U.S. military aid to Egypt: An economic dependency trap

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Egyptian military tanks are positioned outside the police institute near Cairo's Turah prison during the trial of three detained journalists with the Qatar-based Al-Jazeera broadcaster on April 10, 2014. (Photo: AFP-Mohammed al-Shahed)

By: Omar Wehbe

Published Saturday, April 26, 2014

Cairo – U.S. aid to Egypt continues to be a headache for the White House. Views are divided in the U.S. administration between those who are in favor of and those who are against the resumption of aid to the government in Cairo, which has turned a cold shoulder to the Obama administration.

The U.S. president had suspended military aid to Egypt following the ouster of the Muslim Brotherhood-affiliated President Mohammed Mursi. Ahead of the 2014 budget, the U.S. State Department said that U.S. Secretary of State John Kerry would certify whether the Egyptian government had made real and concrete steps to support the democratic transition, before the funds could flow again.

Perhaps this explains the large number of U.S. delegations that have visited Egypt, to probe the situation there following the protests of June 30, 2013.

Dr. Atiya Ibrahim, a political science professor at the University of California, said that recently, Michele Dunne, a senior associate at the Carnegie Middle East Program, had opined that Kerry was confused and unable to make a decision regarding the resumption of U.S. aid, until he could certify that the Egyptian administration would do as the U.S. dictates, as was happening in the past.

Ibrahim explained the real reason for the crisis between Egypt and the United States, which is bearing heavily on the question of military aid. He said, “The U.S. administration suspended the scheduled delivery of four F-16 jets to the Egyptian armed forces, to protest the army’s move to depose the elected president on July 24, 2013.” “Later, on August 14 of the same year, Obama cancelled the Bright Star military exercise with Egypt, in response to the violence against pro-Mursi protesters. Three days later, Washington announced it would suspend $250 million in annual aid, as Congress members John McCain and Lindsey Graham called on the United States to halt military aid to Egypt because of the unrest there,” he added.

Ibrahim then pointed out that the Saudi foreign minister pledged that the kingdom would offset any funds that the U.S. withholds, and also drew attention to the UAE’s move to provide financial assistance to Egypt as well as investment in joint projects, as a way to compensate for the suspended aid.

Dr. Salwa al-Samra, a professor of economics at the University of Alexandria, said that the legal justification for the suspension of U.S. aid to Egypt is that the latter had overthrown an elected president, something that the Americans oppose and want the army in Egypt to reconsider its position. What also makes matters worse, according to Samra, is that the Egyptian administration has ignored these pressures, and sought to forge alliances with countries that are at odds with the U.S., led by the Russian Federation.

Economic war is something that major powers are increasingly resorting to, Samra continued, citing a decision by China and Russia to limit the use of the U.S. currency in their transactions, and U.S. covert actions in these two countries’ vicinity. She said, “Perhaps Egypt stands to benefit at present from the continuation of the crisis between the major world powers.”

The University of Alexandria professor continued, “Egypt made a mistake in 1998 when it agreed to the U.S. request to reduce economic aid over ten years from $815 million to $415 million by 2008. The two sides planned to reach a new agreement for the next ten years, but negotiations continued for two years without reaching a comprehensive deal.”

Regarding the size of the aid Egypt receives from the United States, Abdul-Khaliq Ibrahim, financial expert, said, “The aid contributes to a small percentage to the Egyptian economy. In 1979 – the year the U.S. began to give aid to Egypt – aid accounted for 0.5 percent of the GDP. Now, aid accounts for less than 0.25 percent in recent years.”

He continued, “Members of the U.S. Congress lobbied to link military aid to Egypt to specific measures and policies that the regime in Egypt must implement; it was then agreed that this aid would be conditional upon political reform and the closure of tunnels along the Egyptian-Israeli border, through which arms are smuggled to Gaza.”

Ibrahim then added, “Data shows that USAID allocated $557 million in 2003 for Egypt alone, including $200 million in cash transfers to provide hard currency for new projects. But 70 percent of this conditional aid is routed back to the U.S., to Egypt’s detriment.”

In the 1970s, according to the financial expert, U.S. aid went to rehabilitating the Suez Canal, and infrastructure in the energy, water, and communication sectors, as well as the construction of grain silos. In the 1980s, he continued, aid was diverted to improving the quality of life for Egyptians, especially in rural areas, and for sectors like agriculture, health care, education, economic reform, and administrative development, with a view to give the private sector a bigger role in all sectors of the economy, encourage privatization, and adopt a free market model, in addition to creating jobs and providing loans for small businesses.

In the 1990s, also according to Abdul-Khaliq Ibrahim, aid gave more attention to the government’s efforts to stimulate economic growth, sell public sector assets, and increase exports, in addition to improving water-use efficiency, healthcare and educational services, curbing pollution, and supporting NGOs in order for them to play a more active role in development.

Ibrahim, citing USAID figures, gives a breakdown of the aid in the outgoing period as follows: $5.3 billion to support infrastructure (water, power, communications, etc.); $4.5 billion for basic services (healthcare, family planning, education, agriculture); $6.2 billion for imports of equipment; $2.8 billion for the implementation of administrative, financial, and economic reform; and $3.9 billion in food aid (i.e. grain imports until 1990). In addition, Egypt receives $1.3 billion annually in military aid.

Direct cash assistance during the same period did not exceed $1.815 billion, while the remainder of aid ($21.185 billion) went to finance imports from the United States, bearing in mind the high cost of U.S. goods, and the cost of transporting and insuring them, compared to European or Japanese goods.

On March 4, 2014, Obama submitted a draft for the 2015 federal budget, which comes into force in October 2014, with total expenditures of $3.9 trillion. The budget maintained the same level of aid for Egypt as previous years.

Obama allocated $200 million for economic aid, and $1.3 billion in military aid to Egypt, in addition to $28 million for the U.S. peacekeeping force in Sinai. Part of the economic aid was allocated for supporting a peaceful democratic transition in Egypt.

A large proportion of military aid to Egypt remains suspended, however. The 2014 federal budget unveiled in mid-December 2013 had contained conditions for the U.S. State Department and the White House to certify, at least in a pro forma manner, the adherence of the interim government in Egypt to restoring democracy in the country through a referendum on the constitution, and free and fair parliamentary and presidential elections.

This article is an edited translation from the Arabic Edition.

Comments

I would be interested to know who Atiya Ibrahim might be. There is no
listing for that name among the University of California faculty.

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