WASHINGTON -- While dissatisfied with Egypt's progress toward reinstating a democratic government, the U.S. is holding out the possibility of restoring hundreds of millions of dollars in aid if its Mideast ally moves toward free and fair elections.
At stake: a sizable portion of the $1.5 billion the U.S. provides Egypt each year. Much of the aid is in military equipment, and at least a quarter-billion in cash assistance to the Egyptian government and $300 million in a loan guarantee are also now in limbo.
The State Department made clear Wednesday that the decision to freeze the aid wasn't permanent and it could be restored if "credible progress" is made toward setting up an inclusive government in the wake of the military coup that overthrew the elected if unpopular government of President Mohammed Morsi.
In Cairo, military spokesman Col. Ahmed Mohammed Ali declined to comment on the announcement. Before the announcement, Gen. Abdel-Fattah el-Sissi, the Egyptian military leader, described his country's relations with the United States as "strategic" and founded on mutual interests. But he told the Cairo daily Al-Masry al-Youm that Egypt would not tolerate pressure, "whether through actions or hints."
The Egyptian military set up an interim government after Morsi's ouster, which came after massive anti-Morsi demonstrations in July. Military crackdowns against the Muslim Brotherhood and other Morsi supporters have left hundreds dead amid ongoing turmoil and soured U.S.-Egyptian relations.
The consequences of suspending aid extend beyond Egypt. The move will anger Gulf states, push Egypt to seek assistance from U.S. rivals and loosen decades of U.S.-Egyptian ties that that have been a bulwark of stability in the Middle East.
Neighboring Israel also has indicated concern. The Israelis consider the U.S. aid to Egypt to be important support for the peace agreement between Egypt and Israel.
Cabinet Minister Gilad Erdan said Thursday that while Israel was "disturbed" by the threat of a U.S. aid cutoff, "I hope this decision by the United States will not have an effect and won't be interpreted as something that should have an effect" on the treaty.
"The United States continues to support a democratic transition and oppose violence as a means of resolving differences within Egypt," State Department spokeswoman Jen Psaki said Wednesday. "We will continue to review the decisions regarding our assistance periodically and will continue to work with the interim government to help it move toward our shared goals in an atmosphere free of violence and intimidation."
The State Department did not provide a dollar amount of what was being withheld from Egypt. Part of the withheld aid is $260 million in cash assistance to the government and a planned $300 million loan guarantee, according to congressional aides. They spoke on condition of anonymity because they weren't authorized to speak by name about the briefings that State Department officials gave members of Congress.
U.S. officials said the aid being withheld included 10 Apache helicopters, at a cost of more than $500 million, and M1A1 tank kits and Harpoon anti-ship missiles. The U.S. had already suspended the delivery of four F-16 fighter jets and canceled biennial U.S.-Egyptian military exercises.
The U.S. will continue to provide support for health and education and counterterrorism, spare military parts, military training and education, border security and security assistance in the Sinai Peninsula, where near-daily attacks against security forces and soldiers have increasingly resembled a full-fledged insurgency.
The U.S. officials providing the details did so only on condition of anonymity because they were not authorized to comment by name.
The State Department stressed that the long-standing U.S. partnership with Egypt would continue and added that there was no intent by the Obama administration to end any specific programs. Still, the decision puts ties between the U.S. and Egypt at their rockiest point in more than three decades.
The White House initially welcomed Morsi's election last year. But his relationship with President Barack Obama cooled as his conservative Islamist government offered only tepid support of women's freedoms, his Muslim Brotherhood supporters attacked protesters, and he was unwilling or unable to create an inclusive government.
The cutoff of some but not all U.S. aid also underscores the strategic shifts under way in the region as U.S. allies in the Gulf forge ahead with policies at odds with Washington. Saudi Arabia and other Gulf states, including the United Arab Emirates and Qatar, are strong backers of Syrian rebel factions and were openly dismayed when the U.S. set aside possible military strikes against Bashar Assad's government.
The Gulf states also feel increasingly sidelined as Washington reaches out to Iran, their rival. Iran had moved quickly to heal long-strained ties with Egypt following Morsi's election but now is redirecting its policies with Egyptian leaders who don't share Tehran's agenda.