EGYPT: MUBARAK'S VISIT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP06T00412R000707480001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: December 27, 2016
• Document Release Date: August 22, 2013
• Sequence Number: 1
• Publication Date: January 19, 1988
• Content Type: MEMO

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Egypt: Mubarak's Visit
MESA M# 88-20011
Distribution:
External:
1 - Mr. Philip Wilcox, State/NEA
1 - Ms. Teresita Schaffer, State/NEA/EGY
1 - Mr. George Harris, State/INR
1 - Mr. William Burns, NSC
1 - Lt. Col. Mickey Baity, OSD/ISA/NESA
1 - Mr. Roger Pajak, Treasury
1 - Mr. Richard Tropp, AID
1 - Lt. Col. Douglas Menarchik, Office of the Vice President
1 - Mr. Richard Brown, AID
Internal:
1 - DIR/DCl/DDCI Exec Staff
1 - DDI
1 - ADDI
1 - NIO/NESA
1 - C/PES
1 - PBD Staff
1 - NID Staff
6 - CPAS/IMD/CB
1 - D/NESA
1 DD/NESA
1 C/NESA/PPS
2 - NESA/PPS (one copy to analyst for sourcing)
1 - C/NESA/SO
1 - C/NESA/PG
1CINESA741
1 - C/NESA/IA
1 - NESA/AI/E/Chrono
1 - NESA/AI/E/rs
DI/NESA/AI/E/
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Central Intelligence Agency
Washington. DC: 20505
DIRECTORATE OF INTELLIGENCE
?19 January 1988
EGYPT: Mubarak's Visit
Summary
Buoyed by his reelection in October and Egypt's restored relations with
most of the Arab States following the Arab Summit in November, Egypt's
President Hosni Mubarak comes to the United States in late January in a mood
"almost cocky" by comparison with his outlook a year ago, according to one
observer. Mubarak can claim significant progress in political liberalization--the
opposition presence in the People's Assembly has almost doubled, the press
enjoys unprecedented freedom, and the rulings of a strengthened judiciary are
taken seriously from the President on down. A combination of improved crisis
management and good luck has vindicated his cautious leadership style.
Despite these positive signs, economic grievances are mounting, Cairo's
negotiations with the IMF are not going well, and the disturbances in Israel's
occupied territories raise the political cost to Egypt of a continuing stalemate in
the peace process.
Mubarak's agenda in Washington will focus largely on peace issues. In
particular, he will ask that the US press Israeli Prime Minister Shamir to take a
more accommodating approach to an international conference to resolve the
Arab-Israeli dispute. On bilateral issues he will seek more US cash aid, FMS
debt forgiveness, US intercession with the IMF, and increased defense
coproduction. We doubt, however, that he will come armed with significantly
new ideas on any of these issues or that his expectations for the visit arc
particularly high.
This memorandum was prepared by
Arab-Israeli ?thee of Near Eastern and South Asian Analysis.
Comments and questions should be addressed to the Chief, Arab-Israeli Division
NESA M 88- 20011
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Mubarak's US Agenda
The Peace Process
Middle East peace issues are likely to
top Mubarak's agenda when he comes to
Washington later this month. In particular, he
will look to the United States to push Israeli
Prime Minister Shamir to take a more
accommodating position on peace negotiations
and a workable settlement for disposition of the
occupied territories. In our view, Mubarak
believes that Egypt's reentry into the Arab fold
has strengthened the moderate Arab bloc and
provided a unique opportunity to revive the
peace process. He continues to be frustrated and
discouraged, however, by the intransigence of
Israel's Likud-led government. I-le may be
prepared to acknowledge that the Arabs must
put their own house in order, but he will he
looking to us for new ideas.
Aid and Debt Relief
Mubarak probably understands that US
aid to Egypt is unlikely to increase and expects it
to continue at current levels. He is almost
certain to argue for increased cash disbursements
and other modifications in the implementation
of the aid program.
We expect Mubarak to ask the United
States to intercede with the IMF on Egypt's
behalf. The optimism that accompanied Egypt's
standby arrangement with the IMF last spring
has eroded badly as high inflation and shortages
of foreign exchange have hit the economy.
Egypt's relations with the IMF have become
strained over Cairo's alleged non-compliance
with the terms of their agreement. We believe
Mubarak and his economic advisers remain
determined to implement economic reform but
at their own pace, and they will plead for
understanding of political and social constraints,
especially at a time when domestic dissidence is
rising.
We also believe Mubarak will press for
concessions on Egypt's FMS debt, even though
he probably does not expect a significant
offering. Although he has been well briefed on
recent US legislation that allows commercial
refinancing of military debt, he does not believe
this legislation will help Egypt, according to US
Embassy reporting from Cairo. We believe he is
opposed to refinancing the debt with commercial
banks because he still harbors hopes that this or
some future US administration might forgive the
debt altogether.
Defense Coproduction
We are confident that Mubarak will
reaffirm Egypt's strong military bond with the
United States and will seek assurances of
continued I JS commitment to Egypt's military
modernization program. Specifically, the
Egyptians are likely to press Washington to give
final approval to a deal allowing Egypt to
coproduce technically sophisticated military
equipment such as the MIAI tank--the expected
centerpiece of efforts to revitalize Egypt's lagging
defense industries. The Egyptians may also raise
other coproduction issues, such as assistance in
manufacturing remotely piloted vehicles.
The Domestic Scene
Mubarak comes to the United States
with his political confidence at an all time high.
One foreign observer has described him as
"almost cocky" compared ro a year ago. Indeed,
political stability in Egypt was reinforced during
the past year by a string of domestic and foreign
policy successes:
In Parliamentary elections held
last spring, Mubarak's ruling
National Democratic Party
(NDP) retained a large majority,
ensuring his renomination to the
Presidency in July. . At the same
time, however, the opposition
presence in the Assembly almost
doubled, enabling Mubarak to
claim yet another step toward
more representative government.
l',gypt successfully negotiated an
!MI standby agreement last
May that offered credits and
paved the way for rescheduling
1;10 billion of Egypt's official
debt, provided Cairo commit to
a range of economic reforms.
Mubarak's legitimacy was
strengthened \Own he was
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?
reelected in October by popular
referendum to serve a second
six-year term.
-- The President's political stock
was boosted in November when
nine Arab states restored full
diplomatic relations with Cairo
without demanding concessions,
such as downgraded Egyptian-
Israeli relations, in return.
These states had severed formal
ties in 1979 after Egypt signed
the peace treaty with Israel.
Mubarak can claim significant progress
in political liberalization, including
unprecedented press freedom and a strengthened
judiciary whose rulings are taken seriously from
the President on down. Even the President's
critics admit that the political climate in Egypt is
freer today than at any time since the 1952
revolution.
We attribute Mubarak's recent successes
less to political vision than to a combination of
cautious leadership, improved crisis management
techniques, arrd considerable luck. Mubarak, for
his part, probably views his successful
management of liberalization as a vindication of
his caution in dealing with socially sensitive
issues. Despite Mubarak's successes, Egypt faces
potential threats to its stability that probably will
require bolder leadership.
Economic grievances are
mounting, and domestic
discontent over basic bread-and-
butter issues will almost
certainly increase as Mubarak
haltingly implements IMF-
mandated economic reforms.
Inflation is becoming a serious
political issue?particularly
among middle-class government
workers on fixed incomes who
face a decline in their standard
of living. Meanwhile, the
government is increasingly hard
pressed to provide the generous
subsidies and benefits that most
Egyptians have come to regard
as a right.
Concern about the economy is
intensified by fears of Islamic
resurgence. After two years of
relative quiet, fundamentalist
groups are becoming
increasingly restive, particularly
on Egyptian campuses.
Although the movement lacks
widely accepted leadership,
individual groups tend to be
disciplined, well-organized, and
eager to exploit popular
grievances as a weapon against
the establishment. The
government will crack down
hard on extremist groups to
maintain order, but too tough a
policy risks generating sympathy
for the radicals among the
apolitical mainstream.
The International Context
We expect recent Palestinian violence in
the West Bank and Gaza \IA I I add new urgency
to Mubarak's agenda in Washington. We do
not believe Egypt is likely to take any
dramatically negative action against Israel,
however. Nevertheless, the unrest has once
again made relations with Tel Aviv a focus of
protest in Egypt, especially on campuses and
around mosques. So far the disturbances in
Egypt have been controlled, but government
officials fear that pro-Palestinian demonstrations
could serve as a catalyst for more widespread
unrest fueled by rising economic grievances.
The decision by nine moderate Arab
states to restore formal ties with Egypt after the
Arab Summit in November was a major political
victory fOr Egypt, although Cairo enjoyed near-
normal tics with most of these states for years.
Prospects for a rapprochment with the radical
Arab states appear remote. Press and diplomatic
speculation about a possible reconciliation with
Syria?brokered by Jordan's King Ilussein?
appears dubious. Moreover, Mubarak's publicly
expressed interest in settling differences has not
been reciprocated by Syrian President Assad.
Recent Embassy reporting from Damascus
suggests Syria remains unwilling to work for
better relations, although we cannot rule out
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?
temporary cosmetic improvements spurred b
financial inducements from Saudi Arabia.
We expect Egypt to reap increased
financial benefits from its newly restored
relations with the Gulf Arabs. Although exact
accounting is difficult, we believe the Gulf Arabs
have provided over $1 billion in cash since mid-
1986, as well as an additional $235 million in
project assistance. This aid will probably
reinforce Egyptian political stability--a major
Arab concern--by enabling Cairo to case the
impact of inflation and avoid severe jolts to its
generous system of subsidies. The aid might, on
the other hand, diminish Egypt's sense of
urgency in implementing much-needed economic
reforms.
In return for aid, the Gulf Arab states
will look increasingly to Egypt for support and
protection against Iran. Cairo's response to Gulf
requests for security assistance, however, is likely
to be confined to training missions and some
materiel. Egypt has expressed strong interest in
reviving its indigenous arms industry for the
potentially large Gulf market.
Relations between Cairo and Moscow
have improved steadily since April, when the
two sides reached agreement on rescheduling
Egypt's military debt. -Since then, the Soviets
have reopened their consulate in Alexandria--
after an 11-year hiatus--and recently received
permission to refuel their warships at Egyptian
ports. Moscow has gained favor with Egypt by
appearing flexible and supporting an
international conference on Arab-Israeli peace.
On economic issues, the .two sides concluded a
three-year trade protocol in December under
which they expect to double their bilateral trade
to $1.5 billion in 1990.
The prospects for further dramatic
improvement in bilateral relations are not
promising, however. Egyptian officials are
inately suspicious of Soviet motives, and
Mubarak has told political associates that he has
no intention of risking Egypt's far more
important relations with the United States to
gain. ground with Moscow, which in any case is
incapable of offering really substantial economic
assistance. We believe the Egyptians were
surprised and embarrassed by the speed with
which the Soviet consulate in Alexandria was
reopened in the absence of a firm go-ahead from
Cairo. Moreover, the projected, doubling of
trade appears highly unrealistic?neither country
has a high demand for the other's goods, and
they differ over exchange rates. Still, good
relations with Moscow gives Egypt entre to a
politically important player in the peace process
and helps Mubarak rebut critics who call him a
US puppet.
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