Egypt Assessment

Mr. ENGEL. Mr. Speaker, I rise to call attention to the Report on a Trip to Cairo, Egypt, written by R. Leslie Deak, and presented to the Policy and Planning section of the Joint Chiefs of Staff. Mr. Deak is an American businessman who has spent the last nine years living part of each year in Egypt. He is on the Board of Advisors of the Center for a New American Security and is a Trustee of the National Defense University Foundation.

This is an interesting and important document, and I commend it to my colleagues.

EGYPT ASSESSMENT: REPORT ON TRIP TO CAIRO, EGYPT
(By R. Leslie Deak) Presented to J-5 JCS, May 11, 2011 (Pentagon--Policy and Planning for Joint Chiefs of Staff)

I just returned from two weeks in Egypt. During my trip, I spent most of my time in Cairo reestablishing existing contacts and developing contacts with new players in the emerging power structure.

I met with informed figures in the business, political, legal, journalism and religious fields. I also had extensive contact with our people over there to get their assessment and to gauge their views against those from the Egyptians.

The country is a transition that will likely end in a manner not to our liking. There are some efforts that can be undertaken at this time to help try to impact the outcome if implemented rapidly.

I have summarized the current situation, explored in more depth the key areas of concern and suggested actions that may help impact on the outcome.

The fall of Mubarak's regime is widely welcomed. There is a palpable relief among people that the repression and corruption are finally easing. This is mixed with an uncertainty about what the future holds. This is very a much an Inch Allah moment at all levels that I had contact with.

The impression of the US is poor. We are viewed as a contributory factor to the problems because of our prior support for Mubarak and our wavering during the early stages of the revolution. Our direct involvement in their affairs is not welcomed. Our operating in the background and providing support is more acceptable.

The society in general is fascinated with the unfolding spectacle of arrests, incriminations and the extent of the corruption. Politics and then soccer are the subjects discussed, in that order. Since there is uncertainty about the future, most attention is focused on the past and day-to-day life.

Prices are up by thirty percent from before the revolution but people seem to take it in stride. The Government is raising public employee salaries dramatically and is hiring unemployed workers in great numbers in order to try to maintain social stability. Continued and worsening inflation in the near term is inevitable and the population is reacting accordingly--retaining or acquiring property, jewelry, hoarding, converting pounds to foreign currency when possible, etc.

Withdrawal of Egyptian Pounds was just liberalized. Foreign currency withdrawals are restricted to the equivalent of EL10.000 per day in foreign currency. Transfers abroad are restricted to $100,000 maximum per account and need individual approval from the Central Bank.

Tourism, second largest source of external funds after Suez, is off by 85%. Although the recent lifting of the USDOS Travel Advisory initially helped increase interest in travel from the US to Egypt, the recent sectarian conflict has been a new setback. The consensus opinion is that travel will not recover until the Fall at the earliest assuming that the security situation stabilizes by that time.

Recently, traffic police have returned to the streets in Cairo but regular police, special police, detectives and prosecutors have not yet returned. Our people have been informed by sources they consider reliable, that police presence is back up to 65%. Reliable Egyptian sources I spoke with put the figure closer to 50%. Police salaries have been increased ten-fold (to EL 3,000-4,000 per month) and law school graduates are being recruited to become police. Internal security is nonoperational and is supposedly being overhauled. All US assisted police training programs have been suspended over concerns of working with bad actors.

While Cairo is safe during the daytime, at night there is occasionally sporadic gunfire. Travel outside populated areas carries dangers of hijacking. There is widespread carrying of firearms by the population and no apparent consequence or prosecution for use of deadly force in self-defense.

Politically, the general belief is that things will work out and that the Muslim Brotherhood will play a role in the country's future but will not dominate. Unfortunately, I do not agree with this assessment.

The following analysis is conjecture on my part. However, I vetted the conclusions against all of my sources in Egypt and here and, sadly, found that none could refute them.

The country seems to be sliding towards a modified socialism with the government set to play a significantly increased role in the economy. We can expect that most, if not all, of the economic reforms implemented over the last five years to be rolled back.

The government is already beginning to abrogate contracts and seize properties implicated in any dealings with the prior government. Since the Mubarak regime and their cronies were involved in every aspect of the economy, no prior business arrangement is immune--this is especially true where deals were based on the use of or access to State assets (land, businesses, natural resources, etc.)

Another current problem for the private sector is that there is no place to get a reliable or binding decision on which to make business judgments since the current Cabinet is transitional and their decisions are subject to change in the future.

The public sector is growing dramatically both in terms of cost and size as the Supreme Council races to prevent uprisings from the lower class.

They recognize that they are going to soon be facing a massive external liquidity squeeze and are casting about for any sources of foreign funds available in order to be able to continue to import essential staples. Their foreign policy reflects this with their playing off the U.S., Iran and Saudi to see who will give them money first.

I believe we can expect increasing economic and, eventually, social instability due to the deteriorating economic trends.

In my opinion, I see little likelihood of the Muslim Brotherhood not becoming the dominant force in Egypt in the near term. This will occur despite the desire by the population as a whole to have a more representative secular government.

To understand this conclusion, some background is in order.

For the last eighty years, the Muslim Brotherhood (MB) has been providing social services to a growing sector of the population. They provide health care, education, food, shelter, counseling, adjudicate disputes, etc. This impact has become especially pronounced over the last thirty years as increasing resources were diverted from government services and wound up in the pockets of corrupt officials. During this time, the MB had developed a highly efficient network that is well integrated into the society throughout the country and especially in the poorer areas and in the rural areas in Upper Egypt (the South) and the Delta.

The military, which is a conscript army, is largely drawn from this lower socio-economic half of the population. Accordingly, they are familiar with, and are largely sympathetic to, the MB. They do not currently view them as a threat. In fact, virtually all of the Military officers I have met over the years are religiously conservative as are their families.

An alliance with the MB does not pose an issue for the military and in fact helps solve two critical issues that the military faces.

The first issue is complicity--the military leadership is assumed to be complicit in all of the corruption and problems of the old regime. They have been able to shelter almost all of the ex-military from prosecution, but pressure is mounting to throw them to the wolves. This does not bode well for the current leadership and they are focused on protecting themselves from prosecution with any new civilian government that they allow to emerge. I believe that they have reached this accommodation with the MB.

Secondly, is the issue of the patronage system. The military controls thirty percent patent of the economy and much of the land in Egypt. The proceeds from these enterprises and sale of land are used to provide benefits and perks to the officer corps so as to maintain loyalty and discipline. If anything interrupts this arrangement, the senior staff faces the danger of possible insurrection from the junior officers. I believe the MB recognizes the need to maintain this system and has reached an accommodation with the military to continue it.

With these two issues apparently resolved, I believe that the military cleared the path for accelerated elections in September knowing that the MB would dominate the elections despite the desire by the opposition forces to see a more balanced and secular (civil) outcome. They then dissolved the NDP in order to further strengthen the MB.

Unfortunately, barring a change in the timing of the elections or a suspension by the Military due to security concerns, the MB will sweep the elections simply due to their organizational capabilities. They recently raised their public target from 35% to 50% of the seats. I personally believe that they will ultimately win more than 70% of the seats. This will place them in position to dominate the process that will result in a new constitution that has been mandated as part of the recent referendum.

Except for the MB, there is no organization with the capability to get out the vote. The opposition is highly fragmented and disorganized. There is a possibility that the old parliamentarians may run for election independently and serve to weaken the MB, but it is unlikely. The old members benefitted from their positions in Parliament and under the current environment will most likely not run (as one told me, it cost him EGP 5 million to win each election but he could make EGP 50 million through his position--he has no interest in exposing his past activities of running again with no prospect of recovering his investment--I believe this is representative of the situation in general).

While this has been going on in the background, much international and public attention has been kept focused on the Presidential election. This is a diversion since the new President will have very proscribed powers. The MB has indicated that they will not run, but they are negotiating with the candidates and will throw their weight behind the one that will assure their interests.

The recent issue with the Salafis is largely viewed as manufactured by the MB in order to make the MB appear more moderate. I would personally expect that the MB and the military will resolve the Salafi problem once it has served its purpose.

The first thing that needs to be done is to improve our image with the Egyptian people. We can do this through several actions.

First, we could use our current available resources to help locate and freeze funds that belong to the long list of individuals under detention or indictment. Publicizing our efforts to assist in this manner will be front page news throughout the Middle East and will have an enormous positive impact on public perception of the U.S. in Egypt. I recommend this while at the same time acknowledging the broader impact such an action may have on investors from other countries.

Secondly, we should remain neutral and supportive of the election process and their right to set their own destiny regardless of the outcome. It will be very important for us not to be seen as judgmental of, or in opposition to, the outcome of the election. Any perceived effort on our part to influence the election will backfire and both damage our reputation and adversely impact any individual or group perceived to be supported by us.

This does not mean that we have to sit back and accept the long term impact of the elections.

If we hope to see the situation improve, then the next, and immediate, focus should be to ramp up our efforts to work with groups that can bring influence to bear on the constitutional process. These include the opposition groups, the youth groups, the emerging parties, the Copts and the military and possibly the new President once we know who it is.

The only way to short-circuit the MB dominating the constitutional process after the election is to help the opposition organize to focus the issues and bring people out in to the streets again. We can also try to work in the background to convince the military that it is in everyone's interest to assure a balanced and open constitutional process. The street protests will help in this effort.

To the extent that our assistance is requested, we can also work with those domestic change agents with whom contact has already been established in order to help them work towards an open process so as to assure a fully representational political process in the future.

As long as the constitutional process can be opened up so that it is representative, it is likely that the MB will be a one-election phenomenon and that we will see an outcome like Kuwait. Any group that wins this election is doomed to fail because of the deteriorating economic and security situation. The only real concern we should have is what happens next. I believe that we can have an impact on that outcome which will serve the interest of both Egypt and the U.S.

However, our window of opportunity is closing quickly.

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