Saturday, June 07, 2014

Egypt at the Brink

From Spengler, 1 June 2014, by David P. Goldman:

...The United States faces a unique challenge in Egypt: state failure in Egypt would unleash problems orders of magnitude greater than the collapse of Libya. Yet avoiding state failure is especially difficult because Egypt’s economy is in utter ruin after sixty years of “Arab socialist” mismanagement. It is a banana republic without the bananas, a mainly rural country that imports half its food, the host to a vast jobless proletariat living off a state bread subsidy.
With the U.S. increasingly withdrawn from Egypt, we have seen three countries involved in Egypt. The first is Saudi Arabia, which is lending the country enough money to keep the bread subsidy intact, and preventing actual starvation. The second is Russia, which has stepped in to sell Egypt arms after the United States foolishly withdrew. The third is China. Chinese companies are constructing a north-south rail line and have undertaken to build a national broadband network.
U.S. policy should seek to minimize Russian influence, which can only grow at America’s expense. We should maintain our strong ties to Egypt’s military, the only source of stability in a situation bordering on state failure. Despite our vigorous (and well-founded) objections to Chinese foreign policy elsewhere, we should cooperate with China in investment in Egypt: here China’s influence is economic rather than strategic, and its investments represent no threat to American interests. We have a uniquely difficult challenge in salvaging Egypt’s economy, and China’s willingness to invest in the country is a net positive.

The first paragraphs of Goldman's essay on Egypt, and its conclusion, from a London Center for Policy Research recently-published book on America’s allies in the Sunni Arab world, titled, The Sunni Vanguard: Can Turkey, Egypt and Saudi Arabia survive the New Middle East? follow. (Former Hudson Institute President Herbert London and former Deputy Undersecretary of Defense Jed Babbin wrote the essays on Turkey and Saudi Arabia, respectively.)
The so-called Arab Spring in Egypt began in January 2011 with the overthrow of Hosni Mubarak, an American ally of thirty years’ standing, and ended in November with the restoration of the country’s cold-war alliance with Russia. America’s determination to depose Mubarak’s military-backed regime and to lead the most populous Arab country towards democracy had nearly unanimous bi-partisan support, with the Obama administration vying with the Republican mainstream in its zeal to sweep out the old regime erred and foster a Western-style democracy. The drive for a new democratic Egypt was buoyed by a wave of popular sentiment, and serenaded by rapturous media accounts of young, hip revolutionaries toppling a sclerotic dictatorship.
Instead of moving forward to a new era of democracy, Egypt set the clock back to 1973, before then President Anwar Sadat expelled Russian advisors and prepared the way for an alliance with the United States.
Egypt’s political crisis stemmed from external economic shocks. It faces no external threats, and only minor and ultimately managable internal threats from Islamic radicals including elements of al-Qaeda. Although Egypt fought three wars with Israel from 1947 through 1973, a cold peace with the Jewish state has held firm for nearly four decades, and there is no conceivable scenario under which Jerusalem would seek conflict with Cairo. The radical Hamas government in Gaza represents a prospective haven for terrorists and a source of weapons, but the Egyptian military has shown itself fully capable of controlling its common border with the Palestinian rump state. Although the use of Nile water is the source of a running dispute with Ethiopia, it is far below the level of a prospective casus belli. Egypt’s neighbors (Libya, Sudan) are too weak to engage Egypt militarily. Egypt’s military budget is several times the combined spending of its neighbors excluding Israel, and its air force flies 216 F-16s.
Egypt and its Neighbors: Armed Forces Comparison
$28 billion
$4 billion
$0.4 Billion

Egypt is a unique, standalone case of a country unburdened by external threats and comfortable in its alliances (with the United States and the Sunni Arab world) whose civic life was undermined by the consequences of economic backwardness in a changing world economy. Its military exists less to defend the country than to impose social order from the top.
It is a banana republic without the bananas.  Once the breadbasket of the Mediterranean, it imports half its caloric consumption. It ranks 118th among the world’s nations in Transparency International’s Corruption Perceptions Index.  After sixty-two years in power, the country’s military rulers own 30% of its economy. Most of the country remains locked in the premodern world of traditional society characterized by illiteracy, genital mutiliation and consanguineous marriages. It is a horrible example of how socialism and cultural backwardness can push an economy past the point of no return, such that no policy remedy can reverse the deterioration through the actions of domestic economic factors. The country came to the brink of starvation during the first months of 2013 and survives as of this writing on a subsidy from Arab oil states of about $15 billion a year.
Because Egypt’s economic problems are so intractable the likelihood is that the crisis will deepen over time. Egypt’s military will succeed in crushing the Muslim Brotherhood as an organized force, but elements of the Brotherhood as well as overtly terrorist organizations will remain active and seek opportunity to destabilize the military government. Egypt’s allies among  Sunni states in the Persian Gulf will maintain an economic subsidy sufficient to avert outright starvation for the time being, because the Sunni states seek unity against the threat posed by Iran and its Shi’ite allies in Syria and Lebanon. Such a subsidy cannot last forever, and Egypt’s medium-term prospects for stability are poor.
* * *
America’s best option is to work with the Saudis and the Egyptian military to reduce the likelihood that any of these risks might be realized. In the short term there is no alternative to Gulf State financial support to keep the lights on and the bakeries open. Restoration of order might bring some amelioration by restoring Egypt’s tourist industry, which earned only $5.9 billion in 2013, about half the $11 billion earned in 2008.  In the medium term, Egypt requires extensive investment in infrastructure, agriculture and manufacturing to reverse six decades of economic mismanagement. The United States and Europe are poorly positioned to undertake such investments, which involve high risk and a slow payout of returns. It is more likely that China will step in to the void that is now the Egyptian economy. As the dominant investor in Africa, China has a long-term interest in transportation and telecommunications links between the Eurasian continent and Africa, for which Egypt is a natural bridge.
The cumulative errors in American foreign policy—long-term support for an ineffective and corrupt military government, the sudden abandonment of Hosni Mubarak, and the flirtation with the Muslim Brotherhood—may lead to a vacuum of influence in Egypt which China eventually may fill, erasing the effect of decades of American diplomacy and investment.
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