Egypt’s Foreign Aid

(Photo by Mosa’ab Elshamy)

First published on VICE, here, on August 28th, 2013

Following what a recent Human Rights Watch report called “the most serious incident of mass unlawful killings in modern Egyptian history”, the international community’s response appeared to be just as divided as those within Egypt.

While Western countries condemned the disproportionate actions of the security forces, nations like Saudi Arabia applauded the self-restraint of the Egyptian army and noted their fight against “terrorism and sedition”.

Serious calls were made in the United States to consider suspending Egypt’s $1.55 billion (£970 million) in aid ($1.3 billion of which is part of the US’ Foreign Military Financing scheme). US senators pointed to a 1986 Congress appropriations bill that stated that the flow of funds to a country could be cut if its head of government was “deposed by military coup or decree” – which appears to be why Obama has thus far hesitated to define the social uprising as a coup in public.

Back in the UK, Labour have told the coalition government to “press the US to halt supplying arms to Egypt” just as Foreign Secretary William Hague has declared that “it is not for us to take sides”. The EU, meanwhile, has called for a meeting to discuss whether the €5 billion (£3.2 billion) in loans and grants it has set aside for Egypt will make it there now that Morsi has is no longer in charge.

Clearly, nothing drastic seems likely to happen soon, as the majority of Western states still wrangle over whether to impose economic sanctions on Egypt.

Since Egypt’s initial revolution began in January of 2011, the economy has been rapidly sinking. The budget deficit rose to 14 percent of GDP – the highest it has been for well over a decade – and the government continued to spend its foreign reserves on attempting to prop up a floundering currency, an act that actually left their reserves short in reaching a stipulation for the IMF loan they had longed for. Meanwhile, tourism – an important and well-established sector of Egypt’s economy – continues to suffer from the fallout of constant violence.

The threat of temporary economic suspension from Western states may have once caused concern among the Egyptian government, especially considering the state of the economy. However, the increase of aid from the Gulf States and Saudi Arabia has debilitated their influence, at least through the economic route, according to Adel Beshai, a senior professor at American University Cairo.

“It more than negates the money Egypt would lose from any economic sanctions. These countries are lavishing Egypt,” explained Beshai, who also serves as Member of the Supreme Council for Policy in Egypt.

All in all, Saudi, the UAE and Kuwait have pledged to give $12 billion (£7.7 billion) in aid. Meanwhile, Qatar – considered the strongest ally of the Muslim Brotherhood – denied accusations it would cut off aid to Egypt and has continued with the plans it made with deposed President Mohamed Morsi to provide Egypt with $18 billion (£11.6 billion) over the next five years.

Moreover, Saudi’s Foreign Minister Prince Saud al-Faisal promised that any financial gaps resulting from Western sanctions would be filled. Such a pledge immediately makes any case for economic sanctions providing leverage for the West completely redundant.

Beshai notes that, with regards to the $1.55 billion in aid that the US promises, the $1.3 billion that is designated for the Egyptian military is “part and parcel of [the Camp David Accords] and I really doubt they will risk pulling that… anyway, none of that will affect the average Egyptian on the street… it affects Israel and 200,000 workers in America instead”.

Indeed, American pro-Israel lobbying group, AIPAC, has been campaigning to maintain military ties with the Egyptian Armed Forces – yet another example of pragmatic geopolitics creating unusual bedfellows.

All rumours of the US suspending their military aid have been strongly denied by Washington, and their masterful showing of prevarication in labelling Morsi’s ousting a “coup” – they have yet to make an official statement nearly two months after the event – shows their intent in maintaining its strategic ties with Egypt without crossing any legal Rubicon.

Instead, the White House has been toying with the idea of suspending the financial aid that is not military bound, but at only $250 million (£161 million) Beshai believes the Egyptian government would “consider it an insignificant amount”.

In an interview with CNN, President Obama pointed to his “sense” that “the aid itself may not reverse what the interim government does”, but assured those watching that there is “no doubt that we can’t return to business as usual” with Egypt’s Armed Forces – though no specifics were given to what changes may be made.

As with the cancellation of the two countries’ joint military exercise “Bright Star”, the point of any punitive economic action is not to damage, but to make a point to the Egyptian military’s top brass; it’s a slap in the face without leaving a bruise.

Last week, Catherine Ashton – the EU High Representative – spoke after their “extraordinary meeting of Foreign Affairs Council on Egypt” saying, “We have agreed… that assistance to the most vulnerable groups and to civil society must continue.” Within their statement, they pointed to the EU’s relationship with Egypt and decided that the best course of action was to continue with their €5 billion (£4.3 billion) of aid due in the fiscal year of 2014.

However, EU member states did agree to “suspend export licences to Egypt of any equipment used for internal repression”.

Rejecting the sympathetic angle of the EU towards Egypt’s “most vulnerable”, Beshai instead pointed to the inherently symbiotic nature of aid: “If you give me aid, you’re not doing it because you love me. It’s mutual – it is not a one-way relationship at all.”

The overall sentiment of the current Egyptian government with regards to foreign aid appears to be one of cautious contentment. Ahmed Galal, the interim finance minister, expressed gratitude in a press conference to the “friends” who were providing aid to Egypt. He even stated that the much-desired IMF fund that shadowed Morsi’s presidential term, “is not excluded [from Egypt’s future], but is not the one that will make or break it for us”.

Beshai explained how the interim government and the army would be “cautious with what they say in public, but behind closed doors they know they will be more than alright for now”. Pointing to the markets in Asia and Latin America, he suggests that there would be absolutely no worry with the armed forces were economic sanctions to be brought upon them, not that they would claim that publicly.

“Alienating the Western states, specifically the US, long-term would be something Egypt would want to avoid,” says Beshai, “but for now they know the Gulf States and Saudi cover them well enough. I mean, even as far as the [Egyptian] military is concerned, we live in a globalised world, and right now buying military equipment is easier than buying certain brands of food. They won’t be shuddering in their boots.”


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