WASHINGTON PREPARES FOR A NEW EGYPT / ROUBINI GLOBAL ECONOMICS ( HIGHLY RECOMMENDED READING )

Washington Prepares for a New Egypt

By Michael Moran

The resignation of Egyptian President Hosni Mubarak will resonate across the Middle East but also in the capital of his most stalwart ally, the U.S., where policy makers are reassessing the “certainty” that Egypt will continue to act as a “moderating force” in the region. Having left the Soviet Union’s orbit in 1977 and signed a peace treaty with Israel in 1979, Egypt came to form the foundation of U.S. diplomacy in the region—a role that seemed so secure that its significance was widely overlooked.

The transition in Cairo is in its early stages, and forecasters kid themselves if they speak in certain terms right now. But we gleaned some tentative conclusions from the events of the past month, which we lay out in “Coming Soon: An Egypt That Can Say ‘No.’ ”

During the transitional period to new elections—if, indeed, that is the outcome here—the U.S. will retain significant influence, and its opinion will be sought by various factions jockeying for authority. At the very least, Egypt’s bureaucracies will seek U.S. help in calming nerves in Israel. The first post-Mubarak government, however, will break with the past by giving voice to the resentment among Egyptians at the role the U.S. has played in propping up Mubarak. It is true, as the White House has been pointing out, that successive U.S. administrations have warned Egypt’s government about the trouble it was storing up by repressing its citizens’ legitimate rights. But it is also true that the 1979 peace deal made Egypt feel invulnerable and stiffened Mubarak’s resistance to reform.

These sentiments will be manifested in demonstrations of independence from Washington, particularly when it comes to the Israeli-Palestinian conflict. One is likely to be the opening of the Gaza border with Egypt and a lifting of the embargo against the Hamas-led government there, a policy that has been wildly unpopular in Egypt. The embargo—in place because the U.S. and Europe regard Hamas’s takeover of the Gaza Strip as illegitimate and see the faction as a terrorist group—has led to deprivation in Gaza that gets prominent play in the Middle East. Egypt may also decide to recognize a Palestinian state in the West Bank and Gaza Strip. Shorn of Mubarak’s fealty to U.S. diplomacy, Egypt will now emerge as a more potent force in pressuring Israel to step up the pace of negotiations with the Palestinians.

Still, this assertion of independence isn’t likely to take the form of cutting off the flow of Egyptian natural gas to Israel—an economic tie that began in 2005 and has brought much-needed hard currency into the Egyptian economy. Nor is it likely that a post-Mubarak government, absent civil war or a major terrorist strike, would close the Suez Canal. Canal revenues and related fees contribute about 2.5% of Egypt’s GDP. A new government will have enough on its hands wrestling control of the economy away from the remnants of the venal Mubarak years without pulling the plug on these cash cows.

For Israel, adjustments will be necessary. In the longer term, the U.S.’s ability to sustain a status quo of “moderate Arab states” willing to at least tolerate Israel is diminishing. Israel, which has banked on military superiority for its security since the Oslo Accords collapsed in 2000, should push for peace with the Palestinians while it remains the regional superpower and while U.S. backing still draws grudging respect.

What about the Camp David Accords? From an average Egyptian’s standpoint, the good done for the stability of the region—avoiding a fourth Israeli-Egyptian war—has not translated into a wider peace between Israel and the Palestinians and has utterly failed to transform Egyptian society into the democracy successive U.S. governments have said they wished for. The “cold peace” with Israel will grow colder still.

But peace should remain. Viewed soberly, it was a good deal for Egypt, too: Camp David aligned Egypt with the world’s most powerful nation at a time when U.S. power was at its zenith. Meanwhile, Egypt’s military received US$1.3 billion a year in military aid and the right to produce front-line U.S. armor and aircraft locally on license—the kind of deal offered only to top-tier allies like Japan, the UK and (not incidentally) Israel. All these things will tend to make a renunciation of Camp David much less likely, even if a government that includes the Muslim Brotherhood as a minority partner comes to power.