Palace and British ambassador Lampson forced King Faruq to appoint the Wafd party leader Nahhas as prime minister. With British backing, Nahhas and the Wafd remained in power until October 1944.

The exigencies of the war were undoubtedly the cause of the repeated British violations of Egyptian sovereignty, the explosive increase in the numbers of foreign soldiers on Egyptian soil and the burdensome administrative regulations imposed on the country; likewise, they obviously overrode concern for the inevitable backlash that would follow this resort to colonial-like forms of intervention and control. Egyptian nationalists are also correct in assuming that British policymakers hoped to exploit the position built up during the war in order to strengthen economic linkages between Great Britain and Egypt. But they erred, as did British policymakers like Lampson, in thinking that Egyptian capitalists shared these objectives.

My account of business and politics during the war years begins with the ad hoc creation of new forms of state intervention in the economy, a generally unremarked-upon side of the early years of the war, and the efforts by business rivals to shape the emergency regulatory regime in their interests. The analysis focuses in particular on the unfolding conflicts over fertilizers and the proposed import-substitution nitrate industry.

The Fertilizer Crisis

Landlords, peasants and consumers paid heavy costs for the years of incessant private conflicts and incoherent public policies over the Aswan project, though some shippers and traders had reaped a handsome windfall. The shortage of fertilizers proved to be one of the most critical wartime problems faced by the predominantly agricultural economy. Egyptian producers required more fertilizers than in normal years in order to meet the increased demand for food and to counter the adverse effects on productivity caused by acreage and other war-related restrictions. Instead, fertilizer imports dropped precipitously below the prewar levels. In 1938, Egypt had imported 514 thousand tons of fertilizers. The figure for 1941 by contrast was only 5 thousand tons. Agricultural economist Alan Richards rightly labels this greater than 600 percent drop a “catastrophic decline” (1982: 168–173). Though deliveries began to increase in 1942, by the end of the war imports were still at less than half their pre-World War II levels.

The war had completely disrupted Egypt’s normal channels of trade. Circuits between Egypt and Germany were completely cut off, and the Axis powers instituted a successful blockade of the Atlantic-Mediterranean shipping routes. At the same time, the Allied powers diverted the bulk of their supplies and relatively scarce shipping space to conducting the war, which meant in general a tremendous decrease in the volume of imports reaching Egypt.

From 1941 on, Egypt’s access to foreign supplies was essentially controlled by the Allied economic authority in Egypt, the Middle East Supply Center (MESC), an institution designed to coordinate regionwide military and civilian supply requirements. MESC wielded tremendous power over the local political economy, according to one of its officials, primarily by its ability “to bring to bear just the right amount of pressure on the Egyptian government to induce it to forego what it wanted or to take action that it did not want to take, without provoking a political explosion.” To an important extent, the drastic reduction and, at times, “the complete cessation of fertilizer imports” were “brought about”—that is, coordinated—by MESC (Lloyd 1956: 85, 87). The Allied authorities in particular exploited Egypt’s dependence on fertilizer imports, holding back supplies until the Egyptian authorities turned over domestic food crops—wheat, barley, rice and millet—to the British army.

The steep rise in local fertilizer prices provided an early and obvious sign of the impending supply problem. Prominent landowners protested in parliament against what they claimed was a government-sanctioned jump in prices of over 70 percent between October 1939 and February 1940, and they accused the Mahir regime of helpingthe oligopoly distributors, the Royal Agricultural Society and the Agricultural Credit Bank, to cash in on the war (Egyptian Gazette 29 February 1940). The British embassy accounts report an even steeperprice rise of 120 percent by January 1940.^[5] Mahir’s government found itself compelled by circumstances, as well as by the steady pressure of British ambassador Lampson, to reconsider the EEC’s Aswan scheme as a solution to the fertilizer crisis. As it turns outs, however, the EEC’s rivals applied pressure even more effectively than did Lampson, who found London suddenly deaf to his pleas on behalf of Egypt and the EEC.

Contesting National Interests

Though power, sovereignty and the national interest are three sacred concepts in realist conceptions of international political economy, the power of the investors and their allies who fought for control over development of Egypt’s new fertilizer industry in World War II exposed both sovereignty and national interest as, at best, useful fictions.

The competition to build Egypt’s first import-substitution nitrate factory had turned into a free-for-all on the eve of the war, a reflection of the tremendous uncertainty that gripped investors and decision makers alike. ‘Ali Mahir’s predecessor had ostensibly committed the Egyptian state (April 1939) to an agreement with Hungarian and American investors who were partners with the local Yahya group in the proposed Delta fertilizer scheme. Ambassador Lampson and his staff were intent on protecting what the British Foreign Office and the Department of Overseas Trade viewed as the EEC’s prerogatives in this sector, insisting that the Egyptians sign a final agreement for the rival Aswan project.

Only days before the government fell, ‘Abbud’s ally, the finance minister Ahmad Mahir, intervened to hold up a possible agreement with the EEC. ‘Abbud’s long-time partners, the British Thomson Houston Company (BTH, part of the AEI combination), made a new, eleventh-hour offer that the Egyptians suddenly felt “duty bound” to examine.^[6] Lampson and his staff sought to recover from this setback by beginning a new lobbying effort for the EEC—and their ostensible allies, the Egyptian peasantry—virtually from the day the new ‘Ali Mahir government took office.

‘Ali Mahir was an advocate of a proposed new Ministry of Social Affairs to improve the miserable conditions in the Egyptian countryside. One of Lampson’s advisers sought to convince Mahir that if he really intended “to do something tangible for the fallah,” he should instead let the EEC build the Aswan project! Of course, the EEC and its backers wisely chose not to rely on moral suasion alone. Thus, its bankers sought to block the Yahya group and its foreign partners in the Delta Scheme from access to capital in London, Paris and New York, a step which British officials both supported and believed ultimately to have succeeded.^[7]

I believe that the ‘Ali Mahir government looked futilely in the fall of 1939 for a way to salvage the fertilizer scheme for the Yahya group, the investors whose interests had been so well served by the recent palace-backed administrations, while trying to fend off the British pressure on behalf of the EEC. Thus, when Mahir appointed a new cabinet committee on Aswan, the EEC representatives found its members and, in particular, Sirri, who helped engineer the Yahya group’s takeover of Bank Misr, “intolerable and difficult to deal with, always finding some fresh excuse to postpone a decision.”^[8]

The support for Yahya was constrained, however, as well as contingent on the Yahya group’s being able to “deliver the goods,” which was increasingly open to question. The group’s Hungarian backers could not obtain financing, and the key U.S. firm, American Cyanamid, had prudently begun to revive its old association with the rival Aswan proposal promoted by ‘Abbud and the AEI/BTH consortium (who were the heirs of Docker’s original scheme). Two broader considerations affected the Mahir government’s decision making in this case: the continued health of the agroexport sector and the fragile state of relations with the British authorities.

Both factors were critical ultimately to Mahir’s survival in office and help to explain Mahir’s decision, finally, to come to terms with the EEC in late December 1939 (Chamber of Deputies 1948: 7), a decision made less painful perhaps by a new package of financial concessions offered by these British investors along with a commitment to at least partial production at the plant within two years.^[9] And the cabinet’s insistence on implementing the scheme via a locally incorporated enterprise, for which the EEC would act as contractors rather than concessionaires, meant that some set of Egyptian investors would ultimately gain a share in the new state-created monopoly.

If Mahir found his particularistic agenda constrained by a broader set of institutional forces and relationships, than so did another local power holder, British ambassador Lampson, who had worked so hard over the years on behalf of the EEC. Following his meeting with the Egyptian premier on 20 December 1939, in which Mahir committed to a completed agreement within three weeks (Mahir still had to secure parliamentary approval), Lampson wired the following message to officials in London: “The Aswan scheme is now under the most urgent consideration of the government as a result of continuous pressure kept up by this Embassy.…The fact is that we are pledged to give financial support and I most urgently trust that further instructions will not cut across what has clearly been the policy of his majesty’s government up til now. The Embassy is now unavoidably in daily contact with the Egyptian ministers on this subject.”^[10]

Dismayingly prescient, Lampson soon learned that directors of the rival electrical manufacturer, BTH, had intervened directly with the secretary of the treasury to block the “unfair support” given to the EEC. Within a week, Treasury had reviewed and reversed its position, announcing that the British government would not pay for the Egyptian fertilizer scheme nor allow the diversion of vital raw materials that were needed for the war. Though EEC executives tried to salvage their position in London, the effort failed.^[11]

As Lampson’s diaries reveal, he and the companies proposed to keep the news of this setback from the Egyptian government for as long as possible. Thus, while ‘Ali Mahir and his colleagues negotiated with a parliamentary committee to secure approval for the expedited implementation of the fertilizer-factory project, the obviously desperate EEC and its allies in the British government looked for ways to obtain the Egyptians’ signatures on a contract for a project that they knew would not be built in the foreseeable future (Egyptian Gazette 4 and 12 January 1940). Percy Horsfall, the Lazard Brothers banker, advocated outright lying to the Egyptians, but Lampson, to his credit, advised against it (Killearn Diaries 5, 11, 13, 16, 17 and 21 March 1940).

Mahir, whose government faced increasing domestic pressures on the economic front in the spring of 1940, risked his already-fragile relations with the British authorities over the fertilizer-factory issue. The prime minister apparently thought he could influence the EEC to deliver on at least part of the scheme—a factory capable of producing one hundred thousand tons of fertilizer, one-third of the original projected annual capacity—by threatening to turn to the competition. Thus Mahir made a show of inviting the EEC’s rivals to Egypt and underscored the message by suddenly declaring the old 1935 commitment to exclusive negotiations with the EEC null and void (al-Ahram 17 March 1940). Lampson and the EEC answered by trying both to impose rigid conditions on contacts between the government and the competitors, and to force the Egyptians to uphold the old terms of the infamous 1935 agreement.^[12]

When the Egyptians finally unveiled their reasoned compromise proposal in April, the British purposely ignored it, and in a tense confrontation Lampson instead demanded that they take back the legal adviser’s “wretched letter” overturning the 1935 accord. At the same time, the ambassador privately advised the EEC to take a hard line with the Egyptians, advice which was undoubtedly influenced by the ambassador’s own increasingly hard line toward Mahir. The British documentation on the 1940 Aswan negotiations abruptly ceases after April; these negotiations contributed to and were then overtaken by the crisis that led to Mahir’s fall by June. As one British official later recalled, “Grave business was taking place in Egypt and this particular business [the nitrate scheme] had to be ignored for the time being.”^[13]

This summary of the aborted 1939–1940 bargaining round suggests that, in focusing almost exclusively on Mahir’s alleged pro-Axis sympathies (and, thus, privileging Lampson’s own obsessions), historians have possibly given us an overly narrow and ultimately misleading account of Anglo-Egyptian relations during this early and critical phase of the war. First, Mahir’s government is often described as having complied fully with British authorities in various policy domains, yet this was clearly not the case with the proposed fertilizer factory. Mahir’s government was brought around to support British preferences in this case—agreeing to deal with the EEC—only reluctantly, and under pressure. At the same time, the Mahir government obviously exercised its capacity to resist certain British demands—the burial of the 1935 agreement is a case in point.

Second, then, conventional accounts of wartime Anglo-Egyptianrelations rest on an exceedingly narrow definition of intervention and the realm encompassed by politics. In continuing to focus almost obsessively on the details of such episodes as Mahir’s removal from office in June 1940 or the even more (melo)dramatic encounter between Faruq and Lampson in February 1942, we lose sight of the fact that British administrators interfered daily in the political economy. Embassy and MESC officials oversaw an array of new controls over production, distribution channels and prices. Egyptian landowners and capitalists probably tended to discount the profits and inflate the losses resulting from what they (and most other sectors of society) viewed, quite accurately, as enhanced foreign manipulation, influence and control.

The brief resurrection of the nitrate-factory issue in early 1941 simply underscores the degree to which the local political economy was in fact a captive of the global conflict. On the one hand, local suppliesof nitrates continued to decline. Egypt fertilizer stocks had fallen toeighty thousand tons by early 1941, while prices had nearly doubled again, to £E 21 per ton.^[14] These conditions led the Sirri government to begin a centralized rationing and distribution scheme for supplies that were ultimately controlled by British businessmen and bureaucrats. On the other hand, a revived proposal for carrying out the Aswan project as an emergency war measure came directly from the MESC in Cairo.^[15]

London’s understandable reluctance to accord Egypt’s needs for vital raw materials and machinery a top priority effectively ended negotiations over the Aswan project until the British victory over the Germans at El Alamein. The summer of 1942 was the most critical period of the war in Egypt. Rommel launched his first attack in the desert west of Alexandria, on 1 July, and while his advance had been stalled by 1 September, the decisive battle in the Egyptian campaign was fought on 2 November. Nine months earlier, the British had engineered the infamous return of a “loyal” Wafd government to power.

British officials in Cairo began fighting a different kind of war in Egypt in 1943, with tremendous implications for the Egyptian political economy and, ultimately, for British power. As the documents on the revived Aswan negotiations in 1943–1944 clearly attest, Ambassador Lampson led an ultimately futile effort to preserve the Egyptian market for British heavy industry. As a document from the Board of Trade’s files defined the problem, “We shall need an outlet for our heavy industry after the war and Egypt will always need these nitrates. The situation in that country has changed beyond belief and I wonder if the time has not come to try and re-establish the position the group had built up for themselves by ’35. ICI have said that they would have any amount of surplus plant on their hands after the war. It would be a blessing to get rid of it at a reasonable price.”^[16] Of course, one of the most visible kinds of change was the relative advance of a domestic manufacturing sector in tandem with the emergence of local investors like the ‘Abbud, Yahya and Misr groups.

During the latter part of World War II, British state agents were drawn into the increasingly bitter battles among Egyptian business factions. Lampson and his colleagues sought to exploit their extraordinary political position to defend against what at the time was seen as the most potent threat to long-term British interests: U.S. capital. Thus, even with Rommel threatening Alexandria and Lampson facing a decisive political battle with pro-Axis Egyptian leaders, the Foreign Office was concerned that the ambassador not allow “Americans who might come in the disguise of British to step in” and take over the Aswan project.^[17]

The 1942–1944 Wafd Government and ‘Abbud’s Bid to Become Egypt Inc.

A particular configuration of investors, state agents and political factions, which I called a neo-Anglo-Egyptian investment bloc, had secured what seemed by the mid-1930s to be a dominant position over the investment resources of the Egyptian state. The core of this bloc was the Misr group, the leadership of the Wafd party and the British residency. At the same time, the fortunes of an alternative authoritarian coalition linking King Fu’ad, the palace and ‘Abbud gradually fell apart.

Between 1939 and 1941, a set of rival investors who were led by the Yahya family and who undoubtedly included associates of the newking (if not the king himself) successfully wrested control of Bank Misr and, thus, of the most important of the state-subsidized and state-protected rent circuits. The first two sections of this chapter have in effect recounted the power play by this bloc of palace politicians and Alexandrian investors who had backed the minority governments of‘Ali Mahir and Sirri. Between 1942 and 1944, this same loosely aligned set of businessmen and palace notables formed the core of the opposition to the British-backed Wafd government, and in some heroic-exceptionalist accounts they are identified—quite inappropriately—as representing the most progressive factions of the national industrial bourgeoisie.

The following section analyzes the steadily escalating economic conflicts that marked the second phase of the war, 1943–1945 and, in particular, the remarkable bid by ‘Abbud to become, in the only slightly hyperbolic words of one British official, “the most powerful figure in Egypt, more powerful by far than the king or any group of Egyptians, whether political or financial.”^[18] The key to this effort was a set of three separate alliances that ‘Abbud began to forge in 1942. The first was with the Wafd party, which had expelled the businessman in 1928. The second was with the British embassy, where he had been declared persona non grata for most of the 1930s. And the third was with American capital, much to the consternation of the British state.

‘Abbud Buys the Wafd

While the bargain that brought the Wafd back to power is well known, the accord between the party and the ‘Abbud group requires some preliminary analysis. The British and the Wafd were pushed into each other’s arms by the force of circumstance. The British confronted a growing threat to the Allied strategic position by the Nazi offensive across North Africa. The Wafd sought to return to power. The palace, spearhead of the anti-Wafdist and pro-Axis forces in Egypt during the war, was the common enemy. The British ambassador, Lampson, arranged for the Wafd’s cooperation through his trusted intermediary (and ‘Abbud’s business partner), Amin ‘Uthman, and carried out his coup with the help of British armored cars, which surrounded the palace on the evening of 4 February 1942. The ambassador offered King Faruq the choice between abdication or acquiescence to the appointment of Nahhas, whom the king detested, as premier.

For his part, ‘Abbud had encouraged and benefited from the rise to influence within the party of an entrepreneurial cohort committed to adapting the Wafd to the standard model of postcolonial politics. Thus, according to Warburg, “favoritism, nepotism and politicization of the administration swept the countryside. The Wafd was ‘digging in,’ to use Lampson’s words, and trying to make up for the five lean years it had spent in opposition” (1985: 138).

‘Abbud established business ties with the premier’s in-laws, the notoriously corrupt al-Wakil family, and other would-be investors, including Amin ‘Uthman, the Abu al-Fath family, and the ambitious landowner Fu’ad Sirag al-Din, who seized de facto control of the party in 1942 and who remained at the head of the party more than fifty years later (Berque 1972: 544; Tignor 1984: 241; Warburg 1985: 137; Makram ‘Ubayd [1943] 1984). As British embassy observers pointedly remarked at the time, there were “very few businessmen in Egypt with whom ‘Abbud is wholly unassociated.”^[19]

What could ‘Abbud offer the party in return for its support? Two things come to mind (apart from outright bribes). First, as was common in Egypt (and elsewhere of course), the businessman could offer ambitious politicians or their sons positions in his enterprises, lucrative subcontracting opportunities, etc. Second, though virtually nothing has been written on the subject, the party needed funds to function, and virtually all observers agree that as a party of “relatively poor men,” the Wafd was less able to fund its activities than “rich parties” such as the Liberals or Sa‘dists.^[20] From the time of their reconciliation in 1942 until the party was forced to disband in 1952, ‘Abbud was widely recognized in fact as the Wafd’s primary financier (Moore 1980: 124). Finally, and most important, the liberal economic model to which the Wafd remained committed empowered the private owners and managers of the means of production.

‘Abbud gained handsome payoffs once what I call the business wing of the Wafd triumphed over the remnants of the party’s old guard in an intraparty power struggle. The conflict pitted Sirag al-Din against ‘Abbud’s old nemesis, the lawyer Makram ‘Ubayd, who was the finance minister and number two man in the Wafd until his abrupt dismissal from the cabinet in May 1942 and expulsion from the party itself two months later. Warburg (1985: 140) describes this last of the historic splits within the Wafd as the single most important factor in undermining the Nahhas government and helping the palace to recover the political initiative.

Makram ‘Ubayd later portrayed the struggle with the Sirag al-Din faction as a battle against corruption inside the party, which he publicized (with the palace’s help) in his infamous Black Book (1943). In fact, his dismissal came in the midst of a conflict with ‘Abbud, who as the new chairman of Egypt’s sugar monopoly opposed the finance minister’s plan for widespread public distribution of the costly and increasingly scarce basic good. His fall cleared the way for what British diplomats called ‘Abbud’s “thief’s bargain.” The Wafd government virtually ceded sovereignty to ‘Abbud, allowing him to trade “surplus” stocks of sugar for fertilizers, at a time when the domestic market was experiencing regular shortages of the commodity. After protracted negotiations, ‘Abbud sold enormous quantities of Egyptian sugar to the British authorities, at an impressive profit, while completely circumventing the normally high export tax. At the same time, he obtained the release of fertilizer stocks for his sugar plantation at Armant, though these supplies were officially earmarked for use on other crops. He also received special shipments of machinery for his sugar factories as part of the deal.^[21]

The Wafd-borne windfall was spread across ‘Abbud’s far-flung commercial empire. For instance, the Nahhas government awarded ‘Abbud’s shipping company the lucrative concession to transport pilgrims to Mecca, despite its having been an exclusive preserve of the Misr group during the 1930s.^[22] The government also moved decisively to break the November 1942 strike by shipyard workers at ‘Abbud’s Khedival Mail Line, one of the first unions recognized under the Wafd’s new probusiness labor law (Beinin 1982: 182; Bianchi 1986: 430–431, 433–434).

Another, even more remarkable aspect of this wartime political realignment entailed the rapid restoration of cooperative ties between ‘Abbud and the British embassy, which included increasingly frequent, direct access to Lampson himself. ‘Abbud’s competitors among the resident British business community were understandably distraught over this shift in policy, particularly as ‘Abbud sought to exploit this unique conjuncture and the unprecedented degree of political latitude that it conferred.

‘Abbud’s political maneuvering of the period is symbolized by the meeting he arranged at his Upper Egyptian estate in Armant in March of 1943, where Lampson was recuperating from a dangerously high fever. ‘Abbud arranged for Lampson to see the king’s representative and chief adviser, Hassanhamza Pasha. As Lord Killearn (Lampson received his peerage on the New Year, 1943) wrote, ‘Abbud “was obsessed with the idea that he had a mission to improve relations between the Embassy and king Farouk” (Killearn Diaries, entry dated 19 February to 30 March 1943). The meeting took place only ten days before the palace and Makram ‘Ubayd launched the first of their attempts to bring down the Nahhas government (Warburg 1985: 140–143), and ‘Abbud had obviously hoped to preempt such a challenge.^[23] These efforts on behalf of the increasingly embattled Wafd government were linked to a plan whose scope and ambition gave even the British pause: by 1943 ‘Abbud had launched a bid to take over the Misr group’s plants and factories and to use the resources of the state to create new nitrate and power industries under his exclusive private control.

‘Abbud Buys a Bank: The Assault on the Misr Group

In late July 1943, ‘Abbud called on the British ambassador to discuss two new confidential projects. First, he proposed to take over the Aswan negotiations by forming an Egyptian company that would own and operate the entire scheme. Second, he wanted to take over the Bank Misr group. He told Lampson that he already held a controlling interest in the bank and would seek to overthrow the present administration—i.e., his rival, ‘Afifi. ‘Abbud sought British backing of this naked power play, and to gain it he couched his scheme naturally in terms of encouraging Anglo-Egyptian postwar trade. The implications were clear however. His Aswan scheme meant that he and not the British companies (or the Egyptian government) would control the venture (Killearn Diaries 29 July 1943).

‘Abbud claimed to hold 25 percent of Bank Misr’s stock; British sources estimated that he held 20 percent at most; but at any rate, he was the single largest shareholder.^[24] The chairman of the bank, ‘Afifi, checked ‘Abbud’s first attempt to use his voting bloc by refusing to register a portion of his holdings and then by altering the voting rights. Davis (1983: 156) mistakenly dates this incident back to the mid-1930s, and he attaches to it an idiosyncratic interpretation: “Rather than waning, corruption in the Misr Group became even more pervasive as the struggle among members of the bourgeoisie for directorships increased” (168). Yet the “struggle for directorships” in this case was more accurately an attempt by the bank’s largest shareholder to exercise his property rights!

The maneuver forced ‘Abbud to revise his plan and instead seek to separate the bank from its industrial subsidiaries, with the intention of gaining effective control of those subsidiaries. ‘Abbud concerted his plans with his close friend, the new minister of finance, Amin ‘Uthman. He in turn consulted with Lampson, and, with the ambassador’s approval, ‘Abbud and the finance minister discussed the matter at length with Lampson’s financial adviser. The ambassador gave their plan the go-ahead in a time-honored fashion:

I caused both Amin Osman Pasha and Abboud Pasha to be informed…that the relations of either the government or Abboud Pasha with either the Misr Bank or Hafiz Afifi Pasha were far too delicate ground for me to have anything to do with. It was an entirely internal affair. I could not be drawn into any position where the Embassy could be rightly accused of having had any finger in the business. It followed that it was for Amin Osman Pasha and for Abboud Pasha to decide entirely for themselves on the merits of the case.^[25]

Lampson’s reasoning—that receiving full details of the plan was fully consonant with keeping the embassy’s finger out of the business—is noteworthy. There is no sign in the diary entry or Foreign Office files that ‘Abbud wanted anything from the embassy other than a green light, which he clearly received. The diplomatic dissimulation notwithstanding, Lampson fully supported ‘Abbud, as revealed in numerous dispatches to London urging policymakers to approve ‘Abbud’s scheme for cooperation in Egypt’s postwar industrialization. The embassy’s financial counselor argued even more forcefully for joining with ‘Abbud in the “postwar new order,” pressing London to invite ‘Abbud for talks at the ministerial level. Superiors at the Department of Overseas Trade were forced to remind Cairo that not even refugee governments in Britain were accorded the reception being advocated for ‘Abbud.^[26]

Amin ‘Uthman’s plan to launch an attack against the bank in parliament was delayed by yet another palace attempt to bring down the government in the summer of 1944 and a decisive intervention by Lampson to keep it in office. By the time he finally did move against the Misr group, the bank’s chairman, ‘Afifi, had enlisted palace support, the public face of which entailed a highly visible visit by King Faruq to the Misr mills at Mahalla al-Kubra and the bank’s headquarters in Cairo. The outcome of the ‘Abbud group’s conflict with ‘Afifi for control of the Misr group’s manufacturing empire was ultimately determined by the successful palace coup against the Wafd in October 1944.^[27]

As in the highly polarized arena of the mid-1930s, these fierce competitive conflicts tended increasingly to overlap with, and reinforce, the struggle for state power, thereby constraining the choices of businessmen and politicians alike. If in the spring of 1943 ‘Abbud had sought a reconciliation between Lampson and Faruq, by the fall he was warning direly that the “boy [i.e., Faruq] was a real danger to the country,” a message he would repeat at regular intervals in the months ahead.^[28]

‘Afifi, the Bank Misr chairman who in the regime struggles of the 1930s sided with the British against ‘Abbud and the palace, was forced by circumstances—‘Abbud’s massive stock purchases, the plot against his chairmanship and the rebuff by the British embassy—to turn to the palace to safeguard his position. Not only did the move help Bank Misr’s directors thwart ‘Abbud’s attempted takeover, but ‘Afifi and his new allies challenged ‘Abbud on the fertilizer project, another battle that would be waged unceasingly through, and until, the Wafd party’s defeat.

The Ambivalent Alliance Behind ‘Abbud’s Bid for Aswan

What emerges most clearly from the record of bargains and maneuvers to revive the Aswan scheme in 1943–1944 is the tenacity (or, in the British view, the audacity) of ‘Abbud’s efforts to take control of the proposed new industrial sector by positioning himself as the indispensable pivotal force in the multinational negotiations. Specifically, ‘Abbud exploited the Wafd’s short-term vulnerability and the British government’s increasing concern with its long-term position inside Egypt to claim a controlling share in the venture.

The problem of fertilizer supplies plagued the Wafd government from the moment it took office in February 1942, the year in which nitrate imports fell to their lowest levels of the war. The Wafd government’s first steps included a futile appeal by the finance minister Makram ‘Ubayd for an immediate start on the Aswan project, though the exigencies of the war made obtaining the necessary raw materials (primarily steel and copper for the generators and other electric-plant equipment) impossible. The Egyptians periodically renewed their request, under increasing pressure from a variety of constituencies, as even Lampson recognized.^[29]

From 1942 on, British strategy in Egypt consisted in disguising their own country’s increasingly vulnerable economic position by exploiting the vestiges of colonial political privilege—in particular, the Wafd’s dependence on British power. As the private correspondence on the Aswan scheme makes clear, British officials feared above all that U.S. companies would make a successful bid for the contract. Lampson thus regularly reassured Nahhas that the Aswan scheme remained a top priority, a point that he invariably coupled with a reminder of the EEC’s historic right (eventually) to undertake the work. Among themselves, British company officials and government representatives admitted that U.K. firms probably would not be able to build the project until sometime after the war’s end.^[30]

‘Abbud’s intervention in the summer of 1943 to revive the Aswan project thus played on the vulnerabilities of Egyptian and British political authorities alike. He portrayed himself to Nahhas and Lampson both as the indispensable guarantor of the project and used this leverage to undercut the rival efforts of Bank Misr’s new, hostile board of directors and its bureaucratic allies in such redoubts as the Ministries of Public Works and Supply. One measure of his own sense of increased agenda-setting capacity in this arena is his explicit redefinition of the project’s terms: ‘Abbud proposed to create a new, private Egyptian company to own and operate both the power station and the nitrate plant.

As I have indicated, Lord Killearn and his Cairo staff championed the strategic joint venture in the strongest terms, pressing Whitehall to arrange for ‘Abbud’s passage to London, which triggered a protracted policy debate inside the halls of the Foreign Office and the Department of Overseas Trade. Unsurprisingly, in light of the bitter conflicts of the 1930s, some officials counseled against cooperation with ‘Abbud: “[T]he special pleading…does not impress me very much. It is surely evident that Abboud is aiming at becoming a kind of commercial dictator in Egypt and he thinks he may be allowed and helped in achieving this position if he is allowed to come over here and make contacts and affiliations which he can thrust down the throats of the people in Egypt when he gets back.”^[31]

The overarching concern for Britain’s postwar manufacturing position and markets resolved the debate in ‘Abbud’s favor. In December 1943, both the president of the Board of Trade and the secretary of state for foreign affairs, Anthony Eden, endorsed ‘Abbud’s Aswan scheme as a move toward maintaining Britain’s strategic position after the war.^[32] Eden put it baldly: though “Abboud’s first object is the furtherance of his own interests, our own look like being well served by the partnership.”^[33] In fact, the Churchill administration and its corporate allies seriously miscalculated the benefits of the “partnership” and spent much of 1944 trying to undo the damage; nonetheless, at this remarkable conjuncture, ‘Abbud had successfully positioned himself and promoted himself to the politicians in London and Cairo alike as a vital element in Egypt’s future.

During the Wafd’s annual congress in November 1943, Amin ‘Uthman unveiled his party’s (and Egypt’s) first “Five Year Plan,” in which electrification and, specifically, the Aswan project featured prominently as part of the Wafd’s agenda for developing new Egyptian industries. The Wafd’s leaders were obviously groping for solutions to the country’s multiplying economic problems—minimally, in order to stem the party’s decline. Nonetheless, their views on Egypt’s economic future coincided with those of planners and policymakers in both the United States and Great Britain who anticipated that industrialization would play a key role in the plans of postwar Egyptian governments (DeNovo 1977, Baram 1978, Bryson 1981).

Lampson’s unwavering support for ‘Abbud followed from what he correctly perceived to be an American policy of using the war to challenge Great Britain’s domination of the Egyptian market. The Roosevelt administration had launched this new aggressive posture in Egypt by appointing the New Deal lawyer James Landis to the position of director of economic operations in the Middle East (and the ranking U.S. civilian representative at MESC) in August 1943 (Baram 1978: 164–165; Ritchie 1980: 115–127). Landis’s single-minded devotion to challenging Britain’s economic and political preeminence in fact contributed to a serious heightening of Anglo-American tensions. The British ambassador’s defensiveness is captured in a long, exasperated dispatch complaining about Landis, whom he derided as a “super trade commissioner cum economic dictator,” and in Lampson’s pressing London to support the ‘Abbud project “without waiting until the Americans have consolidated their position” inside Egypt.^[34] Lampson’s complaints, illustrative of emerging Anglo-Egyptian commercial rivalry, were among the subjects discussed with the businessman and Roosevelt confidant, Edward Stettinius, during his 1944 mission in London.

Lampson’s defensiveness may help explain what turns out to have been a relatively uncritical, if not naive, policy of supporting ‘Abbud and his various proposed investment projects, seemingly on the strength of ‘Abbud’s professed loyalty to the principle of Anglo-Egyptian postwar cooperation. Examples of this naivete abound, beginning with the question of ‘Abbud’s ability to secure the right to operate the Aswan power station itself as a private concession. The public-works bureaucracy and the Wafd party leadership had opposed this option back in the 1930s. V. B. Grey, the EEC representative in Cairo and a local British business-community leader, warned that the Egyptian government would never approve such a plan. Lampson lobbied hard, however, arguing that there were “strong grounds” to believe ‘Abbud would win the new private concession, and, on the strong urging of the Foreign Office, the EEC directors reluctantly agreed to cooperate with him.^[35] If only they knew how uninspired the ambassador’s intelligence gathering had been, to judge from his unpublished diaries: “I did make it clear to Abboud that I presumed he felt reasonably sure that the Egypt government would be in favor of giving him the concession. He said he had made preliminary feelers and had no doubt on that score” (Killearn Diaries 3 December 1943).

What else would ‘Abbud say? In fact, Nahhas’s government insisted on public ownership and independent management of the power plant. ‘Abbud tried contesting this condition but ultimately had to agree to it—at least on paper.

Between August and December 1943, ‘Abbud had negotiated successfully to obtain British approval for moving forward on the power plant and fertilizer factory, Egypt’s first large-scale industrial project since the mid-1930s and, as we have seen, a frustrated objective of every wartime administration since that of ‘Ali Mahir. To do so, he depended heavily on the British ambassador, the war having facilitated the painstaking repair of their battered relationship. Lampson subsequently backed ‘Abbud’s attempted takeover of Bank Misr and various other business deals, though equally significant, from ‘Abbud’s point of view, throughout 1943–1944 the ambassador remained personally committed to the policy of propping up the Wafd against the palace, even as other British officials began wistfully to reimagine the night-clubbing King Faruq as a kind of frustrated, would-be reformer (Smith 1979: 477; Louis 1984: 232).

The details of the 1944 Aswan bargaining round, recounted below, are important both in tracing the tangled lines of political power and economic interest in Egypt at the war’s end and in reconciling the apparently contradictory policies of British officials at a key juncture. After all, Eden and his staff had justified cooperation with ‘Abbud on the ground that it served the British state’s vital, long-term interests in inhibiting the penetration of U.S. capital. ‘Abbud had repeatedly made it obvious that his plan depended on the Wafd party’s remaining in power. And yet, almost immediately, the Foreign Office began to withdraw its support for the Wafd, again of course on the ground of protecting long-term vital interests. To what extent were these policies at cross-purposes, as Lampson himself seemed to think?

Senior policymakers in the Foreign Office and directors in the EEC distrusted ‘Abbud and bridled at the conditions he had imposed on these arm’s-length allies. More crucially, they realized that, his effusive celebrations of Anglo-Egyptian cooperation notwithstanding, ‘Abbud’s agenda directly conflicted with their twin objectives, which were reflected in an obsession with defining the Aswan project as British: (1) that the EEC would control the negotiations, and (2) that the involvement of American capital would be minimized, if not excluded all together. In response, his “partners” began secretly searching for a way out of the deal. The much-commented-on Anglo-Egyptian political realignment during 1944 coincided with, and in a sense depended on, these British capitalists’ and policymakers’ locating what they hoped would be a sturdier long-term redoubt against U.S. competition.

The Last Battle of the War: Aswan, 1944

There was a significant continuity in the institutional identities of the sectoral competitors, though almost two decades had passed since Docker first began promoting the Aswan scheme in the mid-1920s. A comparison of Table 1 (in Chapter 3) and Table 3 makes this clear. Of course, the EEC’s interest in the scheme had grown steadily during the 1930s, aided by the Foreign Office and its representatives in Cairo, who served virtually as the EEC’s exclusive private lobbying arm.

The EEC’s “national” rival, AEI, Docker’s old firm which had been secretly sold to and reorganized by G.E. in the 1920s, continued to compete for the business as well under the name of its two “independent” subsidiaries, British Thomson Houston (AEI-BTH) and Metrovick (AEI-MV). Though Docker was long gone, ‘Abbud continued to cooperate with the AEI-MV interests and, through them, with the U.S. chemical producer American Cyanamid, whose engineers had drawn up the rival American-designed Aswan scheme.

Yet the role played by Egyptian capitalists had expanded enormously over time to the chagrin of British officials, such that by 1939 the sectoral conflict essentially had been recast as a conflict among Egyptian investors to develop an import-substitution fertilizer industry. In tandem with this change, the role of American Cyanamid and its engineering subsidiary, the Chemical Construction Corporation, grew as well since they were in effect the only available sources of the technology for both ‘Abbud’s and ‘Afifi’s rival projects.

This sudden and unprecedented prominence of American capital in plans for developing a new Egyptian industrial sector was an even more significant and alarming change in the eyes of British policymakers. To put it bluntly, the growing market power of U.S. producers in this case threatened to undermine the Foreign Office’s policy of protecting the EEC’s investment in the Aswan scheme and, by extension, of preserving the postwar Egyptian market for British heavy industry. This dilemma was made painfully evident by the discovery that every firm in the new, Foreign Office–backed consortium except the EEC had private arrangements with the Americans—including ‘Abbud, AEI and the EEC’s long-time affiliate in the scheme, ICI.

The Desperate Diplomacy of Economic Decline

London’s cable to Lampson on 3 February 1944, which provided the ambassador with his instructions on the Aswan project, reveal the twin fears that underlay the rapidly evolving positions of the British bureaucrats and their business allies. Though ready “in principle” to collaborate with ‘Abbud, Lampson was to inform the Egyptian government that the EEC was also ready to carry out the scheme “without the intermediary of an Egyptian company”—in other words, without ‘Abbud. When Lampson questioned the logic of this “loophole,” London officials feebly justified it on the grounds of the high commission fee that ‘Abbud was allegedly demanding.^[36]

Letters exchanged between Grey, the EEC agent, and ‘Abbud, along with entries in Lampson’s own unpublished diaries (his information came from the censorship service), show that Grey originated the claim for “compensation for expenses incurred.” Lampson sarcastically described the fee as “the paltry sum of £E 100 thousand,” approximately one-half million dollars (Killearn Diaries 4 January and 21 June 1944). Grey had tried to disguise his role in the rent seeking.

Lampson’s fear of loopholes was rational, given the second half of his brief: to keep Nahhas in the dark about the probable participation of U.S. firms in the project while approving negotiations only on the basis of the original EEC scheme. As the Foreign Office archives make clear, the British policymakers sought to control U.S. capital’s direct involvement in the Egyptian industrial sector and thus dreaded the possibility that the Egyptians might begin direct negotiations with the Americans. Here lies the more compelling reason for the growing British reluctance to cooperate with ‘Abbud, whose control of the project increased the likelihood that the rival, American-designed scheme would be adopted.

The U.S. investors showed little sign that they were about to accept a back seat in the project. To the contrary, American diplomats and businessmen coordinated an appeal to Nahhas in March 1944 to delay a decision until representatives of American Cyanamid could reach Cairo and present their own proposal. At the same time, these investors had opened a second “front” in the war for the Egyptian chemical sector by beginning negotiations with ‘Abbud’s local rival, ‘Afifi, to revive the Delta Scheme, again with U.S. diplomatic support. In Cairo, New Dealers like Landis painted the opposition to the Delta Scheme as part of a British strategy to monopolize the postwar Middle Eastern market; and the Americans, who had recently expanded their diplomatic presence and appointed their first ambassador to Cairo, were thus eagerly drawn into the central arenas of Egyptian political and economic life for the first time.^[37]

‘Afifi’s Counter-Coalition Building and the Defection of the EEC

‘Afifi’s tenacity in promoting the rival Delta Scheme should put to rest the canard that, unlike Bank Misr’s original chairman, he showed no interest in developing Egypt’s manufacturing sector. By gaining U.S. diplomatic support for their bid to enter the nitrate market, ‘Afifi and his coinvestors had taken yet another decisive step to counter the formidable coalition of Wafd party leaders and British embassy officials that stood behind ‘Abbud. Along the same lines, they offered shares in the deal to key notables, obtaining the capital and doubtless the political clout of, for example, Muhammad Badrawi-‘Ashur, the wealthy landowner, Wafd party funder, and close relative of the number-two man in the party, Sirag al-Din. And as I have already noted, ‘Afifi and his group were investing heavily in the fortunes of the opposition bloc.^[38]

The group’s most brilliant stroke was its attempt to disarm British opposition to the Delta Scheme by bringing locally resident British businessmen into the deal. ‘Afifi began by offering a position on the board of the proposed new venture to Cecil Campbell, Cairo representative of the British multinational, Marconi, and one of the pillars of the British community. Importantly, Campbell was close to Grey, the EEC representative, and replaced Grey as chairman of the British Chamber of Commerce in Egypt. It is unclear that ‘Afifi realized just how strategic a choice he made. The EEC had taken over Marconi during the period 1943–1944 and retained Campbell as its “political consultant” in Egypt (Jones and Marriott 1970: 178).

Campbell had likely been advising his clients to diversify their risk because the EEC quietly approved a plan of cooperation with ‘Abbud’s local rivals in the Delta Scheme. Campbell began by enlisting his friend Grey to draft a memo showing why the two projects were not competitive! Grey officially joined the board of ‘Afifi’s new company in June, a step that could hardly have been taken without the agreement of the EEC.^[39] Of course, ‘Abbud was outraged by the clear conflict of interest and would accuse Grey and Campbell of attempting to sabotage his project. Though the British ambassador joined him in protesting to London, the Foreign Office shifted its policy in line with the EEC’s evolving interests and in the summer of 1944 ended its opposition to the Delta project.

The Foreign Office was also shifting its position on the fate of the Wafd at this time, though until now we have been given little understanding of the logic behind this move, save in the most general of terms. Thus, as in the political realignment in 1934–1935, analyzed in Chapter 3, the British once again began complaining of the corruption that had infected the Egyptian administration. Historians have preceded along similar lines, twinning the ad hoc argument about corruption with an equally unsatisfactory one about the inevitability of a shift in alignments sooner or later. And we find one more parallel between 1934 and 1944 as well. Once again, ‘Abbud was lobbying fruitlessly in London to save an Egyptian government.

The Collapse of ‘Abbud’s Aswan Coalition

In meetings in London between July and August 1944, American, British and Egyptian investors hammered together a final agreement on their joint Aswan venture, on the basis of ‘Abbud’s proposal to own and operate the factory. Technical plans for both the chemical and power plants were based on the scheme drawn up by American engineers in the 1930s. American Cyanamid would supply the key electrochemical technology. ICI would serve as management consultants to ‘Abbud’s Egyptian company, and ICI’s Egyptian subsidiary, the country’s largest sales and distribution agency, would market the fertilizer.^[40]

The final plans for ‘Abbud’s new postwar industrial venture thus violated both conditions stipulated by the Foreign Office when it approved the project as an emergency priority. The major firms appeared either unwilling or unable to defend British national interests in this case. ICI had conceded the role of principal to American interests; it was represented in the negotiations by Frederick Pope, a director of American Cyanamid and a founder of its engineering arm, the Chemical Construction Corporation. And Pope rejected out of hand the British government’s demand that the equipment orders be placed only with British firms.^[41] The EEC’s role was reduced to that of a subcontractor to ‘Abbud and his American consultants, and they had to share the order for electrical equipment with a competitor, British Thomson Houston (which, despite the name, was substantially American-owned), which ‘Abbud had long represented in the Egyptian market.

The key to ‘Abbud’s ability to influence the terms of the bargain rested most obviously on his influence with the Wafd administration. Various parties in the negotiation were explicit about this influence, though ‘Abbud’s tireless campaign in Cairo and London on the Nahhas government’s behalf makes the same point even more unambiguously.^[42] In turn, two key variables shaping the companies’ decision about cooperating or not in ‘Abbud’s scheme (the opportunity costs) were the estimates of (1) the value of the expected return and (2) the likelihood of ‘Abbud’s actually securing the deal. The Foreign Office and State Department archives contain abundant evidence of the companies’ continuously reestimating these variables and attempting where possible to influence them.

Following the conclusion of the negotiations in August 1944, Ibelieve that the EEC began to reestimate radically the value of co-operating with ‘Abbud on the terms imposed by him and his American partner, Pope, and to discount the risk in reviving negotiations with a post-Wafd Egyptian government. This had been precisely the advice tendered by their Cairo representative, Grey, who had argued against ‘Abbud’s project, claimed that Lampson and others exaggerated his influence, and pressed instead for direct negotiations with the Egyptian state.

The support for the Delta Scheme was in fact a way to protect and perhaps improve the EEC’s position if the Wafd did fall from power. First, ‘Afifi’s group represented key figures in the opposition bloc. Second, by building the Delta plant, they would block ‘Abbud’s attempt to enter the chemical sector and ideally weaken his influence over the power scheme. Certainly, it looks as if ‘Abbud viewed the threat of the Delta project exactly in this way because in September 1944 he and his new American business partner decided to double the planned annual capacity of the Aswan fertilizer factory, from three hundred thousand to six hundred thousand tons, an output that would match Egypt’s entire annual demand and, importantly, make ‘Afifi’s project superfluous.

This was obviously a cut-throat business. American Cyanamid suddenly pulled the reins on the American embassy and the ‘Afifi group, informing them both that the Delta project would have to be “restudied,” while ‘Abbud bragged that he had “torpedoed” ‘Afifi’s scheme. But, by narrowing their options, he also drove key leaders and opinion molders of the British expatriate community to promote the campaign against corruption and to embrace the discourse of reform through which a bloc of royalists, nationalists, oligarchs and capitalists sought to pry loose the Wafd’s grip on state power. Sidqi’s plea in August on the pages of al-Ahram to keep party politics out of the Aswan business shows once more just how close in fact the two had become. And Lampson’s insistence on championing the side of the Wafd (and ‘Abbud) during the summer left him increasingly isolated among British elites in Cairo and London.^[43]

There is nothing puzzling about the closely allied views of the EEC, its Egyptian directors and the managers of Churchill’s Middle East policy in this case. The objectives of regulating the role of American capital and of securing millions of pounds sterling in orders for British manufacturers were linked to the central issues in postwar British political economy and foreign policy, including Anglo-American relations, the health of British heavy industry and management of the country’s massive balance-of-payments deficits. As ‘Abbud and his American partners outmaneuvered their competitors, they also steadily undermined what officials at the Foreign Office had defined as British national interests in a strategic arena. The managers of Anglo-American diplomacy had even come to see the Delta project as a possible bargaining chip in dealing with U.S. investors and diplomats, to be traded to the Americans in return for respecting British-company claims on Aswan.

The threat posed by ‘Abbud’s and Pope’s designs on this key arena made the costs of continuing to support their wartime allies, the Wafd, remarkably concrete for London policymakers and contributed to the well-known decision in the fall of 1944 to encourage a change of government in Egypt. In October, with Lampson on leave in South Africa, the king received his green light to crush the Wafd. The fall of the Nahhas government forced ‘Abbud into a desperate and ultimately futile scramble to hold together the investor bloc that he had assembled to support his Aswan scheme. The new government was riven by competing claims on these resources, and though one of ‘Abbud’s closest friends and business partners, Ahmad Mahir, had been appointed prime minister, Mahir’s assassination in February 1945 proved to be a fatal blow to the ‘Abbud group’s power project.

At the same time, however, ‘Abbud defeated his local business rivals in the competition to secure the cooperation of U.S. investors in Egypt’s postwar chemical industry. After returning from his first trip to the United States, and in response to the government’s May 1945 decision to open the Aswan project to international tender, ‘Abbud and his partner, Pope, laid the foundation of a new era in Egypt’s political economy. In August 1945, the last month of the war, ‘Abbud founded a new £E 4 million venture, the Chemicals Manufacturing Corporation (Akhbar al-Yawm 1 February 1946). He then opened negotiations for a U.S. government loan to build Egypt’s first import-substitution nitrate factory at Suez, in the northeast corner of the Egyptian Delta.^[44]

Summary: The Fall of the Neocolonial Project

Exceptionalist historiography rightly marks Harb’s overthrow in 1939 as the end of an era in Egypt’s political economy, though for the wrong reasons. In the two decades since the 1919 revolution, Egyptian investors like Harb, ‘Abbud, Yahya and their cohorts had unquestionably emerged as the most dynamic segment of the country’s economic elite, successfully usurping as well as advancing what I have described as the subordinate industrial-sector project originally charted by local minority investors and international financiers like Ernest Cassel at the turn of the century. To put it as simply as possible, analysts have clearly exaggerated the degree to which Greek, Jewish and other “foreign” residents continued to command the heights of local large-scale production and commerce in Egypt in the decades after independence.

The new Egyptian investors possessed enormous political advantages that they used in promoting their competitive positions during the 1920s and 1930s. The renaming of the fashionable crossroads in downtown Cairo, long known as “Suarès Square” (Midan al-Siwaris), for the family that was Cassel’s partner and Harb’s original sponsor is a statement about the rise of a new national political and economic elite in Egypt. Of course, so is the fact that many of the ventures and sectors originally pioneered by the minority investors—the sugar company, the alcohol works at Tura, the textile industry, the Kom Ombo Company, etc.—were by the end of the 1940s effectively in the hands of Egyptian investors like ‘Abbud.

This chapter too should finally put to rest the commonly repeated claim that Harb’s overthrow in 1939 marked the end of attempts to build Egyptian national industries—that is, ventures in which foreigners did not hold shares—for which Harb is most often celebrated. Empirically, this is simply untrue, as I have documented. ‘Abbud fought with Harb’s successors (Yahya and ‘Afifi) to build a wholly domestically and privately owned nitrate industry. Harb’s removal as chairman of the Misr group more accurately marked an increased interest in building Egyptian industries, along with the beginning of a protracted struggle over the issue of industrial regulation.

Industrialism and related reform questions had gained increasingly wide currency by the eve of the war, evinced for instance in the spate of social provisions—rudimentary welfare and labor-relations bills—passed by the wartime Egyptian governments. At the same time, investors and undoubtedly others were clearly aware of the limits to the “easy” expansion of import-substitution industry under the liberal economic model in place since the 1880s. As Lord McGowan, the chairman of ICI, had reported confidentially in 1937, and as figures on domestic production levels at the time seem to indicate, there were increasingly fewer profitable investment possibilities in Egypt, barring either a significant transformation of the internal market or increased levels of government protection and other subsidies.^[45]

One need look no further than the corridors of Whitehall for recognition of the growing importance of industry in Egypt and in other parts of the periphery, as British planners sought ways to protect postwar markets against American capital. But while explicitly articulated neocolonial projects may have been successful in parts of sub-Sahara Africa in the years after World War II, the strategy never stood a chance in Egypt. The privileged political position of local Egyptian investors and their clearly divergent economic preferences effectively checked British neocolonial ambitions at least a decade before the wave of national anticapitalism swept these investors from the Egyptian stage.

The role of investors like ‘Afifi, Yahya and ‘Abbud in this quiet, market- or interest-driven challenge to British power is all the more important given that, as Beinin and Lockman see it, these investors were “not particularly nationalist” (1987: 11). As we have seen, the war allowed ‘Abbud to restore his relations with the British ambassador and, through his investment in the British-backed 1942–1944 Wafd government, to recover from the economic setbacks his competitors dealt him between 1935 and 1939. And in the war with his rivals for control of the proposed new nitrate industry, ‘Abbud joined forces with American capitalists who were seeking access to the Egyptian market.

I believe that ‘Abbud’s celebration of Anglo-Egyptian cooperation during the war, along with his close ties to the “corrupt” (and, for many, “traitorous”) Wafd government, originally earned him his enduring reputation as a comprador and an architect of the post–World War II neocolonial order among the influential wave of historians who began to publish in the 1950s and the 1960s. The irony of course is that, for the British imperial managers, ‘Abbud was revealing precisely how hopeless the task had become.

The record of the 1944 Aswan bargaining round shows that the pace of change rapidly outstripped the ability of the Foreign Office to protect British interests in this sector, defined materially in terms of the size of the order to be given to the EEC, symbolically in terms of a British identity for the project, and politically in terms of a gate-keeping function to limit the role of U.S. capital. Needless to say, ‘Abbud, like the other Egyptian investors, showed little interest in or commitment to any of these objectives. Certainly, from this point on, nationalists and others will have to base their criticisms of ‘Abbud and his rivals on different ideological and empirical grounds. In light of the inevitable turn to American capital to build the nitrate project, perhaps they are destined to be recast as the spiritual fathers of the Infitah.

More critically, however, in this chapter we find the origins of a new view of the Egyptian political economy in the decade after 1945, during which the complicated and protracted struggle over the privilege of privatizing public resources and building Egyptian industries takes a decisive turn. We might conceptualize this struggle as being over the building of a new regulatory regime in Egypt, starting with the takeover of Bank Misr in 1939 and continuing with a host of other new forms of intervention introduced and administered by British officials during the war. The right of Egypt’s investors to privatize resources would face increased challenges in the 1940s and 1950s, together with the other property rights that had secured business privilege in Egypt since the time of Cromer.

Notes