Egypt: Linchpin for U.S. Foreign Policy in Middle East

It should never have been a question to support Mubarak, instead the Obama administration took the easy way out and backed the Muslim Brotherhood candidate Morsi, enraging regional allies that continued to support both U.S. regional war aims and Israeli policy goals for flyover rights, desalinization plants and more.  Obama’s political instincts continuously backfired as he sought to open relations with Iran while containing Saudi anger; our Sunni allies throughout the region sought their own advantage in having Gulf Petro-monarchies fiscally underwrite the Islamic State in Iraq.  All this happened as the Shia from Iran began hustling geopolitical advantages throughout Mesopotamia.  True to form, we played checkers to Persian chess.  This continues today with far reaching consequences for the next President.

Where is Egypt, the largest Arab nation state in this calculation?

Egypt is badly damaged, both domestically and fiscally.  Its trying to serve a balance of payments crisis brought about by exceedingly weak tourism revenue and structural flaws in its heavily subsidized economy.  Cairo is in free fall.

While Egypt’s foreign reserves drain the Central Bank, the fisc is hampered by current account deficits, zero growth and complete failure to succeed with FDI (foreign direct investment.)

Immediately after the Arab Spring, al-Sisi asked hundreds of wealthy foreign nationals to vacation in the seaside resort of Sharm el-Sheikh, a residence near Mubarak’s exile to ask for considerable investment of foreign capital.  That opportunity was squandered, and now Cairo has asked the IMF for a three year package worth $12 Billion.

An overvalued currency, double digital inflation and massive unemployment is far beyond the reach of ‘the deep state’ that characterizes Egypt’s authoritarian political economy. The proposals for tax reform, elimination of massive food, fuel subsidies, civil service reform has hampered Egypt’s political class to the point of permanent dysfunction.  As of this writing, Gulf Petro-monarchies have pulled out fiscal representatives, while Cairo dithers with the IMF, the African development bank and the World Bank.  Cairo is buying time as it discerns how best to frame its fecklessness.  What should Cairo immediately do?

It should permanently dismantle its entire food, fuel subsidy scheme that permanently raises price discovery; its Central Bank should seek to reduce inflation chiefly though the import of foreign currencies for tourism, and open its rigid domestic markets to foreign competition while dismantling Cairo’s byzantine predatory bureaucracies.  Large mega-structure projects to widen the Suez Canal while erecting special economic zones adjacent to the canal have failed.  Without addressing the politics solidifying Egypt’s “deep state”; the hoarding of its domestic markets by former military officials, Egypt is heading toward a precipice.

This can only be fixed with broad based political reform:  an Arab Spring!!



About William Holland

Systematic Theologian/International Relations
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One Response to Egypt: Linchpin for U.S. Foreign Policy in Middle East

  1. Pingback: Egypt: Linchpin for U.S. Foreign Policy in Middle East - Affluent InvestorAffluent Investor

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