Leadership in Cairo, Tripoli and Washington

Two weeks later we’re still experiencing the fallout from attacks on U.S. embassies around the world. In Egypt, hundreds assaulted the embassy in Cairo. No Americans were hurt but the sight alone was enough to shock Americans and harm Egypt’s fragile image as a new and trustworthy democracy. The net effect was worse in Libya, where the U.S. ambassador and three others were killed in a sophisticated attack. Unfortunately, Libya disappeared from the U.S. news cycle following last year’s NATO intervention, and many wrongly concluded that authorities had refused to protect Americans, when they were simply incapable.

At home, President Obama was attacked for not projecting enough strength in the region, which would have supposedly deterred aggression. Outrage inevitably led to calls for the severing of foreign aid. Late yesterday, $450 million in non-military aid to Egypt was indefinitely halted by a House subcommittee.  It may ultimately be disbursed but not until Congress reconvenes in November.

With this post I want to focus on why leaders in Egypt and Libya deserve a second chance and how the U.S. can help both countries address their toughest challenges.

Mohammed Mursi is Egypt’s first democratically elected president. His response to the protests was miserably inadequate. Indeed, he did not respond until more than 24 hours later, and even then his comments were tepid. On September 13, two days after the embassy attack, Obama told the press that Egypt was neither an ally or an enemy, but rather a country finding its way. While some insist Obama’s comments were made in error, since every administration since the 1970s has considered Egypt an “ally,” I think his remarks could have been designed to force a serious response from Egypt’s new president. Mursi condemned the attacks later that day.

Mursi’s delay is inexcusable but there is reason to believe he is a credible partner moving forward. Egypt’s primary concern right now is the economy and recent developments show he and his cabinet are serious about fixing it, even if the hard work hasn’t begun yet. Mursi’s election in June injected some confidence into the country’s stock index (the EGX30). Since he took office, it’s climbed more than 50 percent—from a low of 4,000 points to around 6,000 now. His government is currently working on an economic plan. It should be unveiled in the next few weeks and is expected to include subsidy reforms, which is a good sign. (Today, nearly half of Egypt’s budget is dedicated to servicing debt and covering subsidy costs.)

Also on track is a $4.8 billion loan from the International Monetary Fund, which will be finalized before the end of 2012. Even Egypt’s Salafi party, which rejects interest as un-Islamic and could derail a deal if it reaches parliament, is now on record saying they will accept the IMF loan out of desperation. According to Prime Minister Hisham Qandil, the terms are quite good. At the same time, Mursi has methodically reached out to Gulf Arab nations like Saudi Arabia for aid, in spite of Riyadh’s long-held suspicions about Mursi’s affiliation with the Muslim Brotherhood. Along with Qatar, the Saudis have deposited hundreds of millions of dollars into Egyptian banks; billion-dollar aid projects are now underway.

Mursi’s seriousness on economic matters is encouraging. And as IMF chief Christine Lagarde said last month in Cairo, “We have perfectly competent authorities to negotiate with.” The Obama administration is inclined to agree. Earlier this week, Secretary of State Hillary Clinton confirmed that aid would be forthcoming, although it was held up on Friday. Going forward, the White House will have to work closer with Congress in order to ensure the smooth transfer of aid. And instead of expanding bilateral aid, the U.S. can forgive debt, encourage foreign investment, and back IMF and World Bank initiatives. It could also re-prioritize its annual $1.5 billion aid package in a way that benefits the people more than the military. Mursi’s silence is not part of a trend yet and so it seems premature to cut assistance to a government that might eventually set the agenda for the Arab world.

Libya is different. Although the economy is stunted, Tripoli doesn’t need aid: it needs more hands-on assistance instead. The government already has access to over $100 billion in frozen Qaddafi-era assets and a nationalized oil industry that is pumping at pre-war levels of 1.5 million b/d. In today’s prices, that’s more than $5 billion in revenues every month. This explain why the U.S. has given Libya only about $200 million since the revolution started and why in fiscal year 2013 Libya will receive a tiny sum of $1.5 million–with an M, not a B. (Aid in 2011-2012 was mostly spent on urgent humanitarian relief and safeguarding WMD materials.)

Security is Libya’s number one priority; the oil industry can power Libya’s economic recovery in the meantime and frozen assets can be spent on ambitious recovery projects. After the civil war, many of Libya’s powerful militias dug in rather than dissolved. This was only natural since the country’s new order was completely up for grabs following Qaddafi’s demise. Cities have developed violent rivalries, extremists remain active, and militias refuse to disarm. Libya’s new government recognizes the danger but remains handicapped by the problem’s immense scope. “Security is a top priority for the next three to six months and 70 percent of our efforts are dedicated to stabilizing Libya,” Prime Minister-elect Mustafa Abushagur said on September 20.

Unlike Egyptian officials, Libya’s leadership responded quickly to the attacks. Their statements echoed widespread pro-American sentiment in the country. On social media, average Libyans called the ambassador a “martyr,” and in the streets, others carried signs that read, “We demand justice for Stevens,” and “Thugs and killers don’t represent Benghazi or Islam.” One week after the consulate attack, thousands of pro-government demonstrators marched on militia strongholds in the country’s east, forcing out some factions. The government is trying to capitalize on public outrage, demanding that militias disband or submit to Tripoli’s authority. This won’t be easy but Tripoli has the funds and public support to start the process. The U.S. can accelerate these efforts with training programs and military exchanges that aim to professionalize the Libyan army and instill a sense of national purpose.

Credible partners should not be cast aside so quickly, when one spoke up too late, and another is a victim of its own chronic instability. The best way forward, in my opinion, is to prioritize programs that improve the lives of average citizens. In Egypt, this means creating new business opportunities, approving loans, and forgiving debt; in Libya, security is paramount, and the U.S. should lead an effort to train Libya’s security forces in coordination with other NATO partners. In doing so, Washington can establish more durable bonds that cannot be held hostage by extremists in the future.

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