Egypt's Muslim Brotherhood signaled its
intent on Sunday to push the country into economic
chaos. With liquid foreign exchange reserves
barely equal to two months' imports and panic
spreading through the Egyptian economy, the
Brotherhood's presidential candidate Khairat
al-Shater warned that it would block a US$3
billion emergency loan from the International
Monetary Fund (IMF) unless the military government
ceded power.
"We told them [the
government], you have two choices. Either postpone
this issue of borrowing and come up with any other
way of dealing with it without our approval, or
speed up the formation of a government," Khairat
al-Shater said in a Reuters interview. [1]
The news service added that al-Shater
"said he realized the country's finances were
precarious and a severe crunch could come by early
to mid-May as the end of the fiscal year
approached, but that
this was the government's problem to resolve".
Last week, Egypt's central bank reported
that total reserves had fallen to $15 billion, but
- more importantly - liquid foreign exchange
reserves had fallen to only $9 billion, equivalent
to just two months' imports. Foreign exchange
futures markets expect the Egyptian pound to lose
half its value during the next year, and Egyptians
have responded by hoarding diesel fuel, propane
gas and other necessities.
With half of
Egypt's population living on $2 a day or less, the
expected devaluation would push a significant part
of the population below minimum nutrition levels,
and balloon the government's deficit as the cost
of subsidizing imported necessities rose. Egypt
imports half its caloric consumption.
The
IMF loan was a stop gap to delay devaluation, but
the Muslim Brotherhood's al-Shater made clear that
Egypt's dominant political party would spike it.
"It is not logical that I approve a loan that the
transitional government would take for two or
three months, then demand that I, as a permanent
government, repay," Shater told Reuters." I have
to agree to a loan, somebody else gets to spend
it, then I have to pay it back? That is unjust."
As Egypt headed towards chaotic breakdown,
Western observers asked how its economy might be
stabilized. This appears to have been the wrong
question to begin with, for the Muslim Brotherhood
will not allow the West to stabilize Egypt's
financial position. The right question is: who
will benefit from the chaos?
At this
writing, the Muslim Brotherhood appears to be the
winner by default, for no other actor has the
courage and cold blood to exploit the emerging
crisis. America, by contrast, is locked into the
defense of a deteriorating fixed position. And
Egypt's military leaders are more concerned with
feathering their nests in exile, like the Iranian
generals in 1979.
The Brotherhood believes
that widespread hunger will strengthen its
political position, and is probably correct to
believe this. As the central government's corrupt
and rickety system of subsidies collapses, local
Islamist organizations will take control of food
distribution and establish a virtual dictatorship
on the streets.
American analysts mistook
the protestors of Tahrir Square for
revolutionaries. The Muslim Brotherhood now
reveals itself to be a revolutionary organization
on the Leninist or Nazi model.
The
Brotherhood's revolutionary program has been
gestating for some time. As food and fuel
shortages emerged in the first months of after the
downfall of president Hosni Mubarak last year,
Islamist organizations already began to fill the
vacuum left by the breakdown of the old civil
regime.
The Ministry of Solidarity and
Social Justice began forming "revolutionary
committees" to mete out street justice to
bakeries, propane dealers and street vendors who
"charge more than the price prescribed by law",
the Federation of Egyptian Radio and Television
reported on May 3, 2011. According to the
ministry, "Thugs are in control of bread and
butane prices" and "people's committees" are
required to stop them.
The government
already may have curtailed imports of fuel and
other subsidized items, with fuel supplies down by
35% from normal levels, according to local UN
observers. "It has been three months since a fuel
shortage hit Egypt, and people's patience is
wearing thin amid fears the crisis could disrupt
the production of subsidized bread," the
UN-sponsored news service IRIN reported from Cairo
on April 2. "The government blames hoarding for
the crisis," IRIN adds. "Thousands of cars queue
outside petrol stations from early morning, while
long queues form outside gas cylinder centers."
Whether the government has anticipated a
devaluation by hoarding hard currency, or the
public has anticipated a devaluation by hoarding
products that are bought with hard currency, or
both, the result is the same: Egypt is running out
of money and faces a chaotic devaluation. Egypt's
political actors appear to have moved past the
question of avoiding the crisis, and are
positioning themselves instead to exploit the
crisis.
American policy seems entirely
unprepared to deal with this scenario. America has
paid out $75 billion in aid to the Egyptian
military since the peace treaty with Israel in
1979, and continues to see the Supreme Council of
the Armed Forces as the fulcrum of stability in
Egyptian politics.
This is a bi-partisan
stance. Senators John McCain (Republican-Arizona)
and Lindsey Graham (Republican San Francisco) met
with Egypt's Muslim Brotherhood leaders in Cairo
in March, evidently in the hope of persuading the
Brotherhood not to challenge the armed forces'
control of the government.
McCain made
clear that he wanted to maintain reduce "tensions"
between the Islamists and the armed forces regime,
as he said in a March 30 radio interview in Cairo:
The current tension between the
military council and the Muslim Brotherhood may
aggravate the situation in the country in the
upcoming period during which the constitution
will be drafted ... I'm deeply concerned about
the possibility of an escalation of tensions and
the occurrence of more confrontations and
demonstrations [in Egypt]. However, the more
important question is whether the Muslim
Brotherhood will adopt a moderate approach, or
if some of its extremist members will be
directing the constitution-drafting process and
the [presidential] elections. [2]
That
is the default American position, but it appears
to have become obsolete in the week since McCain
and Graham went to Cairo. The Muslim Brotherhood,
contrary to earlier promises, was not content to
take over parliament, but also fielded its own
presidential candidate, Khairat al-Shater, and
al-Shater showed his hand on April 8.
As a
revolutionary organization that rose under the
influence of Nazi Germany's wartime foreign
ministry, the Brotherhood has no qualms about
exacerbating Egypt's economic misery if it
furthers its agenda. Paul Berman's 2010 book
The Flight of the Intellectuals summarized
exhaustive academic research into wartime archives
showing that the Brotherhood was shaped by Nazi
ideology. Berman's report evoked outrage, but has
stood up well to its critics. [3] The New Republic
essay that formed the core of Berman's book is
available. [4]
A Muslim Brotherhood
consolidation of power on the back of devaluation
and food shortages using techniques of the
Bolsheviks in 1917 or the Nazis in 1933 seems the
most likely outcome. There seems to be no plan to
avert it, for the power of the military will run
out along with the country's foreign exchange
reserves.
The US backed away from a fight
with the Egyptian regime over the arrest of
American non-governmental organization (NGO)
democracy activists, and pushed through a renewal
of a $1.3 billion aid package.
But a
Brotherhood coup in Cairo would have implications
through the whole Arab world. As Issandr el-Armani
wrote April 2 at The Arabist:
The US is still putting all of its
eggs in the military's basket, as the recent
waiver for aid to Egypt and the backroom deal
over the NGO affair showed. Gulf states like the
UAE [United Arab Emirates] are in full-blown
anti-Muslim Brotherhood hysteria, reflecting a
wider unease in Saudi Arabia, Kuwait and even
Qatar about a Muslim Brotherhood-led Egypt.
[5]
That is an important wrinkle,
virtually ignored by the US foreign policy
establishment. To the extent American analysts
have examined the links between the Muslim
Brotherhood and the Saudi royal family, they have
concluded that "the Saudis gained newfound
influence with the Muslim Brotherhood and its even
more hard-line Salafis", as John R Bradley argued
last October in Foreign Affairs. [6]
The
Gulf monarchies have a reason to fear the Muslim
Brotherhood: as opposed to the tribal monarchies
of the Gulf, the Brotherhood rebottles Islamic
radicalism in the form of a modern totalitarian
revolutionary party. If Egypt starves, the cry
will go up from Cairo: "Our brothers lack bread
and the corrupt House of Saud spends in wealth on
whisky and whores."
Gulf State officials
have made no secret of their alarm. Egypt
Independent columnist Sultan al-Qassemi [7]
reported on February 2, "In a widely circulated
video recording of a recent speech in Bahrain,
Dubai's police chief, who enjoys close relations
with the country's prime minister, warned against
the Muslim Brotherhood, stating that their 'threat
to the region was just as serious as that of
Iran's."
A potential conflict between the
Gulf States and Egypt will further add to
centrifugal tendencies in the region. They are
allies against Iran, but prospective competitors,
and deadly ones. The Muslim Brotherhood's efforts
to wrest control of Syria from the Iranian-allied
Assad family may push the the conflict into an
entirely new dimension.
Insufficient
attention has been given to the prospective
collapse of Syria as a motivation for an Israeli
strike on Iran's nuclear program. In the past
several days, Israel has sounded public warnings
regarding Syria's chemical weapons stockpile,
estimated to be the world's largest.
As
the Financial Times wrote on March 22, Israel has
"profound concern that parts of Syria's vast
stockpile of arms, including long-range missiles
as well as chemical and biological weapons, will
end up in the hands of militant groups in Lebanon
or elsewhere. [8] Speaking to the Israeli
parliament this week, Ehud Barak, the defense
minister, emphasized the short-term dangers posed
by turmoil in Syria. 'We are monitoring events in
Syria, with an eye on any efforts to transfer
weapons that would alter the balance ... Events in
Syria increase the uncertainty and the need to
prepare for any scenario,' he warned."
Israeli officials warn that an even graver
risk would emerge if Iran were to intervene in
Syria with regular forces to support the Assad
regime, perhaps in response to actual or perceived
Western backing for the Syrian opposition. In that
case, Iranian regular forces might have control
over Syria's chemical weapons, and with it the
capacity to retaliate against any Israeli strike
against Iran's nuclear capacity.
There has
been extensive mention of Syria's chemical weapons
capability in the usual outlets, for example,
Foreign Policy's Middle East Channel blog. [9] But
there has been virtually no mention of what should
be the greatest source of concern. Deterrence has
always worked with the Assad regime: if Syria were
to use chemical weapons against Israel, Damascus
would be turned to glass.
The Assad family
does not want that to happen, but the mullahs in
Tehran do not care much one way or the other; they
have never liked Arabs to begin with. If Iran
gains control of some part of the chemical
stockpile, it gains a retaliatory capability
against Israel outside its own borders, and that
is something Israel cannot tolerate.
American policy rests on three legs:
Use a combination of threats and incentives to
stabilize Syria.
Rely on the military council to stabilize
Egypt.
Use the stick of sanctions and the carrot of a
civilian nuclear energy program to persuade Iran
to stand down from what is widely perceived as
nuclear weapons development.
It appears
that Washington hasn't a leg to stand on. The
Middle East is heading for chaos, not least
because the dominant political force in the most
populous Arab country, Egypt' s Muslim
Brotherhood, believes that chaos will work to its
advantage.
As traditional American policy
tools fail, the alternative to promoting stability
is to manage instability. That is a task for which
Americans lack the required cultural skills and
iron stomach. But they will have to learn fast.
If the Muslim Brotherhood proposes to gain
from an economic crisis that transfers power from
the old civil institutions to revolutionary
organizations on the street, the obvious riposte
is to intensify the crisis, so that the
revolutionary organizations cannot manage it: to
fight fire with fire, and discredit the Muslim
Brotherhood.
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