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Issue 11/July 1998
Editor, Prof. Barry Rubin
Issue 11/July 1998
Editor, Prof. Barry Rubin
TWO ARTICLES ON U.S.-EGYPT RELATIONS (Courtesy, Washington Institute for Near East Policy):
Robert Satloff & Patrick Clawson, "U.S. Economic Aid to Egypt"
Robert Satloff & Patrick Clawson, "U.S. Military Aid to Egypt"
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U.S. ECONOMIC AID TO EGYPT: DESIGNING A NEW, PRO-GROWTH PACKAGE
By Robert Satloff and Patrick Clawson
Egypt's economy has scored impressive improvements over the past decade. While still grappling with huge problems, Egypt today has the potential to compete in the global, free-market economy of the 21st century. The two-decade-old U.S. assistance package, heavily weighted toward project funding from the Agency for International Development, helped improved Egypt's tattered infrastructure, but it is now obsolete. Washington now has the opportunity to trim down and re-fashion its aid program with an eye toward promoting Egyptian exports, making Egypt more attractive for foreign investors, and assisting Egypt's transition to a free-market economy--all goals that would strengthen the U.S.-Egypt partnership and advance U.S. interests.
Background: U.S. assistance to Egypt (and to Israel) blossomed in the wake of the 1978 Camp David Accords. For Egypt, this aid was essential in countering the inter-Arab isolation and the beleaguered popular mood it suffered for Anwar Sadat's strategic decision for peace. Economically, the assistance ($815 million economic; $1.3 billion military) was badly needed: Egypt's balance of payments was hemorrhaging, forcing borrowing that drove the country's foreign debt up from $7 billion in 1976 to $21 billion in 1980. The magnitude of the aid was itself quite large, equal to 10 percent of gross national product--the equivalent of $750 billion for the 1998 U.S. economy--paid on an annual basis. In retrospect, the aid was an excellent example of an effective use of foreign assistance, cementing Egypt's new strategic relationship with the United States, providing an important incentive to keeping the peace treaty alive during moments of stress (e.g., the 1982 Lebanon War), and eventually moving Egypt along the path of vital economic reform.
Two decades after Camp David, much has changed to make aid less important. First, Egypt is doing well economically, with no net foreign debt (foreign debt is less than foreign reserves, a situation helped by Washington's Gulf War write-off of $6.7 billion of military debt), 6 percent annual real growth, and a per capita income ($1,280 in 1997) high enough to put Egypt in the World Bank's middle-income category. To the surprise of many observers, Cairo has actually taken great strides toward implementing a broad array of economic reforms. Second, Egypt no longer suffers diplomatically for its peace with Israel. Cairo faced the Arab world squarely in the eye over its peace treaty and forced the latter to blink. While one can justly criticize the warmth of Egypt-Israel peace, Cairo kept its promise not to buckle to Arab criticism, sanctions or ostracism; Egypt's peace with Israel is a fact of life that all other Arab leaders now accept de facto. Third, and perhaps most important, U.S. economic assistance to Israel is being phased out. Against this background, the original logic of substantial U.S. economic assistance to Egypt clearly no longer applies.
When combined with the intense need to find funds to pay for other international programs, these factors have generated a wide consensus in policy and legislative circles to take advantage of the phase-out of Israel's economic aid to re-think Egypt's aid program, too. However, a phase-out of Egypt's economic aid, along the lines of Israel's, would be inappropriate. Economic reform in Egypt is an unfinished project. Despite its recent progress, Egypt still faces huge obstacles to growth, ranging from the nearly 1 million new entrants to the job market each year to the slow pace of privatization and the still-suffocating power of the state bureaucracy. Egypt will continue to need substantial U.S. assistance to ensure the success of its reform effort and the overall importance of the strategic partnership makes investing in Egypt's economic health a vital U.S. interest. Washington therefore should take the opportunity to re-fashion its assistance program in such a way as to provide a smaller, leaner package that emphasizes aid and trade, lowers the profile of U.S. donors (the AID mission is the largest in the world), invigorates the reform program, encourages Egyptian export industries, and makes Egypt a more appealing place for foreign investment. The following principles would govern the new package:
1) Decrease economic aid by half, from $815 million to $407.5 million, phased in over a five-year period. Ten percent of the current level ($81.5 million) would be cut each year.
2) No new project commitments. Zeroing out future AID project commitments will send foreign investors a strong political message about Egypt's economic maturity. Currently, there is a $1.6 billion 'pipeline' of undisbursed development project aid. This backlog is equal to 4.5 years annual spending, meaning that even if no funds were committed to new projects, disbursements would continue at close to present levels for two-to-three years and then taper off for another four-to-five years.
3) Divide the remaining aid among three programs: commodity import program (CIP); cash transfer; and export enhancement initiatives.
CIP: For years, Congress has mandated this program at $200 million per year, all of which finances imports by the Egyptian private sector of U.S. equipment and material. Economists generally regard this as an inefficient way to transfer cash to the Egyptian government, because of the contradictory mix of too much paperwork providing too little protection against allegations of corruption by local middle-men. On the other hand, U.S. suppliers like a program which makes U.S. goods more competitive relative to European goods. Maintaining this program is a political necessity.
Cash transfer: Cash assistance has been effective at promoting economic reform by tying cash payouts to reform measures. While much progress has been made on the reform program, much remains to be done, as illustrated by the failure to take measures that would secure release of $555 million in cash aid committed but not yet disbursed (i.e., also in the pipeline). The cash component of aid is arguably the element most appreciated by the Egyptian government, if for no other reason than because less of it is diverted into meeting the extraordinarily detailed bureaucratic requirements of the U.S. aid program.
Export Enhancement: This is the major innovation in the aid program and would include funding for ideas such as bilateral research and development endowments; industrial investment funds to promote foreign investment; creation of 'qualified industrial zones' joining Egypt and other peace process states; support for an export promotion agency; funding for training and educational programs with U.S. firms and industries, etc.
By this formula, the two accounts that most directly channel money to Egypt (CIP and cash transfer) would actually show an increase in the first year. In future years, cuts do not have to come equally from the three accounts, giving flexibility to show that the CIP and cash transfer accounts remain near or even above current levels for much, if not all, of the downsizing period.
4) Commit the United States to negotiate and implement a U.S.-Egypt Free Trade Agreement. In the beginning, discussions should focus on increasing Egyptian access to U.S. markets. Washington should promise to begin implementing an FTA by the end of the five-year phase-in period.
5) No change in the level of U.S. military aid to Egypt during the five-year period. (See below.)
Conclusion: While this proposal halves Egypt's economic assistance, it changes the mix in a way that offers Egypt substantial advantages over the current package: an increase in direct cash transfer, a commitment to a Free Trade Area, and a full-scale U.S. effort to remake Egypt into an export-driven economy. Movement in this direction is essential both to ensure that Egypt's notable economic achievements reach fruition and to place the bilateral strategic relationship on firmer footing.
U.S. MILITARY AID TO EGYPT: ASSESSMENT AND RECOMMENDATIONS
By Robert Satloff and Patrick Clawson
The question of U.S. military aid to Egypt poses an unusual policy dilemma: should it go up or down? On one hand, Egypt's strategic location, its strict implementation of the military aspects of the peace treaty with Israel, and its strong record of operational support for U.S. initiatives make a strong case for an increase in U.S. military assistance. On the other side, Egypt's 'cold peace' and competitive approach toward Israel, its coziness with rogue regimes in Libya and Sudan, its public criticism of U.S. initiatives in the Gulf and the peace process, and its lack of significant external threats all convincingly argue for a cut. Indeed, both proposals have been made by influential congressional voices. In the end, an assessment of the costs and benefits of America's $1.3 billion in military aid suggests that maintaining the program at current levels "no increase, no decrease" is the approach that best advances U.S. interests.
Egypt-U.S. strategic relations: At first, U.S. military assistance to Egypt was a reward for making peace with Israel and so was tied to U.S. aid levels to Israel. But over time, the U.S.-Egypt strategic partnership assumed importance of its own. The result is that today, the U.S. relationship with Egypt, and particularly with Egypt's military, is a critical asset to U.S. interests. The U.S. military presence in the Gulf and the region at large is dependent on a logistical pipeline that runs through Egypt. No matter how vocally Cairo may oppose U.S. diplomatic tactics or military planning, as it has repeatedly done vis-a-vis Iraq and the peace process, it has never failed to grant the U.S. overflight rights, basing, or transit through the Suez Canal. During Operations Desert Shield and Desert Storm, U.S. aircraft flew 200,000 sorties across Egypt to the Gulf, and during the October 1997 crisis with Iraq, Egypt granted passage through the canal for the USS George Washington in an unprecedented 12 hours. Sustaining American military operations in the Gulf without Egyptian cooperation would be difficult, if not impossible. The political and strategic reality is that decreases in U.S. assistance are sure to affect Egypt's willingness to cooperate so speedily and effectively. Furthermore, U.S. military aid enhances Egypt's ability to operate jointly with U.S. forces.
Moreover, it is important to recall that Egypt has, in the past, committed troops on several occasions to support U.S. policy initiatives. Cairo sent forces to prop up the Mobutu regime in Zaire in 1977, to Morocco in the war against radical Algeria in 1979, to oppose Libyan operations in Sudan in 1983, to defend Saudi Arabia in 1990, to police Somalia in 1992, and to pacify Bosnia in 1994. In many of these interventions, Egyptian forces provided the critical element of Arab or Islamic partnership with the United States and the West.
The Army and Regime Stability: Domestically, the Egyptian armed forces remain the pillar of the Mubarak regime and a pivotal force for stability in the Arab world's most populous and influential country. Egypt's army is a bulwark against the Islamists and, perhaps surprisingly, one of the most influential constituencies supporting peace with Israel and a pro-American approach to foreign policy. Indeed, to the extent that Cairo has struck an independent course on issues such as the peace process, Iraq, Libya, and Sudan in the last few years--which has justly earned Washington's ire--there is strong evidence that the U.S.-Egyptian military relationship has been active in moderating these Egyptian policies. In short, the strength of the Egyptian military and its ties to the United States are the best guarantor of Egypt's stability and pro-Western stance.
The Dark Cloud of Cold Peace: Discussion of military aid to Egypt cannot be divorced from the Israel connection and an assessment of the dangers of 'cold peace.' The principal reason for concern over Egyptian rearmament is the sense that many, if not most, Egyptians have still not reconciled themselves to Israel's right to statehood but only tolerate the peace treaty because of the latter's military strength; change the balance and peace would dissolve. Anxieties are fed by threatening noises sometimes heard from Egyptian politicians or generals about political initiatives to change that balance (e.g., targeting Israel's nuclear program) as well as by military actions, like the provocative 1996 military maneuver Operation Badr that al-Ahram described as a message to Israel that "the end of war does not necessarily mean the achievement of peace, and vice-versa."
The fear that the U.S.-funded modernization of Egypt's armed forces may create a threat to the security of Israel is a vital concern. To be sure, the possibility that advanced U.S. weaponry (and the acquisition of European arms with cash freed up by the provision of U.S. aid) might embolden Cairo in an Arab-Israeli confrontation cannot be ignored. However, a number of safeguards remain firmly in place:
* The two U.S. battalions stationed in the Sinai as part of the Multilateral Force and Observers (MFO) set up to support the Egypt-Israel peace treaty play a critical role. This highlights the continuing importance of that peacekeeping force.
* The heavy dependence of the Egyptian military upon U.S. logistical support is insurance against an Egyptian return to confrontation with Israel. Institute fellow Kenneth Pollack has found compelling evidence that, in 1995, Cairo wanted to conduct a squadron-sized air-strike against Khartoum to retaliate for Sudan's complicity in the assassination attempt against Egyptian President Mubarak earlier that year. However, when Washington forbade U.S. military personnel from assisting with the operation, Cairo was forced to call off the attack because the Egyptians could not themselves handle its logistical requirements.
* Most indicators suggest that the Egyptian army would likely fare worse against Israel today than it did in October 1973. As Egypt's mediocre performance in the Gulf War demonstrated, Egypt's military capabilities have progressed only modestly over the last 25 years and, despite the efforts of thousands of U.S. advisers and billions of new weapons, almost certainly have not kept pace with improvements in Israeli capabilities.
* It is also worth recalling that in 1973--when Egypt's forces were at their logistical peak--Cairo required an immediate, constant and massive resupply from the Soviets to sustain its war against Israel. Today, such resupply would be even more essential because Cairo has allowed its stockpiles of munitions and spare parts to dwindle, but Egypt knows that it would never receive U.S. support in a battle with Israel.
None of this solves the political problem about Egypt's evident preference for an almost zero-sum approach to peace with Israel--a situation that obtained under both Labor and Likud prime ministers--but there is no reasonable prospect of a move from cold peace (or even cold war) to something hot.
Recommendations: Against this background, any increase in military aid would send the wrong political and strategic message. At the same time, a decrease in military aid to Egypt, concurrent with plans for a sizable (i.e., one-third) boost in military aid to Israel, is likely to inject political strain into the U.S.-Egypt military relationship and unnecessarily complicate the strategic relationship between Washington and Cairo. Staying the course on military aid, therefore, is the appropriate policy.
But that alone will not solve the problem of a deepening freeze in the Egypt-Israel military relationship. While this is just one aspect of the 'cold peace,' it is one with potentially strategic consequences. As a result, it deserves higher priority on Washington's crowded Middle East agenda. Reversing the downward trend in Israel-Egypt relations, especially through military-to-military ties, is an important U.S. interest. The new U.S.-Egypt 'strategic dialogue,' to be inaugurated soon, may provide a useful vehicle to address this problem, but its solution can clearly only be found through America's continued deep engagement with the Egyptian military.
MERIA has won the LinksGo Key Resource Award. We are also now listed in Cambridge University's Index Islamicus (see below).
The BESA Center for Strategic Studies is planning a conference on Palestinian politics for May 1999. To submit proposals for papers, write: Barry Rubin, [besa@ashur.cc.biu.ac.il].
Magnus Persson, Great Britain, the United States, and the Security of the Middle East: The Formation of the Baghdad Pact. (Lund University Press): [order@studentlitteratur.se]
Emory C. Bogle, Islam: Origin and Belief, (University of Texas Press).
The Arab Research Center for Popular Arts (ARCPA), Al-Jana magazine's first English issue focuses on oral history and the Palestinian refugee community: [arcpa@cyberia.net.lb].
Index Islamicus is a bibliography of publications in European languages on all aspects of Islam and the Muslim world. A 1906-1955 volume was published in 1958. Books were then compiled at five-year intervals and, from 1993, annually. A CD-ROM published in 1998 covers articles 1906-1996, and monographs 1981-96. Compiled and edited by G. J. Roper and C. H. Bleaney, Islamic Bibliography Unit, Cambridge University Library: [ibu@ula.cam.ac.uk].
Freedom in the World, 1997-1998 is the annual report of Freedom House, including a survey chapter and a country-by country survey on the Middle East. This 600-page paperback book is not only useful for human rights issues but serves as an extremely handy guide to current political facts and issues. Write: Freedom House, 1319 18th St NW, Washington DC 20036.
Jouvert: a journal of postcolonial studies, Vol 2, Issue 1: "Postcolonial Masculinities" online at: [http://social.chass.ncsu.edu/jouvert]
New online Journal, "U.S. Security Policy in a Changing World" [http://www.usis-israel.org.il/publish/journals/foreign/july98/ij pe0798.htm]
Arab Newsstand has moved to: http://www.arabsweb.com/news Very comprehensive site for Arab newspapers by subject, language (77 English, 117 Arabic and 5 French papers listed), and country of publication. The site also offers links for software to download so as to read the Arabic language sites.
Cecil Marie Cancel, Women's Issues in Third World Countries Web Site: An index of useful Net resources on Women in the Middle East. http://women3rdworld.miningco.com/msub4.htm
Current Events: Documents in the News, [http://www.infomanage.com/Nonproliferation/]
Palestinian sites: Palestinian Authority Ministry of Planning & International Cooperation [http://nmopic.pna.net.htm]; Palestinian Information Center http://www.palestine-info.org/ a large Hamas site including documents, press releases, Filasteen al-Muslimah magazine and other material; Palestinian Women's Affairs Technical Committee, [http:// www.pal.watc.org]
Military/Strategic sites: Center of Lebanese Studies Internet guide to research institutes on international security and strategic studies [http://nonuniv.ox.ac.uk/cls/links.htm/]; U.S. Army Foreign Military Studies Office, good international links [http://leav-www.army.mil/fmso/links.htm]; Defense Fact File, U.S. arms data [http://www.dtic.mil/defenselink/factfile/]; Defense Link, U.S. Defense Dept. data [http://www.dtic.mil/defenselink]; Defense Issues, Defense Dept. statements and briefings, with index. [http://www.dtic.dla.mil/defenselink/pubs/di_1996.html]; Rongstad's Worldwide Military Links, huge link list [http://members.aol.com/rhrongstad/private/milinksr.htm]; War, Peace and Security Guide, Canadian Forces College Information Resource Center, superb! [http://www.cfcsc.dnd.ca/links/index.html]
Economic sites: State Department Country Reports on Economics http://www.state.gov/www/issues/economic/trade_reports/index.html offers thorough information on a group of Middle East countries' economic and trade data, 1995-97. Statistics include GDP, agiculture and industry profiles, unemployment, government spending, CPI, trade data, and U.S. aid. The Energy Information Administration site http:www.eia.doe.gov/emeu/cabs/contents.html, has 1997 economic summaries on countries' energy situation including production, income, exploration and companies.
USIS Information Service: full texts back to 1992 of stories, speeches, press releases, etc. [http://www.usia.gov/usis.html]
Sudanese Islamist leader Hassan Turabi official homepage [http://www.turabi.com]
Rand Corp. Middle East papers, abstracts up to 1991: http://www.rand.org:80/areas/MIDE.Toc.html
Al-Wafd Party of Egypt http://www.alwafd.com/
The Nordic Society for Middle East studies has a monthly electronic bulletin. [http://www.hf.uib.no/smi/nsm/] A directory of members can be ordered from: Chr. Hurst: [hurst@atlas.co.uk]
A new mailing list discusses Palestinian culture and society: [p-culture-request@mailing-list.net]. In the body write: subscribe.
Lis-Middle-East is a forum for Middle Eastern librarianship and bibliography, including archives, photographs, and electronic material. Paul Auchterlonie, Subject Librarian for Middle East Studies, University of Exeter and Chair of the Middle East Libraries Committee (MELCOM-UK). J.P.C.Auchterlonie@exeter.ac.uk or lis-middle-east-request@mailbase.ac.uk
The Science and Technology Planning Unit, Palestinian Ministry of Planning and International Cooperation has recently launched Palestinian Scientists and Technologists Abroad, an internet-based network to harness the scientific and technological knowledge of Palestinian expatriate professionals. http://www.palesta.net or write: Yaser Bashir bashir@palesta.net
The Center for Lebanese Studies has a Visiting Fellows program for researchers working on Lebanon to visit the Center at Oxford and contribute to its activities. It organizes seminars at which Visiting Fellows present a paper related to their field of research. See: http://nonuniv.ox.ac.uk/cls/index.htm
The Tami Steinmetz Center for Peace Research offers doctorate students funding for research from the prestigious Peres-Rabin Peace Award for grants of $5,000-$10,000. Applicants must be U.S. citizens currently enrolled in accredited doctoral programs in the United States. Applications must be received by October 31, 1998: steinmet@ccsg.tau.ac.il
The Working Group Modernity and Islam is a research network of Berlin universities and extra-university institutions. Five young scholars are supported for work on a specific issue concerning the Muslim world in an interdisciplinary exchange between the humanities and social sciences. For academic year 1999/2000 the topic is "Notions of Law and Order in Muslim Societies." Those eligible have received doctorates no earlier than 1994. Participants receive a monthly stipend of 2,550 Deutsch Marks (400 DM extra if married) and work in Berlin, participating in bi-weekly seminars with scholars from this city's universities. The application, consisting of a curriculum vitae, 2-4-page project outline, a work sample of maximum 20 pages (publication, conference paper, chapter of thesis), and two letters of recommendation from university teachers, should be submitted by January 31, 1999. For more information, write Georges Khalil khalil@wiko-berlin.de
A Lebanese reader asked about U.S. economic aid to the Middle East. Gilad Tsur responds: The best source for basic information: [http://www.state.gov/www/issues/economic/trade_reports/index.html]. Other data can be found from Egypt [http://www.sis.gov.eg/] and Turkey [http://www.tcmb.gov.tr/]. See also economic sites in 2., above.
Ernesto Sassot asks about order of battles for Israel and Syria during the 1973 war. This data can be found on pp. 604-617, Col. Trevor N. Dupuy, "Elusive Victory," Harper & Row, N.Y., 1978. Thanks to Lesley Terris of the Jaffee Center.
Fariba Adelkhah, Etre Moderne en Iran ("Being Modern in Iran") Karthala, Paris, 1998 looks at the political and democratic transitions taking place in the country, and tries to relate them to Iranian society as a dynamic and diverse sphere autonomous from political power.
August 8, Jerusalem, Israeli-Palestinian Roundtable Forum of Economists, Businesspeople and Industrialists, "Principles for Future Trade Policies and Agreements Between Israel and the Palestinian Authority," Notre Dame, [Peace@netvision.net.il] or [http://www.ipcri.org]
August 12, Washington DC, Contemporary Iraqi Literature, Saadi Simawe, Middle East Institute. http://www.mideasti.org/mei
September 14-17, 1998, Amman, "The crisis of identity in contemporary Arab-Islamic architecture". Jordan Arch. Soc, J Engineers Assoc.
Autumn 98, Bahu, Turkey, International Symposium on Islamic civilization in Caucasia: ircica@ihlas.net.tr
October 10-11, Tokyo, "Slave Elites in Africa and the Middle East," U Tokyo. [http://bun.l.u-tokyo.ac.jp/IAS/] mail to:[i-inr@l.u-tokyo.ac.jp] or [miura-t@pis.bekkoame.or.jp]
October 16-17, Washington DC, Middle East Institute Annual Conference, National Press Club, http://www.mideasti.org/mei
October 23-25, Binghamton, NY: 17, Annual conference, Society for the Study of Islamic Philosophy and Science: o.n.leaman@livjm.ac.uk
December 15-19, Cairo, "Manufacturing heritage/consuming tradition: Development, preservation and tourism in the age of Globalization," International Association on Transnational Environments: [iaste@ced.berkley.edu.
February 1999, Chicago, Palestine Studies Conference: laa3@midway.uchicago.edu
April 1999, Istanbul: "International congress on learning and education in the Ottoman World": ircica@ihlas.net.tr
September 19-22, 1999, Riyad: "Islamic World Information Sources," King Abdulaziz Public Library. fax +966-(1)-491 1949
November 19-22, 1999, Washington: MESA Conference.
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