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U.S. Aid To Egypt Irreplaceable, Obama Administration Official Says

Official downplays fears as Russia's foreign and defense ministers prepare to fly to Cairo.

Posted on November 11, 2013, at 7:21 a.m. ET

A senior Obama administration official has downplayed concerns over the Kremlin's encroachment into Egypt as Russia's foreign and defense ministers get set to visit the country this week with officials from their state arms exporter in tow.

Egyptian leaders have appeared to embrace eagerness by Russia, Egypt's Cold War-era patron, to step in and make up for some of the U.S. disengagement seen since the military ousted former president Mohamed Morsi this summer — namely, its withholding of part of an annual $1.3 billion aid package.

But the U.S. official, speaking on condition of anonymity because of the diplomatic sensitivity of the aid issue, said fears about Russia overtaking the United States' privileged place in Egypt were overblown: "From an economic perspective, I don't view that as a serious alternative for them."

"Can they make up the dollars? Sure," the official said. Money from Gulf allies has flowed into the country since Morsi's removal, dwarfing the sums lost when the Obama administration announced a partial suspension to the aid package last month. And now Russia is moving to provide the kind of advanced military equipment that America has withheld. "But is a dollar from the Russians or the Gulf the same as a dollar from the United States? We don't think it is."

The official argued that while assistance from Russia and the Gulf may be able to "plug the hole temporarily," U.S. aid brings with it badly needed stability and an invaluable vote of confidence, letting everyone from investors to tourists know that the country is safe for business. "It's apples and oranges," the official said.

Egypt's economy has been in steep decline since its Arab Spring uprising forced former dictator Hosni Mubarak from office. Since then, the country's leaders have proved unwilling to tackle serious reform, while constant political turmoil has only made things worse — keeping investors at bay and seeing the vital tourism industry shrink.

The official said that global companies take important cues from the U.S. on Egypt, suggesting that without the U.S. seal of approval, businesses might stay away. "If you're a company, even a non-Western company, and you're thinking about where to build a new factory, where to hire people, where to engage in contract negotiations, where you're taking a long-term risk, you're going to be asking a lot of questions about the kind of decisions you can be taking and the signals you see coming from the [international community]," the official said. "What we see and what we hear from a lot of companies is that they're waiting for a signal from the United States on whether to go back to Egypt."

"The signal that [U.S.] assistance sends to international investors is very important to Egypt," the official said. "What Egypt is trying to do is strengthen confidence in the economy and bring dollars and investors back into the country in a way that is sustainable in the medium-term. And they can't do that unless the confidence is credible. And U.S. dollars in the context of broad international support is the most effective way to do that."

As another administration official put it: "You can turn the lights on and haul away the trash, but it's just not sustainable."

As talk of U.S. aid cuts gained steam in August, after security forces massacred Morsi supporters in the capital, Egypt's prime minister suggested that a pivot to Moscow might be coming. "Let's not forget that Egypt went with the Russian military for support [in the past] and we survived," he told ABC News. "So, there is no end to life."

The tough talk has continued — raising alarm among some U.S. politicians that America may be ceding hard-won influence. "We do not see a reason to be reliant on [the U.S.] relationship. We are certainly interested in expanding our options," an Egyptian official told BuzzFeed last week.

Russia's foreign minister, Sergei Lavrov, and defense minister, Sergei Shoigu, are due to visit Egypt on Wednesday and Thursday.

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