Egypt & Iraq Trade

Stratfor.com's Global Intelligence Update - 3 May 2000
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An American Ally Becomes Iraq's Chief Trading Partner

Summary

Egypt, a key U.S. ally in the Middle East, has signed contracts
worth $400 million to become Iraq's leading trade partner. While
such moves could worry Washington, no public objection has
materialized. In fact, the United States has recently approved a
deal to upgrade Egypt's air defenses. The United States appears to
be using Egypt to open yet another back channel to Iraq in order to
gain economic leverage over Baghdad and pressure the regime.

Analysis

Iraqi Trade Minister Mohammed Mehdi Saleh announced April 30 that
his country signed contracts with Egypt to purchase products worth
close to $400 million, making Egypt its biggest trade partner,
according to BBC. The signing of the contracts, mainly for
construction materials, was announced at the opening of an
exhibition of Egyptian products in Baghdad.

Ties between Cairo and Baghdad have improved significantly since
mid-March when Iraq's foreign minister expressed a desire to
restore full diplomatic ties with Egypt. On April 14 a London-based
newspaper Al-Sharq al-Awsat reported that Egyptian Prime Minister
Atef Obeid sent a letter to Iraqi Vice President Taha Yassin
Ramadan seeking to improve relations with Baghdad. On April 29 an
Egyptian state minister arrived in Baghdad to promote trade ties,
according to The Iraqi News Agency. Subsequently, Saleh announced
the Egyptian contracts.

On the surface, it would be expected that Iraq's improved ties with
Egypt - the second largest recipient of U.S. aid and military
equipment - would disturb the United States. However, relations
between Egypt and the United States still appear strong. Continued
approval of arms sales to Cairo indicates tacit support from
Washington, if not sponsorship, of the strengthening relations
between Egypt and Iraq.
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Throughout the period in which Cairo improved ties with Baghdad,
Egyptian President Hosni Mubarak had two meetings with top U.S.
government officials. In late March, Mubarak met with President
Bill Clinton, the secretary of state, the secretary of defense and
prominent U.S. congressmen in Washington. It would be difficult to
believe that the subject of Iraq never came up during this meeting.

Several days later, on April 4, U.S. Secretary of Defense William
Cohen met with Mubarak in Cairo and announced the United States had
approved the sale of a short-range surface-launched version of the
AMRAAM missiles to Egypt. Iraq made an offer of improving ties in
mid-March. Then two high-level meetings between the United States
and Egypt took place, and finally Egypt responded positively to
Iraq's offer. Meanwhile, Egypt was careful to publicly appear as
though it had not moved too close to Iraq. On April 28 the
government banned an Egyptian magazine, Al-Tadamon, which had run a
lead story favorable to the Iraqi regime.

It appears that Washington and Cairo have worked out a deal,
allowing a close U.S. ally in the region to obtain a significant
economic lever in Iraq. After all, Egypt has little to gain
economically or strategically from Iraq. The lack of opposition
from neighboring U.S. allies in the region further indicates that
Washington and Cairo worked out a deal. Neither Israel nor Saudi
Arabia has voiced opposition or even concern.

If Washington and Cairo have reached an agreement over Iraq, it
would not be unprecedented. The United States appears to be
pursuing similar goals with the United Arab Emirates (UAE).
Washington is working to sell the UAE 80 advanced F-16C/D Block 60
fighter aircraft, despite the fact that Abu Dhabi has reopened its
embassy in Baghdad. This is not to say that the United States is
rewarding these countries for befriending Iraq - rather Washington
is simply not punishing them.
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For more on Egypt, see:
http://www.stratfor.com/meaf/countries/Egypt/default.htm

For more on Iraq, see:
http://www.stratfor.com/meaf/countries/Iraq/default.htm
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The United States is attempting to use its allies as diplomatic
proxies to improve its ability to strong-arm Iraqi President Saddam
Hussein's regime. Allies inside Baghdad will cooperate with
Washington if properly motivated through certain concessions. U.S.
policy toward Iraq is in the opening stages of a subtle shift.
Rather than pressuring Iraq militarily from the outside - a tactic
that has repeatedly failed and locked Washington into an
unsuccessful military campaign - the United States will start
trying to manipulate Baghdad economically and politically from
within.
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(c) 2000 WNI, Inc.
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