U.S. Foreign Aid and Morsi's Ouster

The United States government announced last week that it would not, after all, make a determination as to whether the ouster of Egypt’s Mohamed Morsi constituted a “coup.”[1] This decision has both important strategic and financial implications for the United States. By not designating Morsi’s expulsion as a military coup, U.S. law allows the United States to continue its $1.5 billion in annual aid to Egypt. This second largest foreign aid package, after Israel, is tied to the Egypt-Israel peace treaty and also contributes to the annual budgets of major American defense companies such as Lockheed Martin and General Dynamics, which have longstanding contracts with the Egyptian military.[2] While the decision to refrain altogether from taking a position on what occurred on 3 July is unprecedented, the consequence of continuing aid to nations ruled by militaries is not new. It reflects a pattern in which U.S. foreign aid decisions are based more on national security and economic interests than democratic ideals. Failing to classify Morsi’s ouster as a military coup signals to the international community the extent to which free and fair elections are (not) a fundamental component of U.S. policy in support of democracy abroad.

The Law Governing U.S. Aid to Foreign Nations

The Foreign Assistance Act of 1961 (FAA)[3] is the foundational legal framework authorizing and defining U.S. foreign aid. However, Congress relies primarily on general provisions of annual foreign operations appropriation bills and freestanding laws to determine how U.S. economic, military, and humanitarian aid is expended.[4] Through these general provisions, Congress asserts its foreign aid objectives and may limit or impose conditions on foreign aid, as well as authorize new programs.[5] Withholding of aid is aimed to incentivize governments that come about by a military coup to return to democratic elections and rule of law without delay.[6] Yet the executive branch has exercised broad discretion in interpreting these provisions to meet foreign policy objectives, even if the result is American support for undemocratic regimes.

The laws governing U.S. obligations when a military coup occurs provide sparse legal justification for continuing financial assistance to a country until a democratically elected government assumes office. Section 508 of the FAA prohibits appropriated funds from being “obligated or expended to finance directly any assistance” to a state where a head of government has been removed by military coup or decree.[7] In contrast to other restrictions contained in the FAA,[8] provisions governing the United States’ response to a military coup do not allow for a presidential waiver that would permit the administration to sidestep, without Congressional authorization, the prohibition on continuing assistance.[9] That said, termination of assistance is not final under Section 508. The law provides that financial assistance may resume or continue if the president reports to the House and Senate Committees on Appropriations that a democratically elected government has assumed office.[10] Thus, either the country returns to democratic rule or remains ineligible for U.S. assistance.[11]

Recently, Congress strengthened Section 508 with a reinforcement clause that imposes an additional factor for Congress to consider in determining whether to withhold aid. Specifically, the United States may not disburse any assistance to the government of any country whose elected leader is removed by a “military coup d’etat or decree in which the military plays a decisive role.”[12]

Though the terms of this clause may appear self-evident, the question as to whether the Egyptian military played a decisive role in deposing Morsi is subject to different interpretations depending on how one characterizes the events leading up to 3 July.[13] The coalition of opposition parties, youth groups, and the Tamarod movement[14] maintain that the military’s actions were comparable to what occurred during the January 25 revolution of 2011, namely that when the military refused to follow Mubarak’s orders to kill the millions of protesters and pressured him to eventually step down on 11 February 2012, a people’s revolution transpired. Similarly, the millions of Egyptians who protested in the streets from 30 June to 3 July 2013 claim that the same interpretation of events should apply in that the military responded to the demands of the people. In contrast, the Muslim Brotherhood and its supporters argue that not only did the military play a decisive role in the physical removal of a democratically elected president, but that his removal was a culmination of months of planning by the military in collaboration with former Mubarak loyalists, the Tamarod movement, and liberal political opposition leaders.[15]

Despite these arguments, the U.S. government opted to take an unprecedented approach by opting not to make a determination as to whether a coup took place.[16] Such a stance indicates that yet again U.S. foreign policy and domestic economic interests have prevailed over democratic ideals, as the United States can now continue its relations with the Egyptian military unheeded—relations that entail substantial economic benefits for American defense companies.

Public Policy Considerations Affecting U.S. Foreign Aid

The United States’ record strongly suggests that overarching policy concerns—whether humanitarian, economic, or national security—often shape the United States’ final calculus when dealing with military coups in aid-recipient states.[17] For instance, in 2006 the George W. Bush administration froze military aid to Thailand but continued humanitarian and economic aid programs after the military deposed Prime Minister Thaksin Shinawatra.[18] In other instances, the United States bypassed Section 508 entirely to meet pressing national security policy objectives, as was the case with the U.S. response to military coups in Algeria and Pakistan.[19] Notably, aid had already been cut off from Algeria and Pakistan, only to be reinstated upon special Congressional authorizations based on national security exigencies arising out of President Bush’s declared global war on terror.[20]

In 1992, the George H.W. Bush administration withdrew all assistance from Algeria, military and otherwise, when the military cancelled elections in what is widely seen as the Arab world’s first free election.[21] But after the September 2001 terrorist attacks, the United States restored and even increased aid to Algeria to recruit it as an ally in the war on global terrorism.[22] Similarly, the George W. Bush administration sought special authorization from Congress to resume all assistance to Pakistan that had been suspended by the Clinton administration following a military coup that brought General Pervez Musharraf to power in 1999.[23] The Congressional authorization expressly permitted the president to waive, with respect to Pakistan, provisions that prohibited “direct assistance to a country whose duly elected head. . .was deposed by decree or military coup,” provided that the waiver was deemed critical to U.S. “efforts to respond to, deter, or prevent acts of international terrorism.”[24] More recently, in 2012, the Obama administration revoked security assistance to Mali after military personnel stormed the presidential palace and announced that the military was assuming control of the country. However, the United States continued to disburse humanitarian aid and food-related assistance to Mali.[25] Hence, the United States reinstated assistance to Algeria and Pakistan after countervailing political exigencies emerged. These examples illustrate how the United States has historically balanced restrictions imposed by U.S. law with competing policy objectives—in particular, the national security imperative—thereby maintaining the flow of aid, whether in part or in full, in select circumstances.

In the context of Egypt, the military’s position as the sole institutional interlocutor between Egypt and the United States ensured it significant leverage vis-à-vis the U.S. decision not to name Morsi’s ouster a coup. Without a parliament or an elected president and with civil society weakened, the United States currently lacks alternative interlocutors with which to leverage its influence, particularly as popular sentiment has turned against the United States and its ambassador to Egypt, Anne Patterson.[26] Moreover, restrictions on military aid may affect Egypt’s willingness to fully adhere to the 1979 Israel-Egypt peace treaty, which would harm American and Israeli interests.[27] It is no secret that the large aid package started in 1979 was an incentive for Egypt to take the politically risky decision of being the first Arab nation to sign a peace agreement with Israel. Furthermore, past events show that suspension of assistance to Egypt has largely been an empty threat.[28] Throughout the George W. Bush and Obama administrations, the United States consistently used conditionality as leverage without actually invoking conditions.[29] This has continued to be the case before and after the revolution, whether Mubarak, Tantawi, or Morsi was in power.[30] The Egyptian military is likely not surprised by the U.S. decision regarding the nomenclature of its actions, as it is fully cognizant that when faced with a choice between preserving its security interests and pushing for democratic reform, the United States generally opts for the former.[31]

While many consider the Egypt-Israel peace treaty to be the touchstone of U.S. policy objectives in the region, vested U.S.-Egypt business interests must also be considered. The terms of the aid package require the Egyptian military to spend the funds on arms manufactured by U.S. defense contractors.[32] As a result, in March 2012, former Secretary of State Hillary Clinton sidestepped an unprecedented Congressional requirement that linked arms sales to Egypt’s commitment to human rights and approved a military assistance package to Egypt.[33] While the State Department framed the waiver as necessary for “promoting regional stability and peace,” the decision was due in large part to the domestic economic costs of delaying or cutting any of the $1.5 billion assistance package.[34] The New York Times reported that the Pentagon—and by extension the U.S. taxpayer—would have had to pay an estimated $2 billion[35] in penalties arising from contract breaches with American defense companies, as the U.S. government is responsible for compensating the defense firms for any consequent losses.[36] Major stakeholders in the assistance package included Lockheed Martin and General Dynamics, which have longstanding relationships with the Egyptian military, not to mention significant political influence domestically.[37]

To be sure, suspension or withdrawal of aid would also have a profound impact on the Egyptian military. U.S. military assistance benefits the Egyptian military in acquisitions, upgrades to existing equipment, and maintenance contracts. In addition, the Egyptian military benefits from extensive co-production initiatives with General Dynamics.[38] Though no precise figure exists, some estimate that U.S. military aid accounts for upwards of 80 percent of the Egyptian military’s total procurement costs.[39] Other key components of U.S. aid include U.S.-Egyptian military cooperation initiatives, such as cooperation-based training for Egyptian military officers.[40] Perhaps most significantly, Egypt’s foreign military financing grants are placed in an interest-accruing account in the Federal Reserve Bank of New York.[41] Under this unique aid provision, the Egyptian military is granted wide discretion to use the funds according to its annual needs. This form of “cash flow financing” permits Egypt to submit large orders for arms and equipment that will be delivered years in advance based on the assumption that military aid to Egypt will not change from year to year.[42]

In the end, the terms and conditions of the U.S. foreign aid package to Egypt are based on mutual interests that affect both nations’ economic, political, and national security interests.

Conclusion

Despite various Egyptian stakeholders’ strong views that the removal of Morsi was either a second revolution or a military coup, for now the Obama administration has opted out of an opinion on the matter. But it may follow the Honduran experience, wherein the United States refrained from classifying the ouster of a civilian president as a military coup until after three months of failed attempts to restore the civilian president back to power.[43] In regard to Egypt, the United States may be waiting to see whether the country’s interim civilian government is in fact ruling Egypt or is simply a guise for long-term military rule.

The Obama administration is in the unenviable position of attempting to balance a good faith adherence to the law that sets precedent for future cases and protecting U.S. economic and security interests consistent with American ideals of democracy and freedom for all. While the interpretation of law is inevitably influenced by politics and public policy, the American government is ultimately accountable to the American people. And it is without question that the vast majority of Americans cherish their own freedoms and democratic rights enough to wish them for others around the globe. In refusing to take a stand, the Obama administration has put the United States’ stated objective of supporting democracy abroad into question.

The author thanks EARLA Law Clerk Ehren Lichtenwalter for his excellent research and invaluable contribution to this article.