Why Egypt may not care about losing US aid

A growing number of US officials are warning that Egypt’s insistence on prosecuting at least 16 Americans in a crackdown on pro-democracy organizations will have drastic consequences.

As the diplomatic crisis escalates, the looming threat is that the US will cut off its $1.3 billion per year in military assistance to Egypt, which has flowed every year since 1987 as unofficial compensation for Egypt’s peace treaty with Israel.  

Yet despite the warnings, Egypt has refused to back down, instead escalating the crisis at every turn. It's unclear whether Egypt sees the US threats as serious. But some say that the military rulers may see the domestic gains to be made in establishing Egypt's independence from the US, which supported former President Hosni Mubarak for decades, as outweighing the benefits of the aid.

“They're trying to provoke [the severing of US aid]," says Robert Springborg, an expert on the Egyptian military at the Naval Postgraduate School in Monterey, Calif. "Because they're desperate and they want to present themselves as popular defenders of the nation. So what better way to do it?”

Furthermore, he argues, “It wouldn't mean a thing” to Egypt’s military were the aid to stop. “A great bulk of that has gone into the procurement of weapons systems that have not been used, are not likely to be used, and that [Egyptian forces] haven't been properly trained on.”

The $1.3 billion in aid isn’t given as cash to Egypt’s military. Instead, it is used to buy US-made military equipment for Egypt, or to pay for upgrades or maintenance for military equipment. In the past, Egypt has used the assistance, which makes up at least 20 percent of its military budget, to buy equipment like Apache helicopters, F-16 fighter jets, M-60A3 and M1A1 tanks, and armored personnel carriers. Egypt has already placed orders, for 2012 and 2013, for F-16s and M1A1 Abrams tanks. Egypt’s military also regularly sends officers to the US for training.

Springborg says Egypt does not properly maintain many of the M1A1 Abrams tanks, does not have all of them in service, and does not regularly train servicemen on them. The F-16s, he says, are “dumbed-down” versions that are “not effective fighting planes.”

“These are just trinkets,” says Springborg. “Militarily, they don’t mean anything. [Defacto leader Field Marshal Mohamed Hussein] Tantawi knows that full and well. … Cutting off military aid is not a real threat. It’s a hollow threat on our part.”

'A big deal' if aid were to be cut

The military council that took power when former President Hosni Mubarak stepped down after massive protests last year has sought to present the unrest and instability that has plagued the country since as the work of “foreign hands” out to destroy Egypt. The crackdown on civil society organizations has been positively portrayed in many newspapers as an attempt to uphold Egypt’s sovereignty against foreign meddling. A recent Gallup Poll found that 71 percent of Egyptians oppose the idea of American aid to Egypt. Some suggest that the investigation may have become too big of an issue domestically for the military to shut it down without losing face.

And some say the generals would not be so quick to wave goodbye to a large chunk of its defense budget. Michael Wahid Hanna, a fellow at the New York-based Century Foundation, says the behavior of Egypt’s leaders suggests that they don’t believe the US is serious about the aid being in jeopardy.

“They do buy hardware and munitions from other places, but it's still supplies and spare parts and training and lots of other stuff – that's a big deal. It would be a dislocation if the relationship was cut,” he says.

And it’s not just a matter of physical weaponry or maintenance, but of the symbolic importance of Egypt’s partnership with the US. “As with Camp David, this relationship is important for what it signifies of Egypt's place in the world,” he says. Severing the relationship would send negative messages to allies in Europe and the Gulf as well.

For the US, cutting aid could mean losing the expedited transit through the Suez canal and access to Egyptian airspace that its aid buys. Many in the US worry that ending the aid might endanger the Egypt-Israel peace treaty. And it could mean losing the access to and leverage on Egypt’s military leadership that the aid, and the military relationships it built, have bought. “Washington doesn’t want to be cutting its most reliable link with the Egyptian authorities at a time of real turbulence,” says Mr. Hanna.

Egypt pushes US to the brink

Yet critics wonder what kind of leverage or influence that aid has bought over the past year, as the military generals have killed peaceful protesters while shrugging off US reprimands, delayed a transition to civilian government, and even refused to take the US defense secretary's calls while protesters attacked the Israeli embassy.

Egypt's targeting of the nongovernmental organizations, some of which are funded by and have close ties to Congress, has pushed the US to the brink. Among the US citizens banned from leaving Egypt and accused of a crime that carries a five-year prison sentence is Sam LaHood, son of Ray LaHood – President Obama’s transportation secretary and an influential Republican politician.

While threats of cutting the military aid have proven useless in changing Egypt’s behavior, a more effective point of leverage could be Egypt’s dependence on loans from the IMF and other donors. Egypt is facing an enormous budget deficit and its foreign currency reserves fell by half last year. Leaders are in the process of negotiating a $3.2 billion loan from the IMF to push down soaring borrowing costs and ease the pressure on reserves.

With Egypt desperate for the loan, the US could push its ally to drop the case against the NGO workers by urging the IMF to put the brakes on a loan deal.

“Were the US to decide to impede that flow, then Egypt is in big trouble,” says Springborg. “This is Egypt's vulnerability now. So if the SCAF pushes so hard that it jeopardizes that, then it's got real problems. It depends on how Washignton plays it. If they focus just on the NGOs and military aid, they're playing into SCAF's hand. If they're a bit quieter and playing behind the scenes, then they've got SCAF in a corner.”

Yet even that line of pressure has its limits. The US has no interest in seeing an economic collapse in Egypt, which would have spillover effect in the region, says Hanna. “Maybe Egypt does see a sort of protection regardless of what it does with respect to the fact that it is too big to fail and everybody is going to be loathe to take steps to push Egypt to the end state.”