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Tuesday, September 25, 2012

Egypt: Background and U.S. Relations

Jeremy M. Sharp
Specialist in Middle Eastern Affairs

This report provides a brief overview of the key issues for Congress related to Egypt and information on U.S. foreign aid to Egypt. The United States has provided significant military and economic assistance to Egypt since the late 1970s. U.S. policy makers have routinely justified aid to Egypt as an investment in regional stability, built primarily on long-running military cooperation and on sustaining the March 1979 Egyptian-Israeli peace treaty. Successive U.S. Administrations have viewed Egypt’s government as generally influencing developments in the Middle East in line with U.S. interests. U.S. policy makers are now grappling with complex questions about the future of U.S.-Egypt relations, and these debates and events in Egypt are shaping consideration of appropriations and authorization legislation in the 112th Congress.

For Obama Administration officials and the U.S. military, there is a clear desire to engage Egyptian President Muhammad Morsi’s new government on a host of issues, including immediate economic support and Sinai security. For others, opportunities for renewed diplomacy may be overshadowed by disruptive political trends that have been unleashed by the so-called Arab awakening and allowed for more expression of anti-Americanism, radical Islamist politics, antipathy toward Israel, and sectarianism, among others. The events of September 11, 2012, in which a visiting U.S. business delegation dispatched to Egypt to expand trade and investment was in Cairo while an angry mob attacked the U.S. Embassy, may be a harbinger of increased dissonance in U.S.-Egyptian bilateral relations for years to come.

For FY2013, President Obama is requesting $1.55 billion in total bilateral aid to Egypt ($1.3 billion in military aid and $250 million in economic aid). The aid levels requested are unchanged from FY2012 appropriations. According to multiple reports, the Administration is currently negotiating with Egypt the terms for obligating funds that have already been appropriated by Congress, such as up to $1 billion in bilateral debt relief and the seed capital for an enterprise fund. Egypt currently owes the United States approximately $3.2 billion from decades-old food aid loans. In order to provide debt relief, U.S. government agencies are required to value U.S. loans, such as bilateral debt owed to the United States, on a net present value basis rather than at their face value, and an appropriation by Congress of the estimated amount of debt relief is required in advance. P.L. 112-74 did provide that ESF funds appropriated for Egypt in the act and from prior acts could be used for an Egypt debt initiative. Moreover, according to P.L. 112-74, bilateral debt relief funds would be a “swap” and channeled into programs that improve “the lives of the Egyptian people through education, investment in jobs and skills (including secondary and vocational education), and access to finance for small and medium enterprises with emphasis on expanding opportunities for women, as well as other appropriate market-reform and economic growth activities.”

Date of Report: September 13, 2012
Number of Pages: 21
Order Number: RL33003
Price: $29.95

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