June 28, 2017
Christian Bischoff
The issue of U.S. policy toward Egypt has come up in four congressional hearings held in the past two weeks.[1] Members of Congress and Trump administration officials have discussed President Donald J. Trump’s strong support for Egyptian President Abdel Fattah al-Sisi; the repressive new NGO law ratified by al-Sisi last month; the potential designation of the Muslim Brotherhood as a Foreign Terrorist Organization (FTO); and U.S. military and economic aid to Egypt.
The Trump administration’s proposed assistance to Egypt in the Fiscal Year 2018 (FY18) budget includes $75 million in economic aid, a proposed cut of $75 million from the amount requested by the Obama administration for FY17, and a decrease of 33 percent from the $112.5 million appropriated by Congress under the Consolidated Appropriations Act, 2017. Trump’s budget request—subject to congressional review and changes—includes $1.3 billion in Foreign Military Financing (FMF) grants for Egypt, approximately the same amount as in each of the past 30 years. (Egypt, Israel, Jordan, and Pakistan are the only countries for which Trump’s budget proposes the continuation of FMF grants; all other countries that historically received FMF grants would shift to a new requirement to purchase U.S. military equipment and services with FMF loans.)
Criticism and Praise for Trump’s Approach to al-Sisi
During a June 13 Senate Committee on Foreign Relations (SFRC) hearing on the Trump administration’s FY18 foreign assistance request, with Secretary of State Rex Tillerson as the administration witness, ranking member Sen. Ben Cardin (D-MD) criticized President Trump’s effusive praise for al-Sisi. He was referring to an April 3 White House meeting with the Egyptian leader, during which Trump had said he was “very much behind” al-Sisi, and again during a May 21 meeting in Saudi Arabia, Trump declared that al-Sisi had “done a tremendous job under trying circumstances.”
Cardin stated,
The leaders of Egypt and the Philippines and others who commit devastating human rights offenses are embraced….while the rights and aspirations of the Egyptian people and the Filipino people are dismissed.
Rep. Gerry Connolly (D-VA) echoed Cardin’s concerns during the House Committee on Foreign Affairs (HFAC)’s June 14 hearing on the FY18 request:
Trump has embraced strongmen, including President Sisi of Egypt, while lecturing allies about their commitments.
Some Republican members of Congress, by contrast, spoke positively about Trump’s approach. At a June 14 hearing of the House Committee on Appropriations Subcommittee on State, Foreign Operations, and Related Programs, Rep. Jeff Fortenberry (R-NE) asserted, “the administration is engaged, I think, in a very appropriate effort to replenish the relationship with Egypt.” Fortenberry praised both al-Sisi and Trump’s support for him:
The current president of Egypt has made some very courageous statements about minority rights, protecting religious pluralism, as well as trying to show leadership on the international stage. Anything we can do affirm that relationship, and of course then have the authentic friendship to be able to discuss hard things regarding human rights and the rest, I think is a very important priority to help restore Egypt’s central role in creating conditions for stability in the Middle East.
Egypt’s Repressive NGO Law
At the same hearing, Secretary Tillerson responded to Fortenberry’s remarks by offering the Trump administration’s first public criticism of Egypt’s human rights record. Tillerson said that there is “a lot of work to do with Egypt on improving the human rights situation,” and criticized al-Sisi’s May 29 ratification of a draconian NGO law:
We were extremely disappointed by the recent legislation that President Sisi signed regarding NGO registration and preventing certain NGOs from operating. We’re in discussions with them about how that is harmful to the way forward.
Rep. David Price (D-NC) pressed Tillerson, asking if Trump’s public embrace of al-Sisi had emboldened the Egyptian leader to enact the controversial legislation. Rep. Price said,
I’m happy to hear your strong criticism of the anti-NGO law. You know that that law was actually sitting there, it was passed in parliament last November. President Sisi, reportedly, hesitated to sign it because of strong international criticism, including from people like Senators McCain and Graham…Recently, he signed the anti-NGO law. And most reports suggest he did it encouraged by the embrace of President Trump. Now, what you’re saying today is very much at odds with that. And so, the question is, did Egypt misread U.S. intentions and what should we do about it?
Tillerson disagreed that the administration had encouraged al-Sisi to enact the law, describing his action as
…a big disappointment to us. There was no, to my knowledge—and I was only involved in some of the discussion between the President and President Sisi—there was no discussion that would have in any way encouraged him to sign that. And certainly we were not encouraging it. In fact, we had indicated to them that he should not sign it. It came up in my bilateral with him. And I know that others in the national security advisers, they also asked that he not sign that. So, why? We’re in conversations with him now. I mean, they have received calls where we’ve told them, you know, what’s going on? Why did you sign this? So it may have been a miscalculation on his part. I can’t really tell you. But we have expressed our disappointment on that.
Designation of the Muslim Brotherhood as a Foreign Terrorist Organization (FTO)
During the June 14 HFAC budget hearing, Rep. Scott Perry (R-PA) asked Tillerson if the Trump administration planned to designate the Muslim Brotherhood as a Foreign Terrorist Organization, or FTO. (The Egyptian government has pushed the United States to do so, and a pair of bills introduced in January 2017 by Sen. Ted Cruz (R-TX) in the Senate and by Rep. Diaz-Balart (R-FL) in the House call on the Secretary of State to make such a designation or to explain to Congress why he is not taking the step.) Tillerson argued against a blanket designation of the group, arguing that the Brotherhood is: 1) a diverse movement of both violent and nonviolent actors in countries across the region and 2) an elected political actor in many countries that have close bilateral relationships with the United States. Tillerson stated,
The Muslim Brotherhood, which purportedly has up to 5 million members, has become somewhat segregated within its own ranks. The number of organizations within the Muslim Brotherhood continuing to commit themselves to violence and terrorism: we have designated those organizations. At the top of the quality chain there are now members of the Muslim Brotherhood that have become part of governments. There are members of parliament in Bahrain that are parts of government, members in Turkey that are parts of government.
So designating the Muslim Brotherhood in its totality as a terrorist organization… I think you can appreciate the complexities this enters into our relations with the government of Bahrain and other governments where Muslim Brotherhood has matriculated to become participants. In those elements, they have done so by renouncing violence and terror. That is one of the complicating issues around just taking a whole designation of Muslim Brotherhood.
Military Aid and Cash Flow Financing
At a June 15 hearing of the HFAC Subcommittee on Terrorism, Nonproliferation, and Trade convened to discuss foreign military sales, Rep. Dana Rohrabacher (R-CA) condemned the Obama administration’s March 2015 decision to end cash flow financing (CFF) for Egypt’s FMF-funded purchases, starting in FY 2018 (which begins October 1, 2017). CFF is a privilege, currently enjoyed only by Egypt and Israel, that allows a foreign government to pay for U.S. defense equipment in installments over several years rather than up front. CFF has enabled Egypt to enter into contracts with multi-year payment structures that well exceed the amount of FMF that it receives from the United States each year. The outstanding balance of the contracts is intended to be paid with the (assumed) provision of future years’ appropriations of FMF, an arrangement that effectively obligates the U.S. government to continue providing FMF at the same level or higher in perpetuity. Rohrabacher criticized the decision to revoke CFF as “making it more difficult for Egypt to have the weapons it needs in this struggle.”
Responding to Rohrabacher, administration witness Vice Admiral Joseph Rixey, Director of the Department of Defense’s Defense Security Cooperation Agency (DSCA, which manages FMF programs), affirmed that the Trump administration planned to end CFF for Egypt. Without the CFF privilege, Egypt would need to pay—either with FMF or with its own funds—the full purchase price of U.S. military equipment at the time of purchase. Rixey explained,
We used to allow [Egypt] cash flow finance, which means if we had 1.3 billion dollars coming in a particular year, they could initiate a procurement of significant size because we knew that 1.3 [billion dollars] was going to come in the following year so they would have three to four to five years of buying power. That was removed. Now we will not execute a case until the cash is there, cash on the barrelhead as you said. That policy is still in place.
The Egyptian-American Enterprise Fund
On June 21, the HFAC Subcommittee on Middle East and North Africa held a hearing that covered the topic of the Egyptian-American Enterprise Fund (EAEF). The EAEF is a nonprofit entity created by 2011 legislation, with an envisioned annual appropriation from Congress of $60 million for up to five years (for a total capitalization of $300 million; the first $60 million was appropriated in 2012). According to its annual report for 2016, the EAEF has received $212 million so far. The EAEF invests these funds in Egyptian small and medium businesses (SMEs) to encourage job creation, sustainable economic development, and private sector reform. According to EAEF Chairman James Harmon, the EAEF has invested a total of $98 million to date in three Egyptian companies and one Egyptian venture capital firm.
Harmon testified about the successes of the fund, asserting that its investments “have created over 430 jobs” in Egypt. Harmon stated that the EAEF’s continuing investment “in companies with platforms that reach hundreds of SMEs and thousands of households… will create many more jobs in the coming years.”
Rep. Ann Wagner [R-MO] questioned Harmon on the EAEF’s investment of $65 million in the venture capital firm SARWA Capital:
I understand that half of all EAEF investment is in one company, SARWA Capital… why has this particular company received such a substantial amount of funding?
Harmon argued that with only 13.7 percent of Egyptian citizens having access to “traditional financial services,”
You cannot solve this problem by going out and trying to put small amounts of money into various different small businesses in Egypt. In our opinion, we needed to have a vehicle that reached thousands and thousands of Egyptians… we bought a consumer finance business which was in a position through its auto activities and leasing activities to reach the smaller middle sized enterprizes. I would say through SAWRA we have now reached some 9,000 SMEs… We could not do it in any other way.
Subcommittee Chairwoman Rep. Ileana Ros-Lehtinen (R-FL) pointed to “positive economic signs [in Egypt] … after years of being on the edge of a crisis.” But she went on to criticize the new NGO law and noted that the Egyptian government “continues to prevent programming of regular U.S. economic assistance through both international and domestic NGOs.”
Rep. Darrell Issa (R-CA) took a very different tone, lashing out at the role of American democracy promotion NGOs in Egypt:
Our use of [American] NGOs in these countries, Tunisia and particularly Egypt, has been problematic on the political side. There can be little doubt that our NGOs, operating in the best interest of democracy, were actually part of putting the Muslim Brotherhood into the role they had by developing naive liberal political organizations that thought that the problem in Egypt was the World Trade Organization. In fact the problem in Egypt was corruption alone… They simply looked and blamed outside forces.
Harmon did not respond to Issa’s critique, and instead spoke approvingly of the Egyptian government’s “ambitious economic reform agenda” and asserted that “the kinds of reforms that the government has taken will lead to a recovery of the economy.” He seemed to suggest that this should outweigh concerns over the NGO law:
I think the Egyptian government doesn’t get appropriate credit for a lot of good things they do. Of course they get criticized for the NGO law. I too am saddened by it. But I think what they’ve done in the financial area, in terms of the IMF agreement, in terms of allowing the currency to float, in terms of reducing subsidies, is to their credit. What they’ve done with security is also to their credit…
1. The four hearings were: Senate Foreign Relations Committee, “Hearing on Review of the FY18 State Department Budget Request,” June 13, 2017; House of Representatives Committee on Foreign Affairs, “Hearing on the FY 2018 Foreign Affairs Budget, June 14, 2017; House of Representatives Committee on Appropriations, State, Foreign Operations, and Related Programs Subcommittee, Department of State, “Budget Hearing,” June 14, 2017; House Committee on Foreign Affairs, Subcommittee on the Middle East and North Africa, Hearing on “Grading the Egyptian and Tunisian Enterprise Funds,” June 21, 2017. At the June 13 Senate Appropriations Committee “Hearing on the FY2018 Budget for the U.S. Department of State,” Egypt was not mentioned.
Photo: [L-R] Sens. James Risch (R-ID), Bob Corker (R-TN), and Ben Cardin (D-MD) at the Senate Foreign Relations Committee hearing on the review of the FY18 State Department budget request, June 13, 2017. (April Brady/POMED)