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Gulf Billions Buy Egypt Economy Breathing Space

 

Twelve billion dollars in aid from Egypt's wealthy Gulf allies have bought Cairo a window of several months to try and stabilize its politics and repair its state finances - or face fresh economic turmoil.

The massive packages of grants and loans unveiled by Saudi Arabia, the United Arab Emirates and Kuwait on Tuesday and Wednesday should boost Egyptian foreign reserves enough to avert a balance of payments crunch that was looming this year.

Economic issues were a major factor in the protest that were used as the justification of the military coup that deposed the Morsi government. A critical problem has been Egypt's rapidly deteriorating balance of payments position and declining foreign reserves. Negotiations with the IMF for an emergency loan were stalled over the political unpopularity of conditions attached to it.

One critical question had been whether the IMF would recognize the legitimacy of the interim government and continue negotiations. This new infusion of capital from the coffers of the oil rich neighbors does much to relieve that pressure. They are of course the people who are selling Egypt the oil that it can't afford to buy.

This raises many questions about politics in the Arab world. Saudi Arabia lives in fear about any political instability in the region that might pose a threat to the security of its rigidly authoritarian regime. It has a long history of using its vast wealth toward that end. A full raging civil war in Egypt would certainly pose a threat to stability.

This assistance provided at such a critical juncture doesn't seem to read as a vote of support for the Muslim Brotherhood since it should contribute to the survival of the interim government. The history of relations between Saudi Arabia and the Muslim Brotherhood is long and complicated. At any rate this is yet another twist in the plot of a very complicated story.

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