VZCZCXYZ0016
PP RUEHWEB

DE RUEHEG #1542/01 1441122
ZNR UUUUU ZZH
P 241122Z MAY 07
FM AMEMBASSY CAIRO
TO SECSTATE WASHDC PRIORITY 5332

UNCLAS CAIRO 001542 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
H PASS CODEL PRICE 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EAID KPAL IAEA EG IZ SO SU
SUBJECT: SCENESETTER FOR CODEL PRICE 
 
Sensitive but unclassified.  Please handle accordingly. 
 
¶1.  (SBU) Representative Price, we warmly welcome you and 
your delegation to Egypt. You are scheduled to meet with 
Egyptian President Hosni Mubarak, Minister of Foreign Affairs 
Ahmed Aboul Gheit, and Speaker of the People's Assembly Ahmed 
Fathy Sorour and other parliamentarians.  You will also meet 
with Egyptian civil society leaders over lunch. 
 
The Bilateral Relationship 
-------------------------- 
¶2.  (SBU) Strategic Alliance:  We have two vital and 
strategic national security interests with Egypt - (1) its 
commitment to peace with Israel and (2) unfettered U.S. 
military access to the Suez Canal and Egyptian airspace, 
including ground-based support for USAF operations. A 
fundamental element in our relations with Mubarak and his 
military is our $1.3 billion in annual Foreign Military 
Finance (FMF)- a commitment born of the Camp David Accords 
and a priority issue for the GOE.  These funds have helped 
phase out Egypt's Soviet-era weaponry, modernize its 
inventory with U.S.-purchased equipment, and develop an 
Egyptian officer corps familiar with Western values and U.S. 
standards.  The Government of Egypt, and President Mubarak 
particularly, value these benefits but especially value the 
political symbol of U.S.-Egyptian partnership that this 
program represents. 
 
¶3.  (SBU) Economic Assistance:  US economic assistance to 
Egypt has been on a 10-year glidepath since 1999, declining 
$40 million annually from $800 million in 1998 to $455 
million in FY 2007, and $415 million in FY 2008.  The 
administration has not yet decided on the funding levels for 
2009 and the post glide-path future of the program.  After a 
2002 policy review, the U.S. negotiated a financial sector 
reform MOU, which established mutually agreed benchmarks for 
cash transfer based on completion of specific financial 
policy reforms.  Based on the success of this program, 
starting in FY 2008, all new monies will be disbursed through 
a sectoral cash transfer program based on reform benchmarks 
in health, education, economic reform and science and 
technology. 
 
Domestic Issues 
--------------- 
¶4.  (SBU) Elections for the Shura Council, the upper, 
"advisory" house, are scheduled for June 11.  Eighty-eight 
seats of the 264-member Council will be contested.  An 
additional 44 members will be appointed by President Hosni 
Mubarak.  Among opposition groups, only the banned Muslim 
Brotherhood is preparing to put up "independent" candidates 
to challenge the NDP majority.  But widespread detentions of 
MB members is hampering their organization.  The elections 
will be supervised by a newly created Supreme Electoral 
Commission.  The Commission was created as a result of recent 
constitutional amendments approved by national referendum 
last March.  The referendum was characterized by low voter 
turnout due to voter apathy and an opposition-led boycott. 
The amendments are also expected to produce new legislation 
on counter-terrorism which will replace the current state of 
emergency and also a new electoral law. 
 
¶5.  (SBU) In June 2006, the GOE instituted a "freeze" on the 
activities of the U.S. political party institutes, IRI and 
NDI, and also the international elections NGO, IFES, which 
had all applied for registration and started activities in 
¶2005.  Since the 2006 freeze, all three organizations, which 
are funded by USAID, have conducted very limited, low-profile 
activities.  IRI and NDI are carrying out programs for civil 
society leaders "offshore."  Secretary Rice and other senior 
USG officials have repeatedly urged President Mubarak, 
Foreign Minister Aboul Gheit and others to allow the 
institutes to carry out their work in Egypt, but the answer 
remains "no." 
 
¶6.  (SBU) Economically, Egypt's prospects are improving. 
Unemployment estimates approach 15 percent, and 
underemployment is much higher.  But analysts predict that 
2007 growth will equal the 7% achieved in 2006.  Since 2004, 
the reformist Cabinet of Prime Minister Ahmed Nazif has made 
significant progress in implementing broad economic reform, 
improving the investment climate and increasing foreign 
investment.  They cut taxes and tariffs, made the budget more 
transparent, privatized state-owned enterprises, including 
one of the four major public banks, and streamlined business 
registration procedures.  As a result, foreign investment is 
expanding rapidly. The reformers are now focused on 
developing a mortgage market and the real estate sector, and 
on sales tax reform.  Trade and customs reforms have helped 
maintain and create jobs. 
Regional Issues 
--------------- 
¶7.  (SBU) Hosni Mubarak remains a central figure in regional 
affairs. Egypt brokered the most recent cease-fire in Gaza, 
which at this writing appears fragile, but holding.  Egypt is 
working to strengthen Abu Mazen and Fatah, in anticipation of 
Palestinian elections in 6-12 months.  In 2005, Egypt 
deployed 750 border guard forces to the Rafah border crossing 
between Egypt and Gaza under an agreement with Israel and is 
addressing the problematic issue of weapons smuggling via the 
Sinai.  On Iraq, hosting the recent Neighbors Conference in 
Sharm El Sheikh demonstrated tangible support for the 
government of Prime Minister Nur Al Maliki.  In general, 
Egypt shares broad Arab concern about Tehran's growing 
influence in the region.  Cairo has dismissed Iranian 
President Ahmadinejad's recent public offer to strengthen 
bilateral relations. 
 
¶8.  (SBU) Sudan: The GOE opposes  international sanctions on 
Sudan.  Instead, they urge us to focus on bringing the Darfur 
rebels into the Darfur Peace Agreement.  Egypt has offered 
engineering units and two battalions of peacekeepers for the 
Heavy Support Package of the UN/AU Mission, but the offer has 
not been accepted by UN/DPKO.  They have already provided 
around 800 troops for UNMIS in South Sudan, around 85 
security personnel for AMIS in Darfur.  Egypt also maintains 
a field hospital in Darfur, has provided 15-20 planeloads of 
humanitarian supplies, and is the home of an estimated 1-2 
million Sudanese refugees.  As a member of the African 
Union's Peace and Security Commission, Egypt is deeply 
engaged in diplomatic efforts and frequently hosts rebel 
groups for talks.  Sudanese President Bashir visited Egypt in 
April and spent a week on vacation. 
 
¶9.  (U) Again, we look forward to ensuring your successful 
visit to Cairo. 
RICCIARDONE