THE CALL: The Egyptian Mess

With nothing better to do on their Thursday lunch hour, three regulars on The Call -- Pepe Escobar, David Goldman, and David Samuels -- decided to kick around the current mess in Egypt. They agreed that with two months of foreign currency reserves left, Egypt is close to economic collapse. The SCAF is looking to pin the country's deep-rooted economic woes and other ills on the Muslim Brotherhood before staging a coup, which will be quietly supported by the Saudis. In turn, the Muslim Brotherhood is looking for help from Iran, whose interest lies in keeping Egypt weak and divided under MB control.

THE CALL

David Goldman: Let's recap Egypt, shall we? Three independent newspapers ran white spaces on Thursday after the Brotherhood-dominated upper house of parliament named new directors and editors-in-chief for state-owned newspapers, many of them nominees close to the Islamists.
[http://www.naharnet.com/stories/en/49505-egypt-dailies-replace-editorials-with-white-spaces-in-protest]
Morsi issued Presidential decrees dismissing Egypt's intelligence chief, the head of the Republican Guard, the commander of military police and the Governor of North Sinai, appointing Major-General Ahmed Mohamed Zaki as chief of the Presidential Guard, Mohamed Raafat Abdel-Wahid as acting head of the General Intelligence Service, Major-General Magid Mustafa Kamel as assistant to the Minister of Interior – for Central Security affairs, Major-General Osama Mohamed Al-Saghir as assistant to the Minister of Interior – for Cairo Security affairs, and Ambassador Rifa'a Al-Tahtawi as head of the Office of the President of the Republic.
[http://www.ikhwanweb.com/article.php?id=30237]

Analysts say that Mr Morsi's choice of a cabinet made up of relative unknowns - many of whom were promoted from within the ranks of Egypt's vast bureaucracy - was aimed at avoiding any row that might detract from undoing what Islamists say is an excessive concentration of power in the military.
[http://www.thenational.ae/news/world/egypts-salafis-plot-after-being-sidelined-by-morsi
10% electricity shortage –gone in September?]
[http://www.egyptindependent.com/news/minister-no-electricity-shortage-september
Red Sea resorts affected:]
[http://english.ahram.org.eg/NewsContent/3/12/49539/Business/Economy/Egypt-diesel-crisis-threatens-tourism-in-Red-Sea-c.aspx]

There were violent protests over water shortages (mainly farmers over irrigation)
[http://www.ooskanews.com/daily-water-briefing/egypt-water-shortage-protests-are-widespread-and-violent_23549]

What I am trying to figure out is what they are going to do about their foreign currency reserves disappearing (down to $5.8 billion in July).

Pepe: House of Saud to the rescue!

David G.: Why, Pepe? The House of Saud didn't put in a penny in July.

Pepe: Not yet. They are waiting for a lot of things to happen. Especially that NAM thing which I will submit to both of you later on.

David G.: Sure. The view of the pro-military, Muburak people is that behind the MB lurks a mass of crazies who will do insane things, like Gamal al Ismaliya and Islamic Jihad -- the guys whom Morsi pardoned.

David Samuels: Don't forget the reception that Morsi's prime minister and apparently anyone with a beard got at the funeral for the Egyptian soldiers killed in the Sinai attack. It's easy to dismiss the throwing of shoes and beatings as a provocation by the Army and Mubarak's men, but when you think about it, the mourners have every reason to be pissed off at the Muslim Brotherhood. At least some of the attackers came from Gaza, whose ruling party, Hamas, has been embraced by the MB as part of the Brotherhood, which in fact they are. More directly, the MB promised an open borders policy with Gaza. If this is the result of that policy, then the families of the dead soldiers have every reason to throw shoes at the PM.

David G.: I agree. But Pepe – what is the NAM?

Pepe: Non-Aligned Movement. 118 countries. Egypt is the current president. Iran is next. Summit in Tehran in late August.

David G.: Geez, Luise -- does that thing still meet? I thought it was kind of like the Shriners or the Freemasons -- still had a building in Philadelphia, but no meetings.

Pepe: I know. It's like a rerun of Return of the Living Dead.

David S.: There is something good to be written about the Western propensity to apply the state model to parts of the world where national states are only one of many relevant actors – and where the real battle is between those groups for control of the letterhead with the name of a country on it. "Hi, we're Egypt." "No, WE'RE Egypt!"

David G.: My core scenario is that the SCAF wants to dump the blame for disintegration on Morsi. Let there be a gigantic devaluation while he's there, blame him for it (it's his economics guys in the cabinet) and discredit him. AFTER the devaluation, the Saudis come in (when everything is cheap).

David S.: Yep. That's what I imagine is happening, too. It's a page from the old CIA handbook from the 50's on how to stage a coup.

Pepe: I basically agree with David's scenario. But the guys who run the MB - I mean Shatter, not Morsi - are also very cunning. There will be a counterpunch.

David S.: The only counterpunch I see is to ally with Iran. Which doesn't seem smart.

Pepe: That's exactly what we'll see after NAM. So, gentlemen, here are my thoughts on NAM:

Tehran sent VP Hamid Baghaei to Cairo specifically to invite Morsi for the NAM summit in late August in Iran. Egypt is NAM's current president. Iran is next. We're talking about 118 non-aligned countries here. That's quite a lot of the real "international community". What I'm getting from Cairo is that Morsi will probably send his FM, Mohamed Kamel Amr.

This could be very big; there have been no diplomatic relations for 3 decades now. If it happens, that means Morsi trying an opening to counterbalance the Pentagon-SCAF-Saudi relationship. SCAF, of course, controls everything in terms of national security.
Before that Morsi will have to follow the money, i.e. appease the Saudis. But Tehran may do it for him, because Ahmadinejad will meet King Abdullah in person at an OIC meeting in Saudi Arabia in a few days. Ahmadinejad was personally invited by the King. I'd give an arm to be a fly on the wall. Or, in a more Monty Pythonesque way, two arms, two legs and would be yelling "that's just a scratch."

David S.: But an alliance with Iran would seem to help the Salafists and the army at the same time, not Morsi, right?

David G.: Here's an interesting way to look at it: The Egyptian stock market has the market capitalization of a medium-sized US company, say, 3M. Its returns are enormously dispersed. Huge returns to luxury real estate developers, steel and telecom, big drop for agribusiness, cement, etc. My guess is that anything that is likely to be an international tradeable is a store of value and people are buying it; anything tied to local prices is getting killed.

What practically can Iran do for the MB?

David S.: Iran's interest is a weak Egypt ruled by the MB.

David G.: Sure. What can they do to help it along? They're not going to cough up a lot of money.

David S.: Have Obama invite Morsi to the WH in September to balance Pentagon support for the SCAF? Wait, he did that already.

Pepe: Barter. Sell them cheap gas, even cheap Iranian cars.

David S.: Cheap gas is a good one. But the Saudis can give cheap gas to the army and let them distribute it through their own structure.

David G.: I suppose if Egypt allied with Iran and broke the boycott Iran would have oil to spare (they've got supertankers full of it just offshore).

Pepe: I agree. It will all hang on those meetings, between King Abdullah and Ahmadinejad, and an Egyptian visit to Tehran.

David G.: I have grave doubts any of this will occur. If Morsi shifts to Iran, the SCAF will have all the pretext in the world to kill him.

Pepe: By the way, China would LOVE a closer Egypt-Iran relationship. They will help - silently. Morsi won't shift. He will hedge his bets. Khatter, actually - he's the poker player.

David G.: Why would they get involved right now? Egypt's financing requirements are enormous. The trade deficit is $36 billion; they make $5 billion a year from the canal, and they might get $7 billion in net tourist receipts and a couple of bn in remittances -- I make the financing requirement north of $20 billion a year. That's just way out of Iran's range.

Pepe: True. But they could help with around $5 billion or so. A bargain in terms of a geopolitical coup. The feeling I get from Tehran is that they will do whatever it takes to get closer to Egypt.

David G.: The other way to read this is that the MB might flirt with Tehran to frighten the Saudis into coughing up more money.

Pepe: Exactly!!!! That's the al-Shatter poker play, as I see it.

David G.: Sure, William Shatter. He was great in Star Trek.

Pepe: The MB goes Star Trekking!

David G.: The problem from the Iranian standpoint is that they are aware that they might be used to frighten the Saudis. If the Egyptians squeeze $5 bn out of them (and money is tight) and then turn around and take more from the Saudis and dump them, they won't like it.

Pepe: Coming back to Sinai, I'd like your thoughts on this. Morsi had already promised to open the Rafah border crossing and wants tighter relations with Hamas. So no wonder many in the Egyptian press and blogs are claiming the Sinai killing was an Israeli false flag. Target; to close Rafah for good. That's exactly what Morsi did – falling into an Israeli trap. Thoughts?

David S.: It's not an Israeli trap. Although it seems possible, even likely, that the Israelis warned SCAF, which chose for whatever reasons not to act.

Pepe: Speculation - in Egypt - was that Israel provided the patsies.

David G.: Pepe, how does Israel get patsies? Do they have their own false-flag terrorist operation recruiting and training Arab terrorists?

Pepe: Of course they do. That's what trillions of Arabs over the years all over the Middle East have been telling me...

David S.: The Israelis were waiting at the border for these guys and blew them away.

So, if the Israelis knew about the plot, which they clearly did, and chose to notify SCAF, though a military channel, knowing the information might not make it to the government, which I'm sure is what happened – because they could hardly notify the Muslim Brotherhood in Cairo that the Muslim Brotherhood in Gaza was part of an upcoming attack -- there is a possible ounce or two of situational complicity in what SCAF then did with the information, which appears to be nothing.

David G.: I follow your drift. They set it up.

Pepe: Makes totals sense.

David S.: It's not so direct, but functionally, to some degree, I guess. Nothing in the Middle East happens by accident, especially in the summer.

David G.: Israelis and SCAF vs. MB. Makes sense.

David S.: You know about a plot, you inform the Egyptians, you don't choose to disrupt the plot, you guard your own border. You have acted properly, but also facilitated the attack and the political consequences of the attack. So, the literal version of the Egyptian street conspiracy theory is nonsense, but functionally, it's not wrong.

To further my theory, the Egyptians asked for Hamas to extradite three planners of the Sinai attack, including the guy who planned the Gilad Shalit kidnapping – a request which I imagine that neither the MB in Cairo or Hamas in Gaza has any intention of meeting. Which again makes it Israel and SCAF against the MB.

Pepe: Haven't seen that kind of analysis in the Egyptian press so far. That's much more plausible than a simple "Israeli false flag".

David G.: Let me call your attention to the first item in my list of gleanings from the press: "Has Morsi created a ticking timebomb in Egypt? Even those who did not vote for the new president are pinning their hopes on him meeting his October 8 deadline to restore law and order, stamp out chaos on Egypt's roads, end the fuel shortage, make bread affordable, tackle litter and sanitation problems and start rebuilding the tourism industry."

David S.: Wow!

Pepe: He wants to do all this in TWO MONTHS? Forget it.

David G.: Morsi has been making Idi Amin like pronouncements. Again: my prior is that SCAF is setting him up for failure. Get a big currency devaluation later this year and he looks really bad. Like maybe, dead. But remember he has some very unhappy, maybe even desperate people to assuage.

Pepe: Unhappy, desperate, hungry, illiterate and at the same time hopeful. A tragedy, really.

David: I feel all Greek about it.

Pepe: You betcha!

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