The Price of Russia's Travel Ban
Russia's decision to stop flights to Egypt is potentially devastating for that country's already battered tourist industry, but it's also a grim sign for Russia. Egypt was the most popular holiday destination for Russians, and they will find it hard to find a replacement: their country's involvement in the Syrian war means other parts of the Middle East may not be safe, either.
President Vladimir Putin's rhetoric and economic policy may be essentially isolationist, but he's never purposefully done anything to limit outbound tourism. The ability of many Russians to travel overseas once or twice a year was one of Putin's major achievements: Although it was his predecessor, Boris Yeltsin, who opened the borders, it was under Putin that most people could finally afford to go. In 2000, Russians made 4.2 million overseas trips as tourists. In 2013, that number increased to 18.3 million. It grew every year since 2009, when the global financial crisis caused a hiccup.
Putin's foreign policy and the falling price of oil have conspired to reverse the growth. In 2014, the number of tourist trips dropped 4 percent, mainly because of the Ukraine crisis and tensions with Europe. As Russia's recession worsened this year, the decline continued. Russians, however, still went to Egypt: It was friendly, visa-free and cheap -- a weeklong holiday for as little as $500 including airfare -- and it offered beach holidays during the winter. Egypt competes with Turkey for the top spot on the list of popular destinations and outranks it when the Mediterranean gets too cold.
The U.K. was the first country to stop flights to Sharm el-Sheikh after information emerged suggesting the Russian airliner that crashed over the Sinai on Aug. 31 had been brought down by a bomb. Yet British planes continued flying to Egypt's other big resort, Hurgada, and in any case, Egypt had been losing its appeal for U.K. holidaymakers since the Arab Spring, in 2011. Only 296,000 visited last year, a mere 0.4 percent of the global number and more than 50 percent fewer than in 2010.
Russians, however, made almost 3 million trips to Egypt in 2014, representing 7 percent of total visitors. Now, the government has stopped all flights both to Sharm and Hurgada, and Prime Minister Dmitri Medvedev says they won't resume anytime soon. "It will take time to ensure security for a vacation in Egypt," he told deputies on Monday. "Let's not indulge in illusions, this won't be a short period."
The flight bans are devastating to Egypt, which could lose 70 percent of its foreign visitors and a large chunk of the 14 percent of foreign currency revenue that tourism provides. Egypt's government will try to make airports resemble Israel's notoriously strict Ben Gurion International. But that wouldn't be enough for Russia. The country as a whole would need to become more secure.
While Russia is fighting radical Islamists in Syria, it's impossible to rule out new acts of terror. Egypt has experienced attacks against tourists: hundreds died in 1997, 2004 and 2005. Russians are now prime targets because of the intervention in Syria to prop up President Bashar al-Assad.
This means most Russians have few safe destinations open to them this season. Outside the Middle East, beach holidays are only possible in Southeast Asia or the Caribbean at this time of year, and those are too expensive for devaluation-hit Russians.
Russia's tourism industry is in for major losses: According to the Russian Association of Travel Agencies, about 140,000 package tours to Egypt have already been sold for the winter season. Medvedev has ordered the government to look into financial aid for the tour operators.
There is a bigger risk to the Kremlin itself. Will Russians be angry at Putin for getting involved in a foreign war that has claimed civilians and closed a popular part of the world? Or will they rally behind the government, demanding retribution against the terrorists? The latter is more likely: The Kremlin propaganda machine is already at work. Dmitry Kiselyov, host of Vesti Nedeli, the most popular weekly news analysis show on state television, said Sunday that the plane could have been blown up because Russia already was doing more damage to Islamic State than the Western coalition has in the past two years. He even suggested the U.S. may have made a deal with the Islamists to attack Russian aircraft and not Western ones.
Increasing isolation always means anger and escalation. The Kremlin is likely to step up its Syria campaign, and it probably will have more public support.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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