US embassy cable - 05CAIRO4359

C O N F I D E N T I A L SECTION 01 OF 03 CAIRO 004359 
 
SIPDIS 
 
E.O. 12958: DECL: 06/09/2030 
TAGS: PREL, OVIP, EG 
SUBJECT: EGYPT:  SCENESETTER FOR SECRETARY RICE'S VISIT 
 
REF: A. CAIRO 4336 
     B. CAIRO 4309 
     C. CAIRO 4263 
     D. CAIRO 4125 
 
Classified by Charge Gordon Gray for reasons 1.4 (b) and (d). 
 
------------ 
Introduction 
------------ 
 
1.  (C)  Madame Secretary, Embassy Cairo warmly welcomes your 
visit to Egypt and looks forward to the opportunity to 
advance U.S. interests.  Political reform, Egypt's desire for 
a free trade agreement (FTA), Gaza disengagement, Iraq, and 
Sudan are likely to be the issues on the top of the agenda of 
your GOE interlocutors (President Mubarak, Intelligence Chief 
Soliman, and Foreign Minister Aboul Gheit).  On each issue, 
you will want to stress the need for Egypt to play an ongoing 
leadership role.  Some of the reform advocates you will meet 
for lunch will likely argue that the regime has no intention 
of pursuing anything but "cosmetic" political reform, while 
others, closer to the establishment or "working within the 
system," would disagree and counsel patience.  You can also 
expect a high level of media interest in Cairo.  End 
introduction. 
 
----------------------------- 
Political and Economic Reform 
----------------------------- 
 
2.  (C)  Adapting to change is not Egypt's strong suit. 
Tradition and entrenched bureaucracy have guided society 
along the Nile for thousands of years and President Mubarak 
has used "stability" as the watchword of his 24-year reign. 
As Egypt witnesses the world changing around it, and sees its 
own leadership credentials questioned by a quickened pace of 
change in the Middle East, Egyptian society is slowly 
acknowledging the need for a more open economic and political 
system.  Mubarak must also recognize that stability is only 
sustainable over the long term through more democratic modes 
of political administration. 
 
3.  (C)  Forced by both internal necessity and external 
pressure to give the public a broader political "space," the 
Egyptian regime has in recent years made evolutionary 
adjustments.  Economic reforms, which had been a well-worn 
topic for some years, got a boost when Ahmed Nazif, the 
reform-minded former Minister of Communications and 
Information Technology, was named prime minister in July 
2004.  Nazif's government, with young, business-oriented 
ministers, has in less than a year implemented sweeping 
reforms, including substantial reductions in customs tariffs 
and income and corporate taxes, as well as privatization of 
public companies.  The Central Bank of Egypt has stabilized 
the exchange rate; for the first time in years hard currency 
is readily available and the black market for dollars has 
virtually disappeared.  Inflation has dropped from 12 to 9 
percent since last July.  The Ministry of Finance recently 
submitted a draft budget to Parliament for the next fiscal 
year that is significantly more transparent than in previous 
years, a refreshing indication of improved governance that we 
have been encouraging for some time.  Egypt is also now 
exporting products under the Qualifying Industrial Zone (QIZ) 
agreement with Israel, signed in December 2004. 
 
4.  (C)  Several long-standing bilateral trade issues have 
been resolved, indicating the Nazif administration's 
seriousness in preparing for an FTA.  Deputy USTR Allgeier 
visited Cairo June 7-9 for a conference of African trade 
ministers; discussions of an FTA dominated his bilateral 
meeting with GOE Trade Minister Rachid and the related press 
events.  One of the few economic issues President Mubarak 
consistently raises with U.S. visitors is his interest in an 
FTA. 
 
5.  (C)  Nazif has also begun reforming Egypt's stifling 
bureaucracy and burdensome public subsidies.  These signs of 
economic maturity are encouraging, yet must be sustained, 
invigorated, and accompanied by progress on political reform 
to make the difference in Egypt's pursuit of greater 
prosperity -- and to lay the foundation for serious 
discussion of a free trade agreement. 
 
6.  (C)  Political change comes more slowly.  While the 
regime's rhetoric is filled with promise (including in 
presidential son and ruling party policy chief Gamal 
Mubarak's May 29 speech to the American Chamber of Commerce 
in Egypt, reported ref C), concrete steps have been sporadic. 
 Of these, the most significant is easily President Mubarak's 
initiative to amend the constitution to allow for competitive 
presidential elections.  This step, most observers agree, was 
historic in that it broke the presumed military grip on the 
presidency.  While the amendment is unlikely to yield 
dramatic change this year, it has the potential to transform 
the political landscape over the next five years, depending 
on the transparency of the next legislative elections and the 
composition of the parliament they yield. 
 
7.  (C)  In the near term, decades of government control over 
political activity and periodic reliance on emergency law 
measures have left their mark on a society now ill prepared 
to produce alternative leadership.  As people consider future 
alternatives, emerging protest movements are finding limited 
space in which to voice dissenting views.  That space appears 
to be widening.  The regime is facing the right direction on 
political reform and is looking cautiously into the future, 
but it now needs to take practical steps forward. 
 
8.  (C)  Practical steps we are encouraging Egypt to take 
include revoking the emergency law (which the GOE justifies 
by citing security concerns and Islamic extremist 
activities), the establishment of two independent electoral 
commissions (one each for presidential and parliamentary 
elections), and international election monitors during 
presidential and parliamentary balloting (Egypt wants no 
"intervention" or "supervision," yet may in the end offer the 
"compromise" of "observers").  We want to see increased 
domestic election monitoring and more open media 
participation as well.  We are also encouraging Egypt's 
tentative steps toward decentralization of government 
functions. 
 
9.  (C)  We are using both the Middle East Partnership 
Initiative (MEPI) and our substantial USAID assistance 
program to provide tangible help to those seeking to boost 
democracy in Egypt, including grants supporting efforts to 
make this year's elections fairer and more free.  U.S. 
assistance in the political realm is very controversial, 
sometimes leading to pointed criticism of both the U.S. for 
"interference in domestic affairs" and recipient 
organizations for allowing "foreign funding" to distort their 
views, but we are pressing ahead. 
 
------------------------ 
The Palestinian Question 
------------------------ 
 
10.  (C)  For most Egyptians, the plight of the Palestinians 
is an emotional issue.  Sensitive to public sympathies, the 
GOE walks a fine line as it engages both Palestinian and 
Israeli leaders diplomatically.  President Mubarak's hosting 
of Prime Minister Sharon and President Abu Mazen in Egypt on 
February 8 was representative of the GOE's strong tradition 
of engagement with both sides.  Coordination efforts by 
Egyptian General Intelligence Service Chief Omar Soliman are 
frequent and effective.  Foreign Minister Aboul Gheit will 
visit Israel June 19, but Mubarak clearly gives primary 
responsibility for this portfolio to Soliman. 
 
11.  (C)  In his June 6 discussion with U.S. Security 
Coordinator LTG Ward (ref A), Soliman articulated his 
oft-stated view that only the USG has the clout to ensure 
progress in Palestinian-Israeli reconciliation.  He argued 
for increased dialogue between the security services, for 
example, noting that positive encouragement from the U.S. was 
needed to facilitate a higher degree of cooperation.  Soliman 
also expressed concern about Gaza disengagement, noting that 
Israel had not clarified the scope or timetable of its plans; 
he stressed that a total and carefully coordinated 
disengagement was needed.  He cited no progress on the 
deployment of Egyptian border guards to the Rafah area, an 
issue pending Israeli approval. 
 
---- 
Iraq 
---- 
 
12.  (C)  President Mubarak reflected Egyptians' skepticism 
regarding Operation Iraqi Freedom from the outset, yet 
quietly facilitated the movement of U.S. military assets 
through the region and thereby enabled our coalition effort. 
In the long months of political maneuvering that followed the 
liberation of Iraq, Egypt has played a positive if sometimes 
measured role in helping integrate the new Iraqi leadership 
into the international community.  The GOE also trained a 
number of police and military officers (at facilities in 
Egypt), although those programs were one-time contributions 
that lost steam partially due to weak Egyptian engagement 
with Baghdad.  We have pressed Egypt to fully upgrade its 
diplomatic relations with Iraq and Egypt has sent an 
Ambassador to Baghdad. 
 
13.  (C)  Egypt's international efforts to help Iraq include 
hosting a large ministerial in November 2004 (in Sharm El 
Sheikh).  More recently, Steering Group members (U.S., EU, 
Iraq, Japan, UN, Egypt, and Russia) met in Cairo June 2 to 
coordinate planning for the June 22 Ministerial meeting on 
Iraq in Brussels.  Aside from issues of participation (i.e., 
Syria's exclusion and the eventual -- yet awkward for Egypt 
-- inclusion of Russia), the June 2 meeting helped set the 
stage for meaningful discussions in Brussels regarding Iraq's 
political, economic, and security needs (see ref B).  The 
group addressed a seven-point agenda that included an Iraqi 
strategy document to be presented in Brussels on development 
priorities, conference logistics, a draft conference 
communique, a public relations strategy, and a conference 
follow-up mechanism. 
14.  (C)  Viewing internal Iraqi politics with some concern, 
Cairo shares our view about the need for more robust Sunni 
participation in governance and in the constitution drafting 
process.  Soliman has often expressed worries about Iran's 
influence and sees a larger Sunni role in Baghdad as an 
effective counterbalance. 
 
----- 
Sudan 
----- 
 
15.  (C)  Egypt has a keen interest in a stable Sudan -- a 
neighbor which straddles the Nile and has traditionally 
strong ties to Egypt.  While Egypt's political tactics tend 
to give Khartoum the benefit of the doubt more than we have 
done, the GOE has made a strong effort to help ensure 
stability there.  Egypt continues to be helpful to 
implementation of the Comprehensive Peace Agreement and plans 
to host negotiations June 12-18 between the leadership of the 
National Democratic Alliance (NDA) and senior Sudanese 
government officials. 
 
16.  (C)  Furthermore, Egypt is backing up its political 
efforts with presence on the ground.  In Darfur, Egypt has 
medical teams looking after the needs of the local population 
and military monitors participating in the African Union (AU) 
mission; Egypt has also dispatched over a dozen C-130 flights 
of humanitarian goods to Darfur and continues to work towards 
a peaceful settlement.  Egypt is also poised to send a 
significant number of troops to southern Sudan, including 
engineers to work on infrastructure projects, under a UN 
umbrella.  Both Egypt and the Arab League are actively 
looking at ways to bolster the economy of the south.  SPLM 
leader John Garang's recent trip to Cairo continues a long 
series of engagement with both sides of the north-south 
conflict in Sudan. 
 
--------------------------------------------- ---- 
Dealing with Foreign Minister Aboul Gheit's Style 
--------------------------------------------- ---- 
 
17.  (C)  A cordial yet very protocol-conscious Aboul Gheit 
does not shy away from direct and sometimes impertinent 
comments during his meetings.  Issues Aboul Gheit may raise 
that you should watch out for include the lack of a nominee 
to replace Ambassador Welch in Cairo.  His staff was upset 
over the inclusion of Russia in the June 2 Iraq PrepCom in 
Cairo (ref D) and may still be smarting about what the 
Ministry believed was an invitation to Russia that should 
have been better coordinated with the GOE.  The Minister has 
also been known to raise individual visa cases with senior 
USG officials which in fact turn out to be no issue at all 
(in one case complaining about our failure to issue a visa to 
a friend who had yet to apply). 
 
18.  (C)  Finally, an equally protocol-conscious Laila Aboul 
Gheit, the Minister's wife, felt slighted during First Lady 
Laura Bush's May 23-24 visit when, because of the failure of 
her staff to coordinate with U.S. and Egyptian security 
officials (despite repeated U.S. admonitions to do so), she 
was prevented from following the First Lady's motorcade into 
the Alexandria airport by a U.S. security agent.  She reacted 
to the incident very strongly, and Aboul Gheit may feel 
compelled to note this perceived slight in your presence. 
 
 
Visit Embassy Cairo's Classified Website: 
http://www.state.sgov.gov/p/nea/cairo 
 
You can also access this site through the 
State Department's Classified SIPRNET website. 
 
GRAY