US to forgive $1 billion in Egyptian debt

From the Washington Post:

The Obama administration has decided to provide about $1 billion in debt relief for Egypt, a senior official said Saturday, in the boldest U.S. effort yet to shore up a key Middle East ally as it attempts a democratic transition.

The aid would be part of a major economic aid package that also includes trade and investment incentives, officials said. It is intended to help stabilize Egypt after demonstrations forced out longtime President Hosni Mubarak on Feb. 11.

While the Obama administration has been preoccupied of late with the war in Libya and protests in Syria, it sees Egypt as even more critical for U.S. interests. Washington has long regarded Egypt as a moderating influence in the Middle East. With one-quarter of the world’s Arabs, Egypt could emerge as a democratic model in the region — or, if its revolution fails, a locus of instability or extremism.

Economic assistance for Egypt and Tunisia is “fundamental to our capacity to support their democratic transitions,” a senior State Department official said on the condition of anonymity. He said that officials were in the midst of “intense policy formulation” but that the economic package wasn’t finished. Parts of it will need congressional approval.

“We are at a crossroads here,” said an Egyptian official who has been involved in talks with Washington, and who spoke recently on the condition of anonymity. “If we go wrong, it will be too late [for the United States] to come later and say, ‘We’ll start helping now.’ ”

The Egyptian finance and planning ministers visited Washington last month to seek forgiveness of the country’s $3.6 billion debt. Egypt pays about $350 million a year to service the debt, which it incurred buying American farm products.

In recent weeks, Egyptian officials have been frustrated by the lengthy U.S. interagency process to consider economic aid, and a cool reaction from a Congress ensnared in a budget-cutting battle. On Saturday, Ambassador Sameh Shoukry said through an aide that Egypt appreciated the U.S. efforts but would not react to news of the debt relief until his government was formally notified.

There is only one problem.

As I exclusively reported last week, in a story that still has not been picked up by mainstream English language media, Egypt has rejected $150 million is aid from the US - because it was tied to democratic reforms.(The Public Record picked up on the story three days later, as did Iran's PressTV.)

If Egypt is rejecting aid meant to help democracy, then why does the US think that its influence on Egypt's future will be helped by forgiving a debt when it has no strings attached?

Egypt will gladly take the money - but it is rejecting any semblance of US influence.

So how exactly will this extra burden to US taxpayers help the US?