RUTHFULLY YOURS

Update: The Obama administration is offering a trickle of new money for Egypt under the grandiose rubric of a “bailout” for the Egyptian economy. The Wall Street Journal reports that the US will offer debt forgiveness of slightly over half a billion dollars (with little impact on the country’s massive cash crunch) and will support a $4.8 billion IMF loan. Also:

Beyond the debt forgiveness and IMF loan, U.S. officials are promoting two financing opportunities: $375 million in financing through the U.S. Overseas Private Investment Corp., a government development finance agency, for loan guarantees for small-to-medium sized Egyptian businesses; and $60 million to help launch such firms through a new U.S.-Egypt Enterprise Fund.

But the Journal adds, “The aid offers will still strain to meet Egypt’s estimated $12 billion in external financing needs. Last year’s revolution and the subsequent 19 months of political instability have kept tourists and foreign investors at bay.” The external financing requirement at current import levels is closer to $20 billion by my reckoning, with a trade deficit running at $36 billion a year, offset by Suez Canal revenues of about $5 billion, tourism revenues of perhaps $7 billion, and $3 to $4 billion of workers’ remittances.

The proposed aid is “part of a gilded-charm offensive that Washington hopes will help shore up the country’s economy and prevent its new Islamist leadership from drifting beyond America’s foreign-policy orbit.” That train left the station when the Muslim Brotherhood forced out the old-guard military leadership in August.

By far the most perspicacious analyst of Egypt’s foreign policy shift is my Asia Times Online colleague, M.K. Bhadrakumar, formerly Egypt’s ambassador to Turkey among other countries. He predicted Egypt’s turn to Tehran in an Aug. 2 post on his Indian Punchline blog, noting that the Iranian vice-president’s visit to Cairo “is a development that holds the potential to shake up Middle Eastern politics.” Tehran had been courting the Egyptian Islamists for months, he observed, “inviting a series of Egyptian goodwill delegations from the civil society in a sustained effort to reach out to the various sections — especially the Islamist forces — of Egyptian society…[and] a critical mass of opinion began accruing in Egypt, including within the Muslim Brotherhood, regarding the restoration of normal ties with Iran.”

Iran outplayed the Saudis in Cairo, he explains: “Taking advantage of the economic crisis in Egypt, Riyadh offered economic assistance, but with strings attached. The bottom line for the Saudis is that Egypt shouldn’t dilute Riyadh’s regional campaign to ‘isolate’ Iran. … The Saudis hoped that Morsi would play footsie on the Sunni-Sh’ite front and get Egypt to play its due role in the Syrian crisis.” As I reported last week in Asia Times, Morsi will deal with his economic crisis not by soliciting Saudi help, but by rationing food, fuel, and electricity, turning Egypt into a sort of North Korea on the Nile. That is in keeping with the Muslim Brotherhood’s character as a modern totalitarian vanguard party with an Islamist ideology, and the Islamist socialism of the late Brotherhood ideologue Sayyid Qutb.

Of course, the opposite occurred: Egypt proposed to include Iran in a “quartet” with itself, Turkey, and Saudi Arabia to sort out the Syrian crisis, giving Tehran an effective veto over regime change in Syria. The Western press is full of self-consoling reports about how Egypt’s Muslim Brotherhood president Mohamed Morsi offended his Iranian hosts at last week’s Non-Aligned Movement summit eeting in Tehran by saying unkind things about their Syrian allies. Look beneath the rhetoric, Ambassador Bhadrakumar now advises, and watch what is really going on.

Iranian FM Ali Akbar Salehi presented the tantalizing idea of a NAM group in the search of a settlement of the Syrian crisis. The group comprises the NAM’s past, present and future chairpersons – Egypt, Iran and Venezuela – plus Lebanon and Iraq.

Clearly, this is one of those rare moments when a new “centre of gravity” is forming in the geopolitics of the Middle East region. It is an intriguing formation since Egyptian president Mohamed Morsi openly called for regime change in Syria, while Iran and Venezuela would be ambivalent about the very concept. But then, all three are agreed that the “transition” should be a wholly Syrian-owned process without outside intervention.
This is Iranian diplomacy at its best, showing mastery over the art of the possible. What matters infinitely more than everything else from the Iranian viewpoint is that Tehran and Cairo are sharing a regional platform on Syria. Both are OIC members while Egypt is also a member of the Arab League. The “regional consensus” that the United States and Saudi Arabia struggled so hard to put together has been dispatched to oblivion.
Turkey’s Syrian debacle is becoming very serious. Egypt’s “entry” puts pressure on Saudi Arabia to change course. The Iranian media has given the impression that some sort of rapprochment between Tehran and Riyadh is on the cards. The restoration of Egypt’s relationship with Syria, equally, changes the calculus for Turkey.
It is no small matter for Tehran that Morsi called Iran a “strategic partner” for Egypt. Even a commentary in the Voice of America admits that the symbolism of Morsi’s visit to Iran “has concerned countries trying to isolate Iran – in particular, Egypt’s longtime ally the United States.” The best spin VOA could give is that Morsi’s trip does not mean Egypt’s “full-fledged approval of Iran” and that the “apparent closeness could be a bargaining chip” in Egypt’s negotiations with the US.

Ambassador Bhadrakumar, I should note, is the scion of a distinguished Indian political family long associated with that country’s Communist Party. He and I disagree about the world as much as two journalists can, but I salute his superior grasp of regional developments. It says something about the world after Obama that we find out what is happening after the fact, from our adversaries rather than our friends.

The Tehran Non-Aligned Movement summit was an unambiguous triumph for Iran and a thoroughgoing humiliation for the United States, despite the spin from the foreign policy establishment. The ubiquitous Steven A. Cook of the Council on Foreign Relations went so far as to claim that Egypt’s turn to Tehran was positive for America because it made Egypt a better “interlocutor” with Iran–as if the only problem we had with Iran was a failure to communicate. The Non-Aligned Movement voted 120 to zero in support of Iran’s right to the full nuclear fuel cycle. Tehran didn’t get an endorsement of its Syrian policy, to be sure–just the offer of a de facto veto on any future regime change in Syria.

As my PJ Media colleague Barry Rubin observes in a Jerusalem Post column, “Does this mean Egypt is going to ally with Iran? No, Egypt will fight Iran for influence tooth and nail. The two countries will kill each others’ surrogates. But it means Morsy feels no friendlier toward America than he does toward Iran.” I hate to take issue with Dr. Rubin, but I think that is somewhat beside the point: Morsi’s Egypt has allied with Iran against Saudi Arabia, which is the main target of the Muslim Brotherhood. The Saudi monarchy will not fall tomorrow, to be sure, but it faces a growing challenge from within: the Brotherhood appeals to ambitious Saudis who did not have the good fortune to be born into the monarchy. By showing open contempt for the Saudi regime, and frustrating Saudi and Turkish attempts to control the Syrian crisis, Morsi has emerged as a challenger to the Saudi monarchy for the dominant role in Sunni Islam.

The whole of the foreign policy establishment, from Dennis Ross, lately Obama’s Iran advisor, to Fox News commentator Fouad Ajami, believed that Egypt’s economic desperation would force Morsi to eat out of the hands of the Saudis. But Morsi doesn’t want the cake. He wants the bakery, and he is happy to force the long-suffering people of Egypt into North Korean conditions if that is what it takes.

Morsi knows far better than our foreign policy mandarins that Egypt, as it is now constituted, is an unsolvable problem. With 45% illiteracy, 50% dependency on imported food, inadequate water, a chronic lack of skills, and a host of other ills, Egypt can’t get there from here. He has to break out or break down. Egypt’s situation is desperate, but the country is led by desperate men. The staid guardians of the status quo, the corrupt old guard of the Egyptian military, have chosen not to oppose the Muslim Brotherhood. It was time for them to go, and they went.

The Obama administration has presided over a collapse of a system of alliances which sustained America’s position in the region for sixty years. And if you want to know what’s happening, ignore the self-consoling spin in the mainstream media, and listen to what our adversaries are saying. They have the ball.

UPDATE: Egypt’s foreign exchange reserves rose by $700 million in August, mainly due to Qatar’s deposit. The government had predicted a $1 billion rise; the different probably reflects spending by the central bank to support the Egyptian pound, which has traded weakly. Egypt’s stock market rose, but that should be read in context: the whole value of Egypt’s stock market is roughly equal to a medium-sized component of the S&P 500, for example, American Express or 3M.