U. S. Aid to Egypt Is Complicated

The complicated issues surrounding U.S. aid to Egypt.

US Egyptian Flags

Many Americans are aware that the United States gives foreign aid to Egypt. Most Americans probably aren’t aware that Egypt is the largest recipient of U. S. foreign aid other than Israel. Since 1979 and the Camp David Accords the United States has given Egypt roughly $2 billion in aid per year. That figure has dwindled a bit over time but $1.3 billion of it is sacrosanct: that’s the amount of military aid that the U. S. gives Egypt every year.

Nominally, the purpose of all that military aid, amounting to a total of more than $40 billion over the years, is to ensure that Egypt doesn’t attack Israel and so that Egypt grants priority to U. S. military traffic through the Suez Canal and over its airspace. I think that the notion that $1.3 billion per year given to Egypt secures Israel’s safety is laughable. Egypt will act according to Egypt’s interests regardless of $1.3 billion per year. If it’s in Egypt’s interests to attack Israel, it will do so. Given that Israel’s military, one of the strongest in the world, pinned back the Egyptian military’s ears the last time the two faced each other, I suspect that Egypt’s assessment is that it’s not in their interests to attack Israel.

However, when you dig a little deeper into that $1.3 billion, as was done by Shana Marshall at Foreign Policy last year, the situation gets even more complicated:

Although domestic interest groups are rarely invoked in the debate over military aid to Egypt, the $1.3 billion in annual assistance represents a significant subsidy to U.S. weapons manufacturers. For instance, the General Dynamics manufacturing facility in Lima, Ohio where the M1A1 Abrams tank is built will not have more work orders from the U.S. Army until 2017 when the current M1 tank fleet is up for refurbishing. Egypt’s latest $1.3 billion order of 125 M1A1s (Cairo’s 11th order since the late 1980s) will keep those production lines open until 2014 building knock down kits that are then shipped and assembled in Egypt. Although shipping fully assembled tanks to Egypt would employ more U.S. workers, without the contract the Lima plant (in a crucial electoral swing state) would shutter its doors and General Dynamics’s bottom line would take a serious hit. Looming reductions in the U.S. defense budget have made General Dynamics and other defense producers even more concerned with keeping such funding channels open.

$1.3 billion, effectively a backdoor subsidy to U. S. munitions manufacturers, is just seed money for a lot more Egyptian military spending on U. S.-produced military equipment. Rather than securing U. S. or even Israeli foreign interests, a key purpose of the aid is to secure private U. S. mercantile interests.

But wait! There’s more.

The tanks mentioned above are assembled in Egyptian factories owned by the Egyptian military and the work is done by Egyptian workers. The parts, of course, are made in the U. S. A. However, that isn’t the end of the complexity. Those same factories and those same workers are used to manufacture civilian vehicles, both for commercial and personal use. The productive capacity of the Arab American Vehicles Company (49% of which is owned by General Dynamics, the producer of the M1A1 tank) has recently been upgraded from about 2,700 vehicles per year to 17,500 vehicles per year and it is not only buying parts from Chrysler for that purpose but from Peugeot, KIA, Citroen, Hyundai, and the Chinese manufacturer Zhongxing.

Consequently, U. S. foreign aid to Egypt’s role in promoting our security interests is fairly minor in the scheme of things. Just the tip of the iceberg. It also subsidizes U. S. munitions manufacturers, the Egyptian military’s far-flung private commercial interests, the Egyptian economy, and U. S., French, Korean, and Chinese auto manufacturers. Whether doing those things is actually in our interests would be an interesting question for debate and Congress has repeatedly chided the Pentagon for being unable to quantify our aid’s value to them or us. Small wonder.

Have I mentioned that both the Bush and Obama Administrations’ State Departments have repeatedly waived the human rights, etc. restrictions the Congress has imposed on U. S. aid to Egypt, citing national security. Well, it’s complicated.

More food for thought: the U. S. gives some foreign aid to practically every country in the world other than European countries, Australia, New Zealand, and Canada and a lot of that aid is military aid. I wonder what that’s propping up?

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Dave Schuler
About Dave Schuler
Over the years Dave Schuler has worked as a martial arts instructor, a handyman, a musician, a cook, and a translator. He's owned his own company for the last thirty years and has a post-graduate degree in his field. He comes from a family of politicians, teachers, and vaudeville entertainers. All-in-all a pretty good preparation for blogging. He has contributed to OTB since November 2006 but mostly writes at his own blog, The Glittering Eye, which he started in March 2004.


  1. Brett says:

    A good chunk of the non-loan-guarantee aid to Israel is the same thing. It’s a back-door program designed to sell them weapons and funnel subsidies to the defense industry.

    I’ve heard about the Egyptian arrangement, which is why I suspected the Obama Administration would get really evasive about the “coup” designation unless it was simply impossible to avoid.

  2. James Joyner says:

    What’s doubly interesting is that we’re selling them M1-A1s, which are two model iterations behind (well, technically, the -A3 is due out in a few months) and which have been out of production for US forces since 1992. I suppose the non-cynical argument for the backdoor subsidy to General Dynamics is that it keeps the capacity online and, presumably, increases economies of scale.

  3. OzarkHillbilly says:

    $1.3 billion, effectively a backdoor subsidy to U. S. munitions manufacturers, is just seed money for a lot more Egyptian military spending on U. S.-produced military equipment. Rather than securing U. S. or even Israeli foreign interests, a key purpose of the aid is to secure private U. S. mercantile interests.

    What was it Eisenhower said on his way out the door? Oh yeah, “Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations.

    “This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

    “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the militaryindustrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

    “We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”

  4. TastyBits says:

    @James Joyner:

    … which are two model iterations behind …

    Allies get the good stuff. Client states get the almost as good stuff. Allies can be trusted, but client states are apt to switch sides.

  5. TastyBits says:

    Money is used to buy influence. Influence is used to help align the target’s interests with yours. The target can be the local dog catcher or an important country. With access to the target, additional options can be proffered to the target. This not necessarily nefarious, but the results are less sure.

    Any drug dealer or credit card issuer knows how to increase the chance of success. You catch ’em on the comeback. The US State Department should hire MasterCard to write the “terms of agreement” for any foreign aid.

  6. rudderpedals says:

    @James Joyner: What’s doubly interesting is that we’re selling them M1-A1

    Triply interesting is that Egypt builds the Abrams under license…

  7. Rob in CT says:

    backdoor subsidy to U. S. munitions manufacturers

    I thought this was well-understood. It’s partly bribery for keeping & maintaining peace with Israel (and our access to the Suez), and partly corporate welfare.

    Of course, $1.3B is a pretty small amount in the grand scheme of things. But I wouldn’t weep to see it, along with aid to Israel, go away.

    I can’t really justify this sort of thing. On the other hand, it’s a laughably small % of federal outlays, so I tend to not get all that worked up over it.

  8. bill says:

    it’s not really complicated- we said we’d cut off aid if they had a coup- they had a coup and we’re trying to think of a better name for what happened so we don’t have to keep our word (and AID) again. kinda like when we said they better not gas their people in syria! well, they did gas their people there….and we did…….what?

  9. michael reynolds says:

    We also buy Egypt to take them off the market, so someone else doesn’t buy them – Russia back in the day, China now. For a few billion dollars – much of it of course coming right back home to the US of A — we effectively safeguard the Suez canal and avoid causing Egypt to go go donor-shopping.

    And I think it’s too simple to suggest we aren’t buying some degree of peace with Israel. There’s many a step between where we are now, and an Israeli-Egyptian war. Egypt could send more arms to Hamas. Egypt could facilitate terrorist attacks on Israel. Egypt could push forces forward causing Israel to respond in kind, which is expensive and wearying for Israel.

    Finally, if we really wanted to hype arms sales we would favor instability, because nothing burns through ammo, jets, tanks, etc.. like an actual hot war. Right now Egypt buys the equivalent of spare parts and upgrades. In the aftermath of a hot war, Israel would be doing some very serious shopping for major weapons systems. Probably about evens out.