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U.S. Arms Industry Would Lose Big from Egypt Aid Cut-Off

Most of the $1.3 billion in annual U.S. "aid" to Egypt goes directly to U.S.-based military contractors.

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Inter Press Service

The United States, which has refused to cut off its hefty 1.3 billion dollars in annual military aid to Egypt, continues to argue that depriving arms to the 438,500-strong security forces will only “destabilise” the crisis-ridden country.

There is perhaps a more significant – but undisclosed – reason for sustaining military aid flows to Egypt: protecting U.S. defence contractors.

Virtually all – or an overwhelming proportion – of the 1.3 billion dollars granted under Foreign Military Financing (FMF) is plowed back into the U.S. economy, specifically into the U.S. defence industry.

William Hartung, director of the Arms and Security Project at the Centre for International Policy (CIP), told IPS U.S. President Barack Obama’s refusal to cut-off military aid to Egypt while U.S. weapons are being used to murder protesters is “unconscionable”.

“The reasons given for continuing this aid no longer hold up to scrutiny. It is not a source of stability, as the Obama administration claims,” he said.

And it has certainly not given the United States any leverage to moderate the behaviour of the regime, said Hartung, who has written extensively on the politics and economics of the U.S. defence industry.

“One thing the aid has done and continues to do is to enrich U.S. defence contractors like Lockheed and General Dynamics,” he added.

With the exception of a tank factory built with U.S. assistance, he pointed out, the vast bulk of the roughly 40 billion dollars in U.S. military aid to Egypt over the past 30 years has gone straight into the coffers of U.S. weapons makers.

The sophisticated weapons systems already purchased by Egypt – with much more still in the pipeline – include F-16 fighter planes, E2-C Hawkeye reconnaissance aircraft, Apache and Sikorsky helicopters, C-130 transports, Sidewinder, Sparrow, Improved-Hawk and Hellfire missiles, M-1A1 Abrams and M60A1 battle tanks, and M113A2 armoured personnel carriers.

All of these weapons have either been delivered – or are in the process of being delivered – by some of the major U.S. defence contractors, including Lockheed Martin, Northrop Grumman, General Electric, Boeing, Sikorsky, General Dynamics, United Defence and Raytheon, among others.

Besides the 1.3 billion dollars in FMF outright grants, Egypt also receives 1.9 million dollars annually for International Military Education and Training (IMET) and about 250,000 dollars in Economic Support Funds (ESF).

Egypt also receives, at minimum cost as delivery charges, second-hand U.S. equipment under Excess Defence Articles (EDA) worth hundreds of millions of dollars annually.

The U.S. defence contractor General Dynamics is involved in helping Egypt co-produce the M1A1 Abrams battle tank, described as “one of the cornerstones of U.S. military assistance to Egypt”.

Additionally, there is an ongoing programme to continue upgrading equipment in the Egyptian arsenal and follow-on support and maintenance contracts for the upkeep of U.S. equipment.

In a piece published in Common Dreams online, Jacob Chamberlain, a staff writer, quotes a report from National Public Radio (NPR) as saying that every year, the U.S. Congress appropriates more than one billion dollars in military aid to Egypt.

“But that money never gets to Egypt. It goes to the Federal Reserve Bank of New York, then to a trust fund at the Treasury and, finally, out to U.S. military contractors that make the tanks and fighter jets that ultimately get sent to Egypt.”

So far, the Obama administration has penalised Egypt by suspending the delivery of four F-16 fighter planes (the Egyptian air force already has 143 F-16s, with the last order of 20 dating back to March 2010 still in the pipeline) and the cancellation of joint military exercises with Egypt scheduled for September.

The Obama administration has also refused to describe the military takeover of a civilian government as a “coup” because under U.S. legislation such a designation would automatically generate a cut off of U.S. aid.

As of Friday, the death toll from the military crackdown has been estimated at between 500 and 1,000, with nearly 4,000 injured.

Pieter Wezeman, a senior researcher with the Arms Transfers Programme at the Stockholm International Peace Research Institute (SIPRI), told IPS, “It is correct that the U.S. military industry benefits from U.S. military aid to Egypt.

“And it is correct that if the United States would stop altogether with supplying such aid to Egypt, that would have some effect on the turnover of the U.S. arms industry,” he added.

However, he said, “I am doubtful if arms industry lobbying [or] concern for the arms industry is a reason of any significance for the U.S. to not halt all FMF aid to Egypt.”

There are several reasons, he said, including that a temporary stop would have only a minor effect.

“After all, some of the equipment that has been contracted for can be produced and stored by the U.S. government – which is, after all, the entity that signed the contracts with the U.S. industry – until the situation in Egypt changes.”

Presumably, funding not earmarked can be withheld and would benefit the industry later, he added.

Moreover, said Wezeman, the U.S. has embargoed major buyers of U.S. arms and cut military aid before, despite the obvious costs for the industry.

The best examples are Iran in 1979 – although that was arguably as well a decision by Iran at that time – Pakistan in early 1990s and India in 1963.

Citing other examples, he said, in the case of Saudi Arabia and the United Arab Emirates (UAE), the U.S. has foregone some major deals due to the fact they did not want to supply certain advanced equipment. For example, it is generally assumed that France clinched a major deal for combat aircraft in the late 1990s because it included 300 km range cruise missiles which the U.S. had refused.

Military aid to countries like Greece has diminished from high in the 1980 and ’90s to a very low level now.

Wezeman said although 1.3 billion dollars a year is a lot of money, it is relatively small compared to the current cutbacks in U.S. military spending and the sequestration issue, which will have a much bigger effect on the U.S. arms industry.

Thalif Deen is a contributor to Inter Press Service.

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