Bloomberg News

Islamist Win Seen as Plus for Egypt Stability -- for Now

June 24, 2012

Egypt Islamist Win Seen in U.S. as Adding Stability for Now

Egyptians set off fireworks in Cairo's Tahrir Square as they celebrate the victory of the Muslim Brotherhood's candidate, Mohamed Morsi, in Egypt's presidential elections. Photographer: Khaled Desouki/AFP/GettyImages

The victory of Muslim Brotherhood candidate Mohamed Mursi in Egypt’s presidential election will re-establish the stability the U.S. seeks in the Middle Eastern nation, if only temporarily.

While the U.S. welcomed yesterday’s announcement that Mursi, 60, defeated the military’s pick, Ahmed Shafik, the election is only the beginning of what’s apt to be a protracted confrontation between the Sunni Muslim Brotherhood and the more secular military that will complicate American interests in the region, according to Aaron David Miller, a senior fellow at the Wilson Center, a Washington policy group.

“We’re trapped between a rising Islamic current we don’t trust and a Praetorian military establishment that we don’t like but we’ll be forced to support for some very good reasons, including the peace treaty with Israel,” Miller said in an interview. “For Americans, this is the better outcome because it preserves a balance between the military and the Islamists. We’re going to have to deal with both of them.”

Mursi’s victory highlights the tension between the Obama administration’s rhetoric on Egyptian democratic change and America’s strategic interests in the region. While the administration supports the “Arab Spring” movement, longstanding U.S. ties and billions in aid to former president Hosni Mubarak’s autocratic regime helped maintain Egypt’s peace treaty with Israel and U.S. military access through the Suez Canal to the Persian Gulf.

Under a civilian Islamic government, the future of those interests may depend in part on whether and how Egypt’s elected and military leaders share power. That uncertainty already has caused friction between Congress and the Obama administration.

‘Mutual Respect’

President Barack Obama congratulated Mursi for securing 51.7 percent of the vote in a telephone call late yesterday and the two leaders pledged to improve bilateral ties.

Obama “underscored that the United States will continue to support Egypt’s transition to democracy and stand by the Egyptian people,” according to an e-mailed White House statement. The president said he would work with Mursi “on the basis of mutual respect,” and the new Egyptian leader “expressed appreciation for the call and welcomed U.S. support for Egypt’s transition,” according to the statement.

Yesterday’s election announcement was preceded by military moves to consolidate power at the expense of the incoming president, re-establish martial law and assume the powers of the legislative branch. A constitution still has to be written, while Egypt’s courts dissolved parliament last week in a move that was “clearly a political decision,” said Marina Ottaway, director of the Middle East program at the Carnegie Institute, a Washington policy group.

Military Aid

Senator Patrick Leahy, the Vermont Democrat who heads the budget committee that funds the State Department and foreign aid, made clear his anger about the military’s actions and voiced his disapproval of the Obama administration’s decision to maintain military aid to Egypt. Yesterday, he said that his stance on continuing the aid will depend on the military.

“The next step is up to the generals and how the constitution is written,” Leahy said in an e-mail.

The administration wants to see the democratic transition completed, Carney said. “It is essential for the Egyptian government to continue to fulfill Egypt’s role as a pillar of regional peace, security and stability.”

With legislative authority now in the military’s hands, it’s unlikely any laws or practices the U.S. cares about will change “anytime soon,” said David Schenker, director of the program on Arab politics at the Washington Institute for Near East Policy.

Domestic Issues

In the short-term, Egypt’s civilian rulers will focus on domestic issues, including re-establishing security in the Sinai Peninsula and righting Egypt’s devastated economy, he said.

The yield on Egypt’s 5.75 percent dollar bonds due in 2020 soared the most last week since they were sold in April 2010. The rate jumped 97 basis points to 7.87 percent in the week that ended June 22, according to prices compiled by Bloomberg. That included a 52 basis-point surge on the last day of the week.

The Arab country’s five-year credit default risk jumped 68 basis points last week to 723, the highest level since December 2008, according to CMA, which is owned by CME Group Inc. and compiles prices from the privately negotiated market. Egypt is among the 10 riskiest credits in the world.

Over time, when elections are held again, the Brotherhood is likely to repeat its success at the ballot box, forcing the military to relinquish legislative control, Schenker said. That will put the Islamists in control of foreign policy, potentially triggering a military backlash and sparking unease in the U.S. and elsewhere, he said.

‘Alarming’ Americans

“In the event that the Brotherhood swept into power in Egypt, that would alarm a large number of Americans and a large number of U.S. allies in the region,” including the Sunni Gulf States that distrust Shiite Islamists, and the Israelis, said Jon Alterman, director of the Middle East program at the Center for Strategic and International Studies, a policy group in Washington. “There would surely be people talking about cutting off the relationship,” he said, with all the implications that would have for military access from the Mediterranean to the Persian Gulf and the Egypt-Israeli peace treaty.

Senator John Kerry, the Massachusetts Democrat who heads the Senate Foreign Relations Committee, said in a statement that “American concerns about the Muslim Brotherhood’s past statements and positions are widely shared and well understood.”

‘Serious Questions’

While noting “serious questions about the future direction of Egypt’s foreign policy,” Kerry said “it would be a mistake for us to pull back from our engagement with a free and democratic Egypt.”

For now, the military and the Islamists are beginning a drawn-out struggle, Alterman said. “The battle lines are drawn, the standoff will be fought over the next couple of years,” he said.

Ottaway said that initially it will be hard for the Brotherhood to be effective as it faces the vestiges of the old regime. “The military, the top levels of Egyptian bureaucracy, and the courts are on one side, the Muslim Brotherhood on the other,” she said.

Change is under way, though, she said. In the November 2010 elections, the Mubarak regime “totally manipulated” the outcome by blocking moderate opposition parties from getting many seats and the Brotherhood from getting any, Ottaway said. Though many Egyptians and some U.S. officials expected the military to give the presidency to Shafik, Mubarak’s last premier, “today, they did not dare do the same thing. The change is huge, but it’s a long battle ahead,” Ottaway said by telephone from Beirut.

Two Themes

That battle is likely to have two main themes, Schenker said. One will be an internal struggle within the Islamist camp, with the more conservative Salafists pushing the Muslim Brotherhood to the right in ways that will have domestic impact.

Recently, the Salafists objected to a $500 million Japanese loan to build a Cairo metro because it involved interest, which is forbidden in Islam. “How is that going to work out with the IMF loan?” Schenker said of the $3.2 billion Egypt needs from the International Monetary Fund.

Another dynamic will echo shifts seen in Turkey, where an Islamic civilian government has steadily sidelined the military.

“Now, in Turkey, the military has been defanged,” Schenker said. “One-fifth of all the generals in Turkey are in jail. The elected Islamic leadership has brought the military to heel.” The head of Egypt’s ruling military council, Field Marshal Hussein Tantawi, “doesn’t want to end up in a cage, but ultimately, this is what the Brotherhood wants,” Schenker said.

To contact the reporter on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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