Egypt rejection of U.S. aid a sign of future rifts?

McClatchy NewspapersJune 29, 2011 

CAIRO — Seeking to chart a more independent foreign policy, Egypt is taking steps to ease its reliance on Western aid, a development that almost certainly will chip away at American influence over the Arab world's most populous nation.

This week, the military council that runs the country rejected the caretaker government's proposed budget largely because of its dependence on aid from the United States and other foreign donors. Egypt also backed off this month from seeking loans from the International Monetary Fund and the World Bank after activists complained that such arrangements compromise the country's sovereignty.

Foreign aid typically comes with conditions about how such money is spent, which many Egyptians interpret as making the country beholden to Western interests. Revolutionaries are keen to shed the old "puppet state" stigma from the days of deposed President Hosni Mubarak, whose regime received more than $50 billion from the United States during his three decades in power.

Pro-democracy activists say the longtime annual U.S. aid package of up to $2 billion — $1.3 billion of it for the military — ensured that Mubarak's authoritarian regime upheld the unpopular peace treaty with Israel and kept the Suez Canal open to facilitate American military operations in Iraq and the region.

That aid-for-loyalty paradigm is just another vestige of the old regime, members of the new political class say, and it must be replaced by a fresh model that emphasizes diplomacy and takes into account popular will on foreign policy issues.

"The U.S. was keen to manipulate the political situation in Egypt, and this was disastrous for Egypt and the United States," said Nagui el Ghatrifi, a former ambassador who's now a liberal politician in the newly formed Justice Party. The al Qaida terrorist network was led by a Saudi, he noted, but "the lieutenants were Egyptians," many of them radicalized under the oppressive Mubarak regime.

"The Americans have to support real democracy in Egypt," el Ghatrifi said. "In the short term, it might have some drawbacks, but it'll lay the groundwork for the future. Egypt can be a partner with the United States on equal footing — not as an agent."

Calls to wean Egypt from U.S. dependence were common in the popular uprising that unseated Mubarak more than four months ago, though few political actors reject outright any ties to the United States. Private investment, for example, is encouraged, with proper checks and balances. American tourist dollars are welcome, too.

But across the ideological spectrum, Egyptian politicians advocate a new relationship with Washington based on mutual interests, not what they thought was a lopsided arrangement under Mubarak. The hard part is putting the election-season rhetoric into practice with Egypt's economy reeling from the effects of the revolution, political analysts and economists say.

"Only saying that we refuse those loans isn't enough. We need to see effective local economic measures that will support production, and we have to stop depending on set resources such as real estate, the Suez Canal and tourism," said Hassan Nafaa, an Egyptian political scientist and pro-democracy activist. "For example, we should start adopting more effective development plans for agriculture and industry. We need a new vision for the economic development of Egypt."

The revolution walloped Egypt's economy, crashing the stock market, scaring off investors, closing banks for weeks and crippling the vital tourism industry, which supports 10 percent of the population. Now, Egyptian finance officials are scrambling to find internal fixes so that foreign aid isn't necessary to cover a reported $28.5 billion deficit.

The IMF's announcement over the weekend of a $3 billion loan to Egypt came with veiled conditions that suggest "it expects the country to alter its subsidies system and adhere closely to free-market principles despite previous claims that IMF assistance is unconditional," according to the local Ahram Online newspaper.

Facing public criticism, Egypt's finance minister was forced to backtrack, saying in interviews this week that "local sources" could be found to supplant the IMF loan.

Egyptian Cabinet officials, quoted in local Arabic-language newspapers, said the budget deficit could be covered with $18.7 billion in unspecified "local aid," with a boost of another $10 million in loans and grants from the United States, Europe and Saudi Arabia. The Obama administration last month pledged a $1 billion debt relief package for Egypt, run through a debt swap mechanism that would invest the money to boost youth employment and help small-business owners.

"It's not the business of the United States to impose or to dictate conditions with regard to these kind of opportunities. We want to assist," William Burns, the U.S. undersecretary of state for political affairs, told journalists Wednesday during a trip to Cairo.

"In the discussions we've begun and are going to continue, we're going to find mutually acceptable ways of providing that kind of assistance that fully respects Egypt's sovereignty but also fully supports what is, I think, the growth of civil society in Egypt and fully addresses the real needs Egyptians and, in particular, young Egyptians face today," said Burns, who wrote a book on the topic, "Economic Aid and American Policy Toward Egypt, 1955-1981."

While rebuffing Western offers of aid, Egyptians are strengthening ties with Persian Gulf Arab states such as Saudi Arabia and Qatar, which last week gave Egypt a "gift" of $500 million with no conditions. Such alliances are growing in the wake of the Arab Spring protests, which the United States has been criticized as slow to support.

Polls conducted in the aftermath of the Egyptian revolution show that an overwhelming majority of the population rejects foreign aid, especially from the United States, even as the country struggles to recover. A Gallup poll found that 75 percent of Egyptians oppose U.S. aid to political groups, and 68 percent think the United States will try to exert direct influence over Egypt's political future.

The anti-aid strain permeates nearly everything in the political scene.

The government is reluctant to accept even American technical assistance or election observers for the upcoming vote, U.S. and Egyptian officials say. Self-styled populist politicians are blasting foreign aid and U.S. ties in their fledgling campaigns for the parliamentary election this fall. Political parties are quick to tell voters that none of their funding or training comes from the United States, and many platforms include promises of more "representative" foreign policy, a swipe at the peace treaty with Israel.

"We fought against the Camp David Accords, we fought against the U.S. invasions of Iraq and Afghanistan, and we'll keep fighting," said Abdulhameed Barakat, the secretary-general of the Islamist-leaning Labor Party, one of Egypt's oldest political parties. "The United States discriminates against the weak and the poor, while Israel, the invader, can do anything without American criticism."

(Special correspondent Mohannad Sabry contributed to this article from Cairo.)

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