VZCZCXYZ0020
OO RUEHWEB

DE RUEHEG #0159/01 0351504
ZNY CCCCC ZZH
O 041503Z FEB 10
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0136
INFO RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUEHEG/AMEMBASSY CAIRO

C O N F I D E N T I A L CAIRO 000159 
 
SIPDIS 
DEPARTMENT FOR NEA/ELA 
PASS TO USAID/ME/MEA 
 
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