VZCZCXYZ0001
PP RUEHWEB

DE RUEHEG #0569/01 0921542
ZNR UUUUU ZZH
P 021542Z APR 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 2088
INFO RUEHRH/AMEMBASSY RIYADH PRIORITY 0910

UNCLAS CAIRO 000569 
 
SENSITIVE 
SIPDIS 
 
H FOR SENATOR BOND; NEA/ELA FOR CANEDO 
 
E.O. 12958: N/A 
TAGS: OREP BOND PGOV KWBG ECON KPAL EG IS
SUBJECT: SCENESETTER FOR CODEL BOND'S VISIT TO CAIRO 
 
¶1. SUMMARY: (SBU) Senator Bond, welcome to Egypt. Your visit 
comes as Egypt continues its efforts to mediate a 
permanent cease-fire between Israel and Hamas, to facilitate 
intra-Palestinian negotiations to form a new, interim 
government, and to stop the smuggling of arms into Gaza. The 
U.S., European countries, and regional governments are 
working to create security arrangements that would improve 
the flow of humanitarian assistance to Gaza.  Egypt hosts a 
large population of Sudanese refugees and is deeply concerned 
that continuing instability in Sudan will pose a threat to 
its own security.  Many Egyptians 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 has visited Egypt and the 
region as U.S. Special Envoy for Middle East Peace twice and 
will likely return to Cairo in April. Your visit will fall 
just after the anniversary of the April 6, 2008 nation-wide 
strike protesting political and economic conditions.  An 
opposition group has called for another April 6 strike this 
year, and other groups may also participate.  We have 
requested meetings for you with President Mubarak, 
intelligence chief General Omar Soliman, Foreign Minister 
Ahmed Aboul Gheit, and National Democratic Party Strategy 
chief Gamal Mubarak.  End summary. 
 
---------------------------- 
Israeli-Palestinian Conflict 
---------------------------- 
 
¶2. (SBU) The election of President Obama generated much 
optimism in Egypt and an expectation 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, and 
Senator Mitchell has assured them that the Administration 
will press hard for progress.  The Egyptians have 
traditionally served as an intermediary between Israelis and 
the Palestinians, and between Palestinian factions. 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 cease-fire.  Chief of Egyptian General 
Intelligence Service Soliman has worked to cement such a 
cease-fire but believes he was badly undercut by the Israeli 
introduction of the release of IDF Corporal Gilad Shalit as a 
new pre-condition for the cease-fire.  For the moment, rocket 
strikes from Gaza are relatively low in frequency. 
 
---- 
GAZA 
---- 
 
¶3. (SBU) The Egyptians believe that Palestinian 
reconciliation is a prerequisite to delivery of the 
approximately $5 billion in Gaza reconstruction assistance 
pledged at the March 2 Sharm El Sheikh conference.  Neither 
the Egyptians, nor the international community can work with 
Hamas as a partner on security, political or economic 
reconstruction issues; Rafah crossings will remain closed 
until the Palestinian Authority returns to operate the Gaza 
side of the crossing for normal business.  However, the 
Egyptians periodically open their side of the border for 
humanitarian and emergency medical cases.  The Egyptian 
public was angered by the Gaza "siege" and is anxious to see 
how the U.S. will deal with the new Israeli government and 
the perennial issue of settlement expansion. 
 
¶4. (SBU) Egyptian security forces continue to improve 
counter-smuggling efforts along the Gaza border and further 
afield, through increasing their security presence in 
northern Sinai and giving greater focus to preventing weapons 
from entering the Sinai.  Egyptian officials claim to have 
identified and sealed over 100 tunnels since the beginning of 
the year, with new discoveries occurring daily.  Recently 
arrived U.S.- supplied counter-smuggling equipment, once 
installed and fully operational, could help improve Egypt's 
ability to fully exploit the tunnels and break up smuggling 
rings.  The government has requested additional border 
security assistance and we are currently exploring ways to 
provide the requested assistance.  Long-term success, 
however, depends on removing the economic incentives driving 
smuggling on both sides of the border. 
 
-------------------------------------- 
ARAB RECONCILIATION, IRAQ, IRAN, SUDAN 
-------------------------------------- 
 
¶5. (SBU) The recent Gaza crisis was the latest issue to 
expose the intra-Arab fault line, with Egypt and Saudi Arabia 
on one side, and Syria and Qatar on the other.  The Egyptians 
and Saudis have subsequently reached out to Damascus through 
a series of visits, but Cairo remains disenchanted with the 
Qataris, believing Doha to be an upstart with pro-Iranian 
leanings.  Al Jazeera coverage of the Gaza crisis, which was 
generally negative on Egypt's role, is another issue of 
contention.  Driven largely by these reasons, President 
Mubarak did not attend the annual Arab League summit of March 
30-31 in Doha. 
 
¶6. (SBU) Egypt has shown increasing confidence that Iraq has 
turned the corner, although concerns remain that the 
Maliki government is prone to Iranian influence.  An Iraqi 
delegation recently visited Cairo for consultations on 
developing Iraqi-Egyptian economic and political ties.  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. Egypt 
has deployed peacekeeping troops to the UN Mission in Darfur, 
just agreed to send troops to the UN Mission in Congo and is 
taking a greater role within the African Union on regional 
security and political issues.  President Mubarak met 
Sudanese President Omar Bashir on March 25 in Cairo, 
reportedly to discuss the Darfur conflict.  Egypt hosts a 
large population of Sudanese refugees and is deeply concerned 
that continuing instability in Sudan will pose a threat to 
its own security, compromise its access to Nile water, and 
increase the flow of refugees.  Consequently, Egypt opposes 
the International Criminal Court's issuance of an arrest 
warrant for Bashir. 
 
------------------------------- 
Internal Politics and Economics 
------------------------------- 
 
¶7. (SBU) We continue to promote 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. 
 
¶8. (U) Economic reform is ongoing although Egypt still 
suffers from widespread poverty affecting 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, although this 
is expected to drop in the face of the economic crisis to 3-4 
percent.  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, 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 so far 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 
global credit crunch 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.  The Egyptian government viewed the USG's 
reduction in Economic Support Funds (ESF) by half to $200 
million in FY2009 as an affront, and has high expectations 
that the new administration and Congress will approve higher 
levels in FY2010.  The Ambassador and USAID Mission Director 
have emphasized the impact of the ongoing financial crisis on 
budget discussions in the U.S. 
 
¶9. (SBU) We continue to stress the importance of advancing 
military to military cooperation, long a cornerstone of the 
U.S. - Egyptian relationship.  Security agreements, a 
revamped exercise program, establishing shared objectives, 
and interoperability are a few areas where we are seeking to 
strengthen the relationship. 
 
------------------------ 
SUGGESTED TALKING POINTS 
------------------------ 
 
¶10. (SBU) President Mubarak: President Mubarak will emphasize 
his concerns about Iran's influence in the region and ask the 
U.S. to work closely with Egypt and other moderates in the 
region before it moves to engage Iran directly. 
 
--Thank Egypt for its leadership in facilitating a cease-fire 
between Israel and Hamas, seek the president's opinion on 
next steps for the Palestinian Unity government and the 
reconstruction of Gaza. 
 
--Thank the President for Egypt's progress in preventing the 
smuggling of weapons into Gaza. What more can the U.S. do to 
support Egypt in counter-smuggling efforts? 
 
--Ask the President about latest efforts to promote Arab 
reconciliation. 
 
--Seek his opinion on the security situation in Iraq and next 
steps for enhancing cooperation between Iraq and its Arab 
neighbors. 
 
--Thank the President for deploying peacekeeping troops and 
doctors to the UN Mission in Darfur, and to the peacekeeping 
mission in Congo, and ask for his assessment of recent 
developments in Sudan. 
 
¶11. (SBU) EGIS General Omar Soliman:  General Soliman leads 
Egypt's mediation efforts between Israel and Hamas, and 
amongst Palestinian factions. 
 
--Thank General Soliman for his work in mediating between 
Israel and Hamas, and seek his assessment of current 
intra-Palestinian negotiations. 
 
 
¶12. (SBU) Foreign Minister Ahmed Aboul Gheit: The USG cut 
Economic Support Funds (ESF) to Egypt in half in FY2009 to 
$200 million.  Minister Aboul Gheit is likely to complain 
about what he feels was a "unilateral" cut in aid and will 
express his hope that Congress will increase ESF levels in 
¶2010. 
 
--Thank him for Egypt's leadership role in the region. 
 
--Note that ESF is an important symbol of cooperation between 
Egypt and the U.S. and we are keen to move forward to resolve 
problems relating to FY2009 ESF. 
 
¶13. (SBU) Gamal Mubarak:  Mubarak leads the governing NDP 
party's efforts to promote economic reform in Egypt. 
 
--Seek his opinion on the impact of the global economic 
crisis on Egypt. 
 
--Ask him for his thoughts on the NDP's priorities and how it 
will address the top domestic concerns of poverty and job 
creation. 
SCOBEY