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CNN "State of the Union with Candy Crowley" - Transcript: Egyptian Aid

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CROWLEY: The president canceled next month's joint military exercises with Egypt, but did not cut off U.S. aid, not yet. His equation is this. However popular, a military coup ousting an elected government followed by a deadly crackdown on protesters run counter to the values the U.S. spouses to the world. Still, so much rides in the balance of what happens next. For decades, Egypt has been an imperfect, undemocratic but critical U.S. ally in the Middle East.

The first Arab state to make a cold peace with Israel for which Egypt was rewarded with U.S. aid. The Egyptian military, where U.S./Egyptian ties are strongest, has helped fight extremism in the Sinai, buttressing Israel Southern Boarder. Egypt has been helpful in the U.S. fight against terrorism, a counterweight to Iran, and in many ways, Egypt, the most populous Arab state, is the heart of the Middle East. Many analysts believe as Egypt goes, so goes the Arab spring for the rest of the region.

Joining us now is Senator John McCain. He recently traveled to Egypt at the request of the president. Senator, you came back a changed man, at least, on the issue of whether the U.S. should cut out -- should suspend aid to Egypt. What made you change your mind?

MCCAIN: Well, first of all, I wanted to give them an opportunity to do the right thing after the coup had taken place. And it was pretty clear, to say the least, that they have not only not changed, but they have orchestrated a massacre, as you mentioned. We don't know, a thousand or many thousands wounded.

We have no credibility, Candy. That's the problem, because we know that the administration called the Egyptians and said, look, if you do a coup, we're going to cut off aid because that's the law. We have to comply with the law. And we're -- in this administration did not do that after threatening to do so.

And we are not in compliance with the law about a coup, which is clearly what it is. And then, we thought there was possibly a deal to be made where they would release a couple of the Muslim Brotherhood, including a former speaker of the parliament, and in return for reductions in numbers of demonstrators, a dialogue, move forward with the constitution and elections.

Obviously, the General al-Sisi decided not to pursue that and rejected it and decided to use force as we saw today, in the last few days. And with apache helicopters flying overhead, nothing is more symbolic of the United States of America siding with the generals. We have no credibility.

We do have influence, but when you don't use that influence, then you do not have that influence. We could be cutting off the aid, the spare parts and maintenance of this military equipment that we've given the Egyptians is important to their capabilities.

CROWLEY: Wait --

MCCAIN: Tourism, economic assistance, business, the IMF loan. There are many areas where we could exercise influence over the generals, and we're not doing any of it, and we're not sticking with our values.

CROWLEY: And yet, when you argued earlier, trying as you say to give the military leaders a chance, you argued that to cut off U.S. aid to Egypt might harm Israel. Others also add that once you cut off aid, you've lost any kind of leverage. There is nothing after you've cut U.S. aid.

MCCAIN: Well, again, we thought that at that particular time that it was not the right thing to do, because we wanted to give them an opportunity to get back on the path to democracy. And obviously, that's not the case. Look, as I say, our interests, our values, there are consequences of failure -- consequences of any action we might take. But for us to sit by and watch this happen is a violation of everything that we stood for.

And when we threaten something, as we did that we would cut off aid, the administration did, and then not do it, then you lose your credibility and your influence. In other words, the generals now are acting with confidence that we will not take any --

CROWLEY: That the U.S. won't do it.

MCCAIN: Right.

CROWLEY: Right.

MCCAIN: There will be no reprisals, right.

CROWLEY: But is it still, do you think, at the risk for Israel if the U.S. cuts off that aid as you once argued?

MCCAIN: I think there's a risk to Israel. There's more increasing unrest in the Sinai. But I also would point out the Mubarak regime and this regime is stoking anti-Americanism to a large degree and anti-Israel rhetoric is very high. I believe that Israel can defend itself, although, it may be -- may be at some cost to them. But look at the cost to American credibility.

CROWLEY: Right.

MCCAIN: When the president -- when the president of the United States says that if Bashar al-Assad uses chemical weapons, he crosses a red line. When the president of the United States says that Iran's path to nuclear weapons is unacceptable.

When we see the al Qaeda coming -- rising across the Arab world, particularly now, Iraq unraveling, Iraq, Syria returning to al Qaeda influence to a large degree, we are losing all across the region, and one of the reasons is, is because there's no credibility on the part about the United States actions.

CROWLEY: So, you think that the president has been weak when it comes to dealing in the Middle East, has not followed through? You know, what is your sort of description of U.S. policy?

MCCAIN: There is no policy. And there is no strategy. And, therefore, we react and we react poorly. Again, one of the best examples is Syria where the president said if Bashar al-Assad uses chemical weapons, it will cross a red line. He's used them and we have done virtually nothing in response to that.

The centrifuges in Tehran continue to spin. Iraq unravels. Tremendous uncertainty about Afghanistan and what our forces remaining will be there. We can go through country after country and compare that to the president's vision for the Middle East in his speech in Cairo in 2009. We are much -- we are much more hated and much less respected --

CROWLEY: Senator, quickly --

MCCAIN: -- than we were in 2009. Go ahead.

CROWLEY: I've got two quick questions for you. The first is, there is talk now that the U.S. -- that the Egyptian military, the Egyptian government might outlaw the Muslim Brotherhood. What will be the net result of that?

MCCAIN: An Algeria. It won't be a Syria situation, because they have the capability to repress. But when a third -- roughly a third of the people of Egypt support the Muslim Brotherhood at least, and by the way, they would lose a free and fair election. You're going to see insurgency all over Egypt.

The Muslim Brotherhood has been underground for years. They know how to behave. And, I can see a long period of unrest in Egypt and repression. And again, a violation of United States values, and our values and our interests.

CROWLEY: And senator, I quickly have to ask you about the NSA story this week. We have learned that mistakes were made, as they say. They don't seem to be intentional, but there was some spying on innocent American citizens through some clerical errors mostly. Your quick reaction to that?

MCCAIN: Why do we have to keep finding out this information by revelations from Mr. Snowden? He's giving credibility, particularly amongst young people, that he is sort of a Jason Bourne character. We need better Congressional oversight. where was the Congress in this? Was the Congress informed? We know that Mr. Clapper, the director of National Intelligence, made a false statement to Congress in open hearing, in a Senate hearing.

So, we need more Congressional oversight. We need more information. And can't we find these things out from somebody besides Mr. Snowden, who I believe was violation of his oath to the United States of America?

CROWLEY: Senator John McCain, thank you so much for getting up early for us.

MCCAIN: Thank you.

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