Maged Mandour: Will Egypt suffer from Trump’s aid cuts?

US President Donald Trump has threatened to cut aid to Egypt and Jordan, aiming to push both states to accept a mass exodus of Palestinians from the Gaza Strip, as part of his plan to ethnically cleanse the territory.

This new American policy not only threatens Palestinians who resist their expulsion with mass genocidal violence, but also poses the gravest threat the Egyptian regime has faced since President Abdel Fattah el-Sisi took power in 2013.

The suspension of US military aid to Egypt – which amounts to around $1.3bn annually – as part of a broader campaign of intimidation, would have grave consequences for the regime’s stability in the short and medium term. But in the long term, paradoxically, it could help Sisi to consolidate his grip on power.

This would depend on a variety of factors, including the responses of regional actors, which could prove critical to the Egyptian regime’s ability to weather the storm.

Egypt’s heavy dependence on the US, and especially on American military hardware, is an obvious structural weakness.

Between 2000 and 2019, 41.6 percent of Egyptian arms imports came from the US. As of 2015, Egypt owned 230 American F-16s, comprising more than a third of its fixed-wing aircraft fleet.

In light of this strong structural dependence, the suspension of aid would be a major blow to the ability of the regime to maintain and upgrade its arsenal of American-made weapons, weakening its regional position in the face of an ever-more aggressive Israeli colonial policy.

 

 

Economic pressure:

The situation is compounded by the weakness of the Egyptian economy, amid an ongoing debt crisis. US pressure could create substantial hurdles to the regime’s ability to solicit capital inflows and keep itself afloat.

The sensitivity of financial markets to American policy whims was reflected in January, when Egyptian dollar bonds rallied upon Trump taking office, based on the assumption that his administration would be friendly to the regime – not an unreasonable theory.

The financial clout of the US was also made apparent in January 2024, when former Treasury Secretary Janet Yellen voiced her support for the regime amid talks with the International Monetary Fund on increasing its loan. The loan was subsequently raised to $8bn from $3bn, with a broader international rescue package totalling more than $50bn.

Hence, even when the US does not provide funds directly, it acts as an arbiter of the global financial system, and can cause untold havoc to a peripheral economy like Egypt’s.

 

“The recent shift in US policy towards unbridled support for the most extreme version of Israeli colonialism spells an uncertain future for the Egyptian regime and the region as a whole.”

 

This all comes at a time when Egypt’s external debt has risen by about $2.3bn over the past year, with Egypt’s four-year financing needs forecast at around $25bn as of early 2024. This makes the country extremely susceptible to external pressures.

But if Trump follows through on his threats, there are countervailing forces that could help the regime to survive: namely, financial support from Gulf countries, in addition to the regime’s ability to use the crisis to restore its battered base of popular support.

The first unknown is the willingness of the UAE and Saudi Arabia to step up their financial support to compensate for possible losses of other sources of financing.

After a meeting in Cairo at the start of this month, the foreign ministers of the UAE, Egypt, Saudi Arabia, Qatar and Jordan issued a joint statement rejecting the forced displacement of Palestinians from Gaza. Israeli Prime Minister Benjamin Netanyahu’s subsequent suggestion that a Palestinian state should be established in Saudi Arabia received a harsh rebuttal.

If Israel is perceived as a collective threat to all Arab states, then the Gulf will likely step in to support the Egyptian regime. But this is not guaranteed, especially considering the slowdown of Gulf support in the face of Egypt’s debt crisis.

 

 

Golden opportunity:

For the UAE, the most prominent example of recent support was its $35bn investment last year to develop a stretch of the Egyptian coastline – a figure that represents around 10 percent of Egypt’s GDP.

But there are significant questions around the willingness of the UAE to continue to send mass capital flows to rescue its fragile ally, especially amid deepening Israeli-Emirati ties.

The Saudis, meanwhile, have shown considerable reluctance to get involved in large-scale investments in Egypt; despite a $15bn deal signed last year, the concrete details of the associated projects remain unclear. Without considerable support from the Gulf, the economic fallout for Egypt could be immense.

On the domestic front, however, the Trump standoff represents a golden opportunity for the regime to regain some of the popular support it has lost over the years, by branding itself as the protector of Egyptian sovereignty.

This narrative would appeal to constituencies across the political spectrum, from hardline regime supporters to the Nasserist and liberal opposition. The regime could cast itself as the protector both of the Egyptian nation and of Palestinian rights, as Sisi alluded to when he stated that the deportation of Palestinians was an “act of injustice” that his regime could not abide.

This could help to build popular acceptance of the possible economic hardships associated with US pressure, thus prolonging the regime’s lifespan and reviving its ideological construct of national unity behind the military regime at the expense of democratic rights.

The recent shift in US policy towards unbridled support for the most extreme version of Israeli colonialism spells an uncertain future for the Egyptian regime and the region as a whole. Countervailing forces will come into effect, with unpredictable outcomes.

READ: Egypt passive amidst looming Houthi threat

 

But the most likely scenario is that these forces will not only devastate the lives of the Palestinian people, but also harm regular Egyptians, who will suffer for the foreseeable future from continued economic deprivation, poverty and violations of their democratic rights – regardless of the final outcome for Sisi and his regime.

 

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Maghrebi.org. Maged Mandour is a political analyst and the author of an upcoming book entitled Egypt Under Sisi, to be published by IB Tauris. The book will examine the social and political developments in Egypt since the 2013 coup.

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