SCENESETTER FOR CODEL MCCONNELL'S VISIT TO CAIRO

UNCLAS CAIRO 000529

SENSITIVE
SIPDIS

H FOR SENATOR MCCONNELL; NEA/ELA FOR CANEDO

E.O. 12958: N/A
TAGS: OREP MCCONNELL PGOV ECON KPAL EG IS
SUBJECT: SCENESETTER FOR CODEL MCCONNELL'S VISIT TO CAIRO


1. SUMMARY: (SBU) Senator McConnell, welcome to Egypt. Your
visit comes as Egypt continues its efforts to mediate a
permanent cease-fire between Israel and Hamas, to facilitate
intra-Palestinian negotiations to form a new, interim
government, and to stop the smuggling of arms into Gaza. The
U.S., European countries, and regional governments are
working to create security arrangements that would improve
the flow of humanitarian assistance to Gaza. Many Egyptians
see the new U.S. administration as a cause for cautious
optimism in both the bilateral relationship and in U.S.
engagement with the region. Senator George Mitchell has
visited Egypt and the region as U.S. Special Envoy for Middle
East Peace twice and will likely return to Cairo in April.
Your visit will fall on the anniversary of the April 6, 2008
nation-wide strike protesting political and economic
conditions. At least one opposition group has called for
another April 6 strike this year. We have requested meetings
for you with President Mubarak, intelligence chief General
Omar Soliman, Foreign Minister Ahmed Aboul Gheit, and Defense
Minister Tantawi, as well as a visit to the Egypt-Gaza border
at Rafah. End summary.

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Israel-Palestine
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2. (SBU) The election of President Obama generated much
optimism in Egypt and hopes that the new administration would
quickly focus on problems in the Middle East. In particular,
the Egyptian leadership wants the U.S. to urgently address
the Israeli-Palestinian conflict, and Senator Mitchell has
assured them that the Administration will press hard for
progress. The Egyptians have traditionally served as an
intermediary between us, the Israelis, and the Palestinians.
Since the January 2008 Hamas breach of the Egypt-Gaza border,
the Egyptian role has shifted to focus on intra-Palestinian
reconciliation and the establishment of a lasting
Hamas-Israel cease-fire. EGIS Chief Soliman has worked to
cement a Israeli-Hamas cease-fire but believes he was badly
undercut by the Israeli introduction of the release of IDF
Corporal Gilad Shalit as a new pre-condition for the
cease-fire. For the moment, rocket strikes from Gaza are
relatively low in frequency.


3. (SBU) The Egyptians believe that Palestinian
reconciliation is a prerequisite to delivery of the
approximately $5 billion in Gaza reconstruction assistance
pledged at the March 2 Sharm El Sheikh conference. Neither
the Egyptians, nor the international community can work with
Hamas as a partner on security, political or economic
reconstruction issues; Rafah crossings will remain closed
until the Palestinian Authority returns to operate the Gaza
side of the crossing for normal business. However, the
Egyptians periodically open their side of the border for
humanitarian and emergency medical cases. The Egyptians will
tell you that limiting movement in and out of Gaza is
necessary, but will urge that you impress upon the Israelis
the need to maintain adequate humanitarian inflows to Gaza.
The Egyptian government will stress that opening up for
legitimate trade and forging effective measures against
smuggling should go hand-in-hand. Public opinion however
remains deeply angered by the Gaza "siege" and is eager to
see if the new administration will push to allow normal
commerce to flow into Gaza. The Egyptian public is also
anxious to see how the U.S. will deal with the new Israeli
government and the expansion of settlements.


4. (SBU) Egyptian security forces continue to improve
counter-smuggling efforts along the Gaza border and further
afield, through increasing their security presence in
northern Sinai and giving greater focus to preventing weapons
from entering the Sinai. Egyptian officials claim to have
identified and sealed over 100 tunnels since the beginning of
the year, with new discoveries occurring daily. Recently
arrived U.S.- supplied counter-smuggling equipment - once
installed and fully operational - could help improve Egypt's
ability to fully exploit the tunnels and break up smuggling
rings. The government has requested additional border
security assistance and we are currently exploring ways to
provide the requested assistance. Long-term success,
however, depends on removing the economic incentives driving
smuggling on both sides of the border.

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Other Regional Issues
--------------


5. (SBU) Egypt has shown increasing confidence that Iraq has
turned the corner, although concerns remain that the
Shi'a-led government is prone to Iranian influence. An Iraqi
delegation recently visited Cairo for consultations on how to
reestablish Iraqi-Egyptian economic and political ties.
Foreign Minister Aboul Gheit visited Baghdad in October 2008
(the first such visit in over 18 years) and is moving forward
to reopen Egypt's embassy in Baghdad. On Iran, Egypt is
concerned by rising Iranian influence in the region, has
supported UN sanctions, and is increasingly active on
countering Iran, e.g. in Gaza and to some extent in Lebanon,
working with Saudi Arabia and other Arab states to support
Lebanese political and territorial sovereignty. Egypt has
deployed peacekeeping troops to the UN Mission in Darfur,
just agreed to send troops to the UN Mission in Congo and is
taking a greater role within the African Union on regional
security and political issues. President Mubarak met
Sudanese President Omar Bashir on March 25 in Cairo,
reportedly to discuss the Darfur conflict. Egypt hosts a
large population of Sudanese refugees and is deeply concerned
that continuing instability in Sudan will pose a threat to
its own security, compromise its access to Nile water, and
increase the flow of refugees. Consequently, Egypt opposes
the International Criminal Court's issuance of an arrest
warrant for Bashir.

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Internal Politics and Economics
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6. (SBU) We continue to promote democratic reform in Egypt,
including the expansion of political freedom and
pluralism, and respect for human rights. Egyptian democracy
and human rights efforts, however, are being stymied, and the
GoE remains skeptical of our role in democracy promotion,
complaining that any efforts to open up will result in
empowering the Muslim Brotherhood, which currently holds 86
seats in Egypt's 454-seat parliament. An ongoing challenge
remains balancing our security interests with our democracy
promotion efforts. On April 6, 2008, a new opposition group
calling for political and economic reforms organized a strike
through "Facebook" that noticeably quieted the streets of
Cairo. The opposition group is calling for a similar April 6
strike this year. The April 6, 2008 strike coincided with a
separate labor action in the Delta industrial city of Mahalla
that led to violent, fatal clashes between police and
protesters.


7. (U) Economic reform is ongoing although Egypt still
suffers from widespread poverty affecting 35-40% of the
population. Reforms in trade and tax policy, financial
reform, privatization and increased transparency have led to
6-7% economic growth over the past three years. Foreign
investment increased from around $3 billion in 2005 to $11
billion in the last year, mostly in the petroleum sector,
though growth in foreign investment appears to be dropping
off. Despite this success, significant problems remain,
including high inflation, high levels of poverty, and
unemployment, and endemic corruption. Egyptian-U.S. trade has
more than doubled in the last four years, reaching almost $9
billion in 2008. The U.S. exports to Egypt about twice as
much as it imports. Egyptian banks operate very
conservatively and have been spared involvement in risky
financial products, but the effects of the global
economic crisis on Egypt are beginning to be felt. As the
global credit crunch worsens, Egypt remains vulnerable as
exports, Suez Canal revenues, tourism, and remittances -- its
largest sources of revenue -- are all down and likely to
continue to fall. The Egyptian government viewed the
reduction in Economic Support Funds (ESF) by half to $200
million in FY2009 as an affront, and has high expectations
that the new administration and Congress will approve higher
levels in FY2010. The Ambassador and USAID Mission Director
have emphasized the impact of the ongoing financial crisis on
budget discussions in the U.S.


8. (SBU) We continue to stress the importance of advancing
military to military cooperation, long a cornerstone of the
U.S. - Egyptian relationship. Security agreements, a
revamped exercise program, establishing shared objectives,
and interoperability are a few areas where we are seeking to
strengthen the relationship.

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SUGGESTED TALKING POINTS
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9. (SBU) President Mubarak: President Mubarak will emphasize
his concerns about Iran's influence in the region and ask the
U.S. to work closely with Egypt and other moderates in the
region before it moves to engage Iran directly.

--Thank Egypt for its leadership in facilitating a cease-fire
between Israel and Hamas, seek the president's opinion on
next steps for the Palestinian Unity government and the
reconstruction of Gaza.
--Thank the President for Egypt's progress in preventing the
smuggling of weapons into Gaza. What more can the U.S. do to
support Egypt in counter-smuggling efforts?
--Seek his opinion on the security situation in Iraq and next
steps for enhancing cooperation between Iraq and its Arab
neighbors.
--Thank the President for deploying peacekeeping troops and
doctors to the UN Mission in Darfur, and to the peacekeeping
mission in Congo, and ask for his assessment of recent
developments in Sudan.


10. (SBU) Visit to Rafah:

--Thank Ministry of Defense officials for frontline efforts
to combat smuggling.
--Seek current assessment of smuggling problem and economic
impact of Egypt's increased counter smuggling efforts on
Bedouin and other communities in the Sinai.
--Inquire about status of FMF-funded tunnel detection program.
--Inquire about tunnel exploitation and remediation efforts.


11. (SBU) EGIS General Omar Soliman: General Soliman leads
Egypt's mediation efforts between Israel and Hamas, and
amongst Palestinian factions. He will likely express his
frustration that Israeli Prime Minister Olmert tied the
ceasefire and further prisoner exchanges between Israel and
Hamas to the release of kidnapped Israeli soldier Gilad
Shalit.

--Thank General Soliman for his work in mediating between
Israel and Hamas, and seek his assessment of current
intra-Palestinian negotiations.
--Express appreciation for excellent intelligence cooperation
and reaffirm U.S. commitment to Egypt's security.


12. (SBU) Foreign Minister Ahmed Aboul Gheit: Economic
Support Funds (ESF) to Egypt were cut in half in FY2009 to
$200 million. Minister Aboul Gheit is likely to lament what
he feels was a "unilateral" cut in aid and his hope that
Congress will increase ESF levels in 2010.

--Thank him for Egypt's leadership role in the region.
--Note that ESF is an important symbol of cooperation between
Egypt and the U.S. and we are keen to move forward to resolve
problems relating to FY2009 ESF.


13. (SBU) Defense Minister Tantawi:

--Thank Field Marshal Tantawi for Egypt's heightened efforts
to combat arms smuggling to Gaza.
--Stress the importance of accelerating implementation of the
FMF-funded tunnel detection program.
--Inquire about any additional border security assistance the
USG could provide.
--Thank Tantawi for contributing peacekeeping troops to the
UN Peacekeeping Mission in Darfur and Congo.
--Seek his thoughts on tunnel remediation and exploitation.
--Inquire about current and future prospects for increased
U.S.-Egyptian interoperability.
SCOBEY