VZCZCXRO0263
PP RUEHROV
DE RUEHEG #0265/01 0431437
ZNR UUUUU ZZH
P 121437Z FEB 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 1630
INFO RUEHXK/ARAB ISRAELI COLLECTIVE

UNCLAS SECTION 01 OF 02 CAIRO 000265 
 
SENSITIVE 
SIPDIS 
 
H PLEASE PASS TO SENATOR LIEBERMAN 
 
E.O. 12958: N/A 
TAGS: PREL ECON PGOV OREP KPAL EG IS
SUBJECT: SCENESETTER FOR CODEL LIEBERMAN'S VISIT TO CAIRO 
 
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Summary 
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¶1. (SBU) Senator Lieberman, welcome to Egypt. Your visit 
comes at a pivotal time for Egypt and the region.  A 
ceasefire is almost in place between Israel and Hamas, which 
the Egyptians are seeking to cement. The U.S., European 
countries, and regional governments are searching for ways to 
put in place security arrangements to allow the flow of 
humanitarian assistance to Gaza.  Many see the new U.S. 
administration as a cause for cautious optimism in both the 
bilateral relationship and in U.S. engagement with the 
region.  Senator George Mitchell visited Egypt in late 
January for his first trip to the region as U.S. Special 
Envoy for Middle East Peace and will return to Cairo March 1. 
 Secretary Clinton plans to attend a March 2 Gaza 
Reconstruction conference the Egyptians are hosting in Cairo. 
 We have requested meetings for you with President Mubarak, 
intelligence chief General Omar Suleiman, and Foreign 
Minister Ahmed Aboul Gheit.  End summary. 
 
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Israel-Palestine 
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¶2. (SBU) The election of President Obama generated much 
optimism in Egypt and hopes that the new administration would 
quickly focus on problems in the Middle East.  In particular, 
the Egyptian leadership wants the U.S. to urgently address 
the Israeli-Palestinian conflict.  The Egyptians have long 
served as an intermediary linking us, the Israelis, and the 
Palestinians.  Since the January 2008 Hamas breach of the 
Egypt-Gaza border, the Egyptian role has shifted to focus on 
intra-Palestinian reconciliation and the establishment of a 
lasting Hamas-Israel ceasefire.  The Egyptians are now 
working to conclude and cement the Israeli-Hamas ceasefire 
for 12 to 18 months, giving them time to help forge a 
non-partisan Palestinian government.  They believe that 
Palestinian reconciliation is a prerequisite to any major 
next step in Gaza, as neither the Egyptians nor the 
international community can work with Hamas as a partner on 
security, political or economic reconstruction issues.  The 
Egyptians will tell you that limiting movement in and out of 
Gaza is necessary, but will urge that you impress upon the 
Israelis the need to maintain adequate humanitarian inflows 
to Gaza.  The Egyptians will stress that keeping borders open 
for legitimate trade and forging effective measures against 
smuggling go hand-in-hand. 
 
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Other Regional Issues 
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¶3. (SBU) On Iraq, Egypt, although still concerned that Iraq's 
Shia government is too prone to Iranian influence, has shown 
increasing confidence that Iraq has turned the corner. 
Foreign Minister Aboul Gheit completed a successful trip to 
Baghdad in October 2008 and is moving forward to reopen its 
embassy in Baghdad.  On Iran, Egypt is concerned by rising 
Iranian influence in the region, has supported UN sanctions, 
and is increasingly active on countering Iran, e.g. in Gaza 
and to some extent in Lebanon, working with Saudi Arabia and 
other Arab states to support Lebanese political and 
territorial sovereignty. 
 
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Internal Politics and Economics 
------------------------------- 
 
¶4. (SBU) We continue to work towards democratic reform in 
Egypt, including the expansion of political freedom and 
pluralism, and respect for human rights.  Egyptian democracy 
and human rights efforts, however, are being stymied, and the 
GoE remains skeptical of our role in democracy promotion, 
complaining that any efforts to open up will result in 
empowering the Muslim Brotherhood, which currently holds 86 
seats in Egypt's 454-seat parliament.  An ongoing challenge 
remains balancing our security interests with our democracy 
promotion efforts. 
 
¶5. (U) Economic reform has been, on the whole, a success 
story, although Egypt still suffers from widespread poverty 
affecting of 35-40% of the population. Reforms in trade and 
tax policy, financial reform, privatization and increased 
transparency have led to 6-7% economic growth over the past 
three years.  Foreign investment increased from around $3 
billion in 2005 to $11 billion in the last year, mostly in 
the petroleum sector, though growth in foreign investment 
appears to be dropping off.  Despite this success, 
 
CAIRO 00000265  002 OF 002 
 
 
significant problems remain, including high inflation, high 
levels of poverty, and unemployment, and endemic corruption. 
Egyptian-U.S. trade has more than doubled in the last four 
years, reaching almost $9 billion in 2008. The U.S. exports 
to Egypt about twice as much as it imports.  Egyptian banks 
operate very conservatively and have been spared involvement 
in risky financial products, but the effects of the global 
economic crisis on Egypt are beginning to be felt.  As the 
economic crisis worsens, Egypt remains vulnerable as exports, 
Suez Canal revenues, tourism, and remittances -- its largest 
sources of revenue -- are all down and likely to continue to 
fall. 
SCOBEY