Scencesetter for Deputy Secretary Lew's February 15-16 Visit to Cairo

Reference ID 10CAIRO159
Created 2010-02-04 15:03
Released 2011-01-28
Classification CONFIDENTIAL
Origin Embassy Cairo



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E.O. 12958: DECL: 2020/02/04
TAGS: EAID ECON PREL OVIP EFIN EG
SUBJECT: Scencesetter for Deputy Secretary Lew's February 15-16 Visit
to Cairo

CLASSIFIED BY: Margaret Scobey, Ambasssador, State; REASON: 1.4(B),
(D)

¶1. (C) Deputy Secretary Lew, we warmly welcome you to Cairo and are
seeking meetings with Prime Minister Nazif, Foreign Minister Aboul
Gheit, and Minister of International Cooperation Aboulnaga. While
we continue to work closely and effectively with Egypt on the range
of critical regional issues, our bilateral discussions,
particularly relating to human rights, civil society and democracy,
and their relationship to the ESF program, remain difficult at
times. President Obama's speech here in June helped immensely to
broaden this conversation, making it clear that the US intends to
work in partnership with Egypt and our regional allies to meet the
challenges the people and governments of the region face. However,
we have also been clear that the U.S. considers democracy and
development two sides of the same coin, and that our policy toward
assistance will reflect that principle.



¶2. (C) Your interlocutors may convey their disappointment that the
new Administration has yet to respond fully to their proposal for
restructuring U.S. economic assistance to Egypt. In particular
they seek the Administration's intentions for the next five-ten
years, noting not only that such a multi-year perspective has been
the norm for the US-Egypt ESF relationship, but also that the GOE
cannot adequately plan multi-year projects without reference to
expected sources of foreign assistance. They may also raise GOE
objections to continued U.S. funding, through non-ESF funds, of
non-registered Egyptian civil society organizations. You will hear
a different view during your visit from some of our civil society
interlocutors and have an opportunity to reassure them of the
Administration's continuing support for Egypt's economic
development and political reform.



------------------------------------------

Aid: Pillar of a Strategic Partnership ...

------------------------------------------



¶3. (C) Egypt's leading position among pro-Western Arab governments
aligns it with key U.S. strategic goals, including comprehensive
Arab-Israeli peace, countering Iranian ambitions, supporting U.S.
military efforts in Iraq and Afghanistan, and counter-terrorism
cooperation. As a cornerstone of our bilateral relations, U.S.
assistance, both ESF and FMF, has nurtured Egypt's strong support
for U.S. regional policies while also serving as a visible symbol
of U.S. commitment to Egypt and the welfare of its people.



---------------------------

... and a Source of Tension

---------------------------



¶4. (C) In recent years, however, as ESF funds have declined, and
democracy and civil society have been emphasized, the assistance
relationship has become at times as much a source of tension as a
symbol of partnership. Tensions over the U.S. approach to
democratic reform and human rights led to an impasse when the
previous multi-year ESF agreement expired. Without consultation
with Egypt, the U.S. cut the ESF program by over 50 percent from
$415 million in FY2008 to $200 million in FY2009 but promised to
sustain this level for five years. The GOE never accepted this
unilateral decision and effectively suspended negotiations on
FY2009 program implementation. Only the assurance that
conditionality language would not reappear in 2009 and the Obama
administration's agreement to raise the ESF level to $250 million
for 2010 and to respect previous agreements to fund only registered
NGOs via bilateral ESF smoothed the way to resume programming for
2009 and beyond. The subsequent addition of $50 million via the
FY2009 supplemental for North Sinai development was welcomed by the
GOE but has created new challenges as the MIC seeks to rewrite
standard USAID agreements to reflect the sensitive nature of the
Sinai programs.



-------------------------------------


Recasting the Assistance Relationship

-------------------------------------



¶5. (C) Minister of International Cooperation (MIC) Fayza Aboulnaga
has told us that the GOE seeks to end all ODA programs for Egypt
within ten years based on their projections of economic growth.
Aboulnaga has been the most vocal and unrelenting advocate of
restructuring the U.S.-Egyptian assistance relationship. (We note
that most of the line ministries in the government continue to seek
and appreciate the traditional role that USAID has played.) She is
the originator of the mega-endowment proposal ($3.6 billion over
ten years), that would eliminate ESF over ten years, and, in her
view, significantly limit the likelihood of political conditions
being placed on endowment funding. She will argue that the
proposal reflects a more mature U.S.-Egypt relationship that would
set the stage for the eventual closure of the USAID Mission to
Egypt.



¶6. (C) Although the Egyptians are aware that their ambitious
multibillion dollar endowment concept has found no support in
Washington, they will likely pursue the concept even if a scaled
down version. The Minister of International Cooperation may press
the case for directing current Egyptian ESF-loan repayments to the
endowment, noting that it is "not right" that ESF appropriations
are less than GOE debt repayments to the U.S. She has been told
clearly and repeatedly that debt repayments to the U.S. will not be
part of discussions on assistance but continues to pursue this
goal. Aboulnaga has also led the campaign to halt all USG-funding
of non-registered NGOs and may possibly raise with you the DRL and
MEPI funding of such organizations. Egypt has also steadfastly
refused to register NGOs such as IFES, ABA, NDI, and IRI, thought
the GoE tolerates their activity here.



------------------

Slow Roll on Sinai

------------------



¶7. (C) Our effort to conclude negotiations to obligate the FY 2009
$50 million supplemental for assistance to the Northern Sinai has
moved at a glacial pace. Out of respect for the very real security
concerns in the Sinai, we agreed early on that the U.S. would keep
a very low profile on the Sinai projects and allow GOE ministries
to implement the contracts directly. MIC has, nevertheless,
haggled over every element of the agreement process, possibly in an
effort to establish new bilateral precedents that would govern
future USAID projects in Egypt. We hope that you stress to the
Egyptians that demonstrating credible and timely implementation of
the Sinai projects will be an important justification for ongoing
ESF support for Egypt. While the U.S. respects the security
challenges in the Sinai, we do not understand the excruciating
focus on changing language that has been used in countless previous
agreements.



---------------

More to Be Done

---------------



¶8. (C) Although Egypt, with large-scale U.S. funding, has made
significant development progress in a broad range of areas,
daunting development challenges remain. There is broad bilateral
agreement that future U.S. assistance should focus on human
capacity development, with a focus on education and training,
strengthening civil society, building institutional capacity to
sustain key services, and augmenting Egypt's competiveness. In
conveying a vision of what our assistance program will look like in
the coming years you would help signal a return to normalcy in our
assistance relationship.


¶9. Key points for your meetings with GOE officials may include the
following:



- Express that the U.S. regards long-term development assistance as
a key component in fostering a mutually beneficial bilateral
relationship.



- Reiterate that it is premature to discuss the phase-out of the
ESF program. President Obama laid out an ambitious agenda for
partnering with our allies in the region, including on education,
S&T, entrepreneurship, and civil society. We need Egypt to be a
part of that. (Note: the Mission strongly recommends sharing with
the GOE the Administration's intentions with regard to future ESF
levels.)



- Reaffirm the U.S. commitment to development in the Sinai and
convey the urgency to begin implementation of program activities
there.



- Reaffirm that the U.S. cannot support an endowment proposal of
the magnitude the GOE envisions, or one that includes debt relief.



- Confirm the intention of the U.S. to provide a counterproposal on
a possible endowment funded by ESF but one that begins on a smaller
scale than that proposed by the GOE.



- Emphasize that the U.S will remains committed to providing
assistance, through a variety of programs, that bolsters Egypt's
civil society, helps Egypt expand the protection of basic human
rights, and enhances government transparency. Registering
respected U.S. and international NGOs such as IFES, ABA, NDI and
IRI would send the right signal.



SCOBEY









Source: Wikileaks