European diplomats meeting to review the EU's economic relations with Egypt may come to realise that the West has little leverage to end the country's bloody turmoil. It will be hard to influence the actions of the Egyptian government when Cairo can count on massive financial support from the Gulf countries. For the moment Egypt is being shielded from an immediate balance of payments crisis. After the military-led removal of Islamist President Mohamed Mursi last month, Kuwait, Saudi Arabia and the UAE pledged $12 billion of financial assistance to Egypt. The three monarchies' support reflects their deep distrust for the Muslim Brotherhood movement, viewed as a threat to their own stability.
The funding beefed up Egypt's foreign exchange reserves to a 20-month high, and allowed the military to focus on repression first and forget about the crucial need for economic reform. That isn't a new trend. Aid also bred complacency within the Muslim Brotherhood government, which was financially supported by Qatar and others, including Turkey. Together they handed more than $10 billion to Egypt over two years in the form of grants and loans. It was enough to blind the Brotherhood to the need to build consensus and fix the underlying economy - which proved its downfall.
Aid from the West to Egypt is paltry in comparison, and most of what has been pledged is yet to arrive anyway. The EU last year promised a 5 billion euro ($6.7 billion) package to Egypt, conditional on democratic reforms. Meanwhile, it would be self-defeating for the US to cut off its annual $1.3 billion in aid to the Egyptian military, because the funds help support US defence equipment manufacturers. It would also put at risk Egypt's peace treaty with Israel.
At least 850 people have now been killed since Aug. 14 in violence that is also feeding a dangerous militant Islamist insurgency in Egypt's relatively lawless Sinai region. As long as the Gulf countries remain large benefactors to Egypt, a move by the West to cut economic ties is unlikely to persuade authorities in Cairo to seek political reconciliation.
