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1 février 2012 3 01 /02 /février /2012 12:41

The New Egypt: Bankrupt and Sinking Fast

Rob Miller


All hail the wondrous Arab Spring!

It is one year ago today that the protests in Cairo's Tahrir Square began, ending in the fall of the Mubarak regime.  It was fitting that President Obama mentioned it at the State of the Union, since he had a major role in that "wave of change," calling for Mubarak's ouster and signaling to the Egyptian military who now control the country which way to turn.  It's well worth examining how things are going.

The parliamentary elections have been held, and the Islamist Muslim Brotherhood and the hardcore Salafist al-Nour Party won -- surprise! -- over 75% of the seats.  The Facebook and Twitter liberals in places like Cairo and Alexandria -- the people whom everyone in the West was so in love with -- proved to be a negligible political force, and Egypt is likely headed towards an Islamic Republic as soon as the proper arrangements are made with the Army.

The Army originally had ideas of a government that had little civilian control over the military or its budget, à la the old Turkish model.  In response, Islamists played their cards quite cleverly, gradually fomenting discontent against military rule and instigating violent riots after Friday prayers over the military's refusal to turn over power to a civilian government.  The riots resulted in a harsh series of crackdowns that effectively turned the military from the people's heroes during the Revolution into oppressors and the chief villains opposing "democracy."  Between September and the end of December, something like a hundred demonstrators were killed by the Army and police, while hundreds were injured and arrested.

The military junta's tactics also turned the Brotherhood and the Salafis into heroes, and the election results show how effective the latter groups' tactics were.  The Egyptian military will almost certainly have to make the same devil's bargain with the Islamists that the Iranian military did.

So Egypt is likely headed towards Islamist rule, but the country's future is looking increasingly grim.  Egypt's economy is essentially collapsing from within.

After the Lara Logan gang rape and the widespread scenes of unrest, most of Egypt's tourism industry is dead, and the rest will likely collapse as soon as the Islamists take power and put sharia law in place to outlaw alcohol, bikinis, and mixed bathing on beaches.

Sectarian violence against Egypt's Coptic Christians, who largely supported the Revolution, is ensuring that a large group of Egypt's more prosperous and educated citizens are emigrating.

Investors are unwilling to buy Egyptian bonds even at double digit-interest rates, which means that Egypt's ability to borrow is being cut to the bone.  No one wants the Egyptian pound.  The only Egyptian bonds anyone was willing to buy in the most recent bond auction were dollar-denominated treasury bills.  After the results of the last election, currency flight has become a major problem, as anyone with money is stashing it overseas as fast as possible, in euros or dollars, preparing for relocation out of the country.

Foreign aid is also problematical.  Egypt's government has begun negotiations for a $3.2-billion IMF loan and still receives about $1.3 billion annually in military aid from the U.S., but that's not enough for Egypt's needs and won't even begin to replace the amount of money leaving the country.  And it's also likely that as things unravel, any of that military aid that isn't directly spent on armaments will likely follow the rest of Egypt's treasury overseas, while foreign nations are unlikely or unwilling to commit large amounts of aid right now.  Unlike in Libya, there's no significant oil wealth in Egypt to tap.

Any warehoused resources or stocks that can be sold for cash are being liquidated, resulting in shortages of fuel, foodstuffs, and even medicines in a number of localities according to numerous reports.  Egypt has a population of over eighty million, and it can't support or feed its own; food imports are a necessity, and there is less and less money to do so, or for consumers to buy it even if it were available.

Egypt is heading for some very uneasy times.

Aside from major economic woes, Egypt's political situation looks increasingly bleak from an American standpoint.  The best-case scenario is an agreement between the military and the Islamists for governing which would at least ensure a certain amount of domestic peace.  At the same time, though, the agreement would almost certainly be a setback for American strategic objectives in the region, which include helping to guard the Eastern Mediterranean, cooperating with the U.S. on anti-terrorism efforts, keeping the Suez Canal and its access to the Red Sea and the Persian Gulf functioning, and continuing to observe the Camp David Accords.  Mubarak was at least a nominal anti-Islamist ally in these matters, but those days are gone.

The Obama administration will likely try to appease Egypt's new Islamist rulers, and Deputy Secretary of State William Burns met with Brotherhood leaders earlier this month to begin that process.  Given the Brotherhood's hostility toward almost every American policy aim in the Middle East, that will probably end up working as well as President Carter's attempts to appease the Ayatollah Khomeini in Iran did.

In later years, historians will be looking at President Obama's encouragement of the Muslim Brotherhood and the Islamists in Egypt, Libya, and elsewhere the same way they now see Jimmy Carter's encouragement of the same thing in Iran...as a major foreign policy blunder.

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