From Reform to Revolution

The Economy Isn't Helping

The Egyptian homegrown jihadi threat is escalating against a weakened economic backdrop. A large number of Egyptians are unable to reliably feed their families. More still have only a limited chance to find growth, fulfillment, or dignity through work. These economic realities compound the threat posed by mainland-based terrorists.

Egypt’s Weakened Economy

Egypt’s difficult economic situation is evident in the numbers. The Egyptian economy has grown at or above 4 percent since 2014. This is a substantial improvement from a growth rate near 2 percent in 2011–2014.⁴¹ But substantial portions of Egypt’s population are not benefiting from this growth. 

As of mid-2016, the latest official data showed that 27.8 percent of all Egyptians lived in poverty.⁴² At the same time, overall unemployment was 12.5 percent, as compared with 9 percent in 2010, and overall youth unemployment was at least 30 percent.⁴³ The youth unemployment rate may be particularly difficult to improve given recent increases in Egypt’s population growth rate.⁴⁴ That makes for an especially frightening prospect, with young, unemployed men considered by many to be likely potential targets for jihadi recruitment.⁴⁵

At the same time, credit remains basically inaccessible for most Egyptians, rendering entrepreneurship a nonstarter.⁴⁶ And the prices of food, fuel, and other essentials have risen concurrently over the past several years. This has made it very difficult for poor and lower middle-class Egyptians to feed their families.⁴⁷

Economic Reform Is a Must

Egypt’s weak economy fuels popular grievances that may be exploited by homegrown jihadists. President Sisi recognizes that more Egyptians may become vulnerable to radicalization the longer the nation’s economy struggles. But his administration has had difficulty stabilizing the economy. 

Cairo has long subsidized the cost of food and fuel for its cash-strapped citizens. However, the costs of subsidies have risen with the prices of food and fuel.⁴⁸ This has placed a tremendous strain on government resources that have been made scarce by public corruption, lackluster competition in private industry, and a collapsed tourism industry.⁴⁹ Foreign direct investment, primarily by Saudi Arabia and the United Arab Emirates since 2013, has helped Egypt to support the economy despite scarce revenue. But Egypt’s relationship with Saudi Arabia has proven volatile. Saudi Arabia cut aid to Egypt in late 2016 after Cairo voiced support for Syria’s Bashar al-Assad – a client of Saudi Arabia’s chief rival, Iran. Sisi and Saudi Arabia’s King Salman apparently healed the rift in early 2017, and aid has resumed.⁵⁰ But the episode highlighted that Egypt’s dependency on Gulf aid makes it vulnerable to economic coercion, which, in turn, can undermine Egypt’s economic recovery. 

At the height of the Cairo–Riyadh tensions, Egypt sought help from the International Monetary Fund (IMF), which approved a $12 billion loan in November 2016.⁵¹ The loan – in addition to at least $6 billion already raised by Cairo from other sources – gives Sisi’s administration the breathing room it needs to implement other, much needed economic reforms. Such reforms include allowing the Egyptian currency to trade freely, reducing energy subsidies, and introducing a value-added tax. These changes are designed to help Cairo attract the scale and diversity of foreign investment needed for sustainable economic growth. That growth, in turn, will help to improve Egyptians’ livelihoods, enhance the Sisi government’s popular legitimacy, and stabilize the political environment.

An Uncertain Future for Reform

Sisi’s reform agenda may have already begun to stabilize Egypt’s economy. Pursuant to the IMF agreement, Cairo has allowed the Egyptian pound to float, reduced subsidies, and introduced new taxes. As a result, foreign investors are showing higher confidence in the Egyptian economy.⁵² But the nation is still early in the reform process. There are reasons for concern that Egyptian economic reform will stall or that, even if it continues, changes will not occur quickly enough to allay public discontent. 

Egypt’s government has historically been reluctant to reform its economy. While reforms are being made, they may be driven more by desperation than by a genuine belief in their necessity. If that is true, President Sisi’s administration may prove unwilling to follow through on all the much needed changes. For instance, resumed Gulf aid may lead Egypt to reinstate subsidies or delay other reforms. Reform efforts may also suffer due to backlash from special interest groups. For example, the Egyptian military is a dominant actor in Egypt’s economy.⁵³ Sisi may face pushback from the nation’s military elite if his administration pushes too hard, too fast on the economic liberalization front, causing financial shocks or losses for this community of interest.

Even if President Sisi does sustain reform, however, successful economic reform does not guarantee stability in the near term. Reform will likely be a tumultuous process, as is already evident.⁵⁴ Egyptians are being forced to make do with less – food, electricity, and other necessities – while their currency stabilizes and subsidies are reduced. This suffering can be mitigated by foreign aid, but it won’t be fully alleviated until reforms have taken hold and Egypt has become a target for sustained foreign investment, as planned. The civil unrest that will likely accompany such indelible suffering – as well as a potential uptick in terrorist activity – may pressure Cairo to abort reform.

Economic liberalization does not guarantee long-term stability either. For instance, Hosni Mubarak sought a similar economic revitalization in the 1990s. His liberalization reforms helped to grow the nation’s economy. But they did not yield the types of lasting improvements to average Egyptian households that could have helped to strengthen his legitimacy and stave off revolutionary sentiment.⁵⁵ This stagnation contributed, in part, to the 2011 revolution in Egypt. As of early 2017, the average Egyptian has not begun to see the benefits of Sisi’s reforms.⁵⁶

These are all legitimate reasons to fear that Egypt’s economic reforms will not yield the stability the country needs. But if President Sisi does not sustain reform – or if reforms prove ineffective – the Egyptian economy is unlikely to right itself. The only path forward, then, would be to more limited production, rising prices of necessities, expanded unemployment, weakening of the social welfare system, and escalating civil unrest. All this would only compound the threat already posed by Egyptian terrorists.

What Is at Stake for the United States?

President Sisi’s current approach to counterterrorism has thus far managed to contain violence in the mainland. However, if current security trends hold, homegrown jihadist organizations will likely continue to gain ground. Their foreign counterparts – especially al Qaeda – may then be able to exploit local successes in order to penetrate mainland Egypt. Economic trends are also concerning. Violent actors’ messages may gain traction among Islamists – not to mention others who may have reason to hate Sisi’s government – who believe that they do not have an economic future in Egypt. These trends threaten to push Egypt toward higher levels of civil unrest and state responses. This, in turn, could lead back to the cycle of violence that actors like al Qaeda have demonstrated their ability to co-opt. 

Egypt’s descent into heightened cycles of violence would bode poorly for U.S. national security interests in Egypt and the Middle East as well. American support for Cairo during heightened security crackdowns may validate the narrative that the United States is at war with Islam, a narrative that is prominent across the Middle East and that fuels radicalization. Visible jihadi inroads into Egypt may also embolden like-minded actors throughout the region. That inspirational effect would be magnified if al Qaeda is able to capitalize on local unrest in Egypt, as it has in places like Iraq, Syria, and Yemen, where the state’s monopoly on violence has eroded.

Al Qaeda’s entry into Egypt – a cultural hub of the Arab world – would constitute a major prize in its 16-year quest to push the United States out of the Middle East. It would signal to onlookers – friends and foes alike – that its strategy of slow expansion, stoking and capitalizing on local unrest, works. That would pose a serious threat beyond Egypt to U.S. partners in Jordan, Saudi Arabia, and other Middle Eastern nations. It would speak poorly for North Africa’s future as well. Libya remains in a very fragile state. Jihadi gains in Egypt may yet embolden bad actors there, who may find opportunities for operational cooperation as well.

Moreover, Egypt’s security forces will be increasingly stretched if the jihadi threat – along with broader political unrest – continues to expand. Not only will they require more assistance from the United States to sustain operations, they will also be increasingly hard-pressed to secure the Israel–Sinai border. This could allow Gaza-based actors to smuggle in more weapons and men, at a time when Israeli–Palestinian tensions are on the rise. U.S. forces in the Sinai Peninsula may also come under a more serious threat. Their departure would only further heighten the risk to Israel.

There is also the question of the Suez Canal, which would be a high-value target for Egyptian jihadists. Damaging canal infrastructure or striking vessels on their way through the channel would seriously undermine Egypt’s reputation for securing passage, including that of U.S. commercial and military vessels. That, combined with low global oil prices, could shift even more traffic away from the Suez, only further damaging Egypt’s economic standing and exacerbating domestic instability.

A More Balanced Approach

President Sisi can contain and roll back recent gains by Egypt’s homegrown jihadists. But doing so will require adopting a more balanced approach to counterterrorism. His administration’s efforts thus far have emphasized the use of force over all else. That has proven counterproductive, especially in light of Egypt’s weak economy. The use of force will form a key part of any successful Egyptian counterterrorism strategy. But it should be complemented by efforts to remedy the conditions that have allowed Egypt’s homegrown jihadi threat to escalate in the first place.

Policy Options for Egypt

To defeat homegrown jihadists in mainland Egypt, the Egyptian government must invalidate jihadists’ pitch that nonviolent means alone cannot bring Cairo to address Egyptian Islamists’ grievances. Sisi’s administration must devise and enact policies designed to show Egyptians that they can find dignity through hard work and peaceful political participation. To achieve these objectives, President Sisi’s administration should consider the following policy options:

Demonstrate that the burden of economic reform is borne by all Egyptians. The Egyptian government will likely face increased public outcry during the period of transition to a more liberal economic order. Yet this transition must succeed if Egypt is to remain a pillar of stability in the Middle East. To ease the pain of transition, President Sisi’s administration should continue to impress upon Egyptians how important these changes are. Strategic communications should focus on why economic reform is essential for their well-being and how it will affect them while it is taking place. Cairo should emphasize as well that the wealthy are bearing their share of the burden, as validated by shifts in the Egyptian industrial base.

Frame the economic reform imperative in terms of the business – and political – elite’s core interests. President Sisi must sustain efforts to persuade Egypt’s current industrial leaders to compete in a more inclusive economic environment. His pitch to disenchanted industrial leaders should stress that, without these reforms, Egypt’s economy will falter and could ultimately collapse. Such an outcome would be to the economic detriment of all. It would also seriously endanger the political and security interests of these actors, who benefit most when Egypt is stable, secure, and led by someone with military experience. 

Sustain efforts to target irreconcilable jihadi actors. Top-down efforts are needed to protect Egypt’s national security. Many of Egypt’s homegrown jihadists are likely irreconcilable. They are unlikely ever to be persuaded to return to the Egyptian political fold. Whether for ideological reasons or simply a profound loss of faith in the Egyptian government, they have opted for a path of violence and are unlikely to give up their arms or ill intentions. These actors should be dealt with justly but decisively so that they cannot continue to use or incite violence against the Egyptian state. 

Improve detainee treatment. Egyptian officials should take visible steps to curb the mistreatment of detainees. The Egyptian state’s use of mass trials, the indefinite detention of unconvicted inmates, and the alleged use of forced disappearances have fueled jihadi propaganda. Abysmal prison conditions, as well as torture, sexual assault, and other abuses in Egyptian prisons, do likewise. The net effect of detainee mistreatment is to accelerate the growth of populations vulnerable to radicalization in the Egyptian mainland.  

Exercise restraint in the treatment of nonviolent protestors. Egyptian security forces should show greater restraint when dealing with nonviolent protestors. As with the mistreatment of detainees, the use of indiscriminate violence to keep nonviolent protestors off the street is strategically counterproductive. Egyptian security forces should be trained, equipped, and mandated to disperse protestors using nonlethal force whenever possible. This will be especially important if civil unrest results from the economic reform process. 

Update sources and methods used to inform Cairo’s threat perception. The Egyptian government frequently assesses Egypt’s Islamists as a monolithic group. As Mokhtar Awad and Mostafa Hashem detail, this approach to threat analysis not only increases the likelihood of poor targeting and collateral radicalization. It also denies Egyptian authorities the opportunity to identify and engage Islamists who may be willing to cooperate in Cairo’s fight against terrorism.⁵⁷

Prepare a political agenda to complement economic reform. Economic reform is an inherently painful and uncertain process. The Sisi administration should design a political agenda to mitigate blowback caused by slow or failed economic reform. This agenda’s goal should be to provide Egyptian Islamists with an outlet for their grievances that does not include violence. This has been done before. Hosni Mubarak allowed the Muslim Brotherhood to operate freely in broader Egyptian society and run for a minority of parliamentary seats. President Sisi might initiate engagement by offering lighter sentences to imprisoned Muslim Brotherhood officials who publicly renounce violence. His administration might also publicly state its desire to cooperate with exiled members of the reform-oriented Brotherhood old guard in order to build a more peaceful Egypt or ease the targeting of Islamist advocates of nonviolence. 

Accept – as necessary – greater risk in reintegrating the Muslim Brotherhood into Egyptian politics. Egypt’s government may fear that the Muslim Brotherhood could become too powerful if it is brought back into the political fold. But that is unlikely to occur in the near term, as the Brotherhood works to rebuild its degraded organization and regain lost influence in Egypt’s Islamist community. Moreover, if the Brotherhood were to regain power in the future, the Egyptian government will nearly certainly be better positioned economically and politically to deal with it then than it is today. Lastly, the Egyptian armed forces remain a powerful check on Islamists’ political ambitions. Mohamed Morsi’s removal from office in 2013 stands as a reminder of the costs of trying to impose an Islamist agenda against the people’s will. That is a powerful deterrent for the future.

Policy Options for the United States

President Trump has rightly stated that his administration has no desire to interfere in the domestic affairs of other nations. This principle of noninterference should form the basis of renewed U.S.–Egyptian cooperation on the counterterrorism front. As Mr. Trump and other senior U.S. officials build relationships with their Egyptian counterparts, they should communicate that the U.S. administration’s chief objective in engaging Egypt on counterterrorism issues is to advance the two countries’ shared interest in defeating global jihadism. In this regard, the policy recommendations listed below are designed to help the Sisi administration as it faces a particularly innovative terrorist threat. U.S. policymakers should consider the following options: 
 
Increase U.S. economic aid to facilitate Egypt’s pivot toward economic liberalization. Washington should offer additional economic aid to help Cairo provide or finance food and other important social welfare initiatives. This may help to stabilize Egypt’s domestic political situation as reforms take hold. In addition, the U.S. State Department and other agencies can offer technical assistance as Egyptian agencies restructure the nation’s subsidy, tax, and monetary policies. U.S. agencies may also be able to help identify ways to reduce regulations that obstruct competition, expand access to finance for Egyptian small businesses, and improve the efficiency and coverage of Egypt’s social welfare programs.

Sustain the counterterrorism focus for U.S. military aid to Egypt. The Trump administration should uphold its predecessor’s decision to deny Egypt’s use of U.S.-provided foreign military financing grants to buy new conventional assets, like F-16 fighter jets and M1A1 tanks. Future U.S. military aid to Egypt should be restricted to the equipment required to conduct counterterrorism, border security, Sinai security, and maritime security missions. Pending updated analysis of Egypt’s absorption capacity, the United States might also consider increasing the amount of counterterrorism-focused military aid provided to Egypt annually from the current $1.3 billion amount. This reconfiguration of U.S. military aid is important to ensure that Egypt has access to the equipment – and training – required to more reliably and discriminately target and defeat its unconventional opponents. Given how critical Egypt’s success in the fight against terrorism is for U.S. national security, congressional authorization of counterterrorism-focused military aid should not be made contingent on Egypt’s progress toward democratization. 

Open an additional – conditional – stream of U.S. military aid to Egypt that includes conventional military assets. The United States should also consider opening a second stream of military aid to Egypt that includes conventional military assets.⁵⁸ The aid should be authorized by the U.S. Congress contingent upon certification by the U.S. Secretary of Defense and/or Secretary of State that Egypt has taken steps to improve detainee treatment and police tactics. Congress should stipulate that certification cannot be waived. This would clarify for Egyptian officials that conventional military aid cannot be legally authorized until reforms are made. Doing so would help to deter attempts by Cairo to sidestep the reform requirement. The conditional stream of conventional military aid may provide Egypt with greater incentive to pursue security reform. It may also offer the United States a more credible source of leverage over Egyptian counterterrorism policymaking. The Obama administration’s promise to withhold military aid until Egypt enacted political reform was not credible. Cairo rightly anticipated that America would eventually be forced to reinstate aid to keep ISIS from destabilizing Egypt. In contrast, the Trump administration could reduce conventional military aid without implicating core U.S. counterterrorism interests.

Take a renewed look at partner capacity-building in nonmilitary areas. The U.S. Department of State should lead a review of U.S. interagency engagement or cooperation with Egypt on law enforcement issues. The State Department and partners in the U.S. interagency should prioritize the development of programs designed to facilitate the exchange of intellectual capital between U.S. and Egyptian law enforcement practitioners. Particular focus should be given to identifying and cultivating best practices for the use of force – especially nonviolent force – to manage protests in the social media era. Such exchange programs would not only help Egyptian partners to better manage domestic instability in a time of potentially fitful economic transition. It would also allow the United States to better understand the challenges faced by Egyptian forces operating in a unique threat environment. 

Expand intelligence cooperation to enable Egyptian policymakers to better understand the threat landscape. Expanded U.S.–Egyptian intelligence cooperation may help Egyptian policymakers to better understand the complexity of the Islamist organizations – including the Brotherhood and others – that they are surveilling. Recognizing the diversity of backgrounds, beliefs, goals, risk tolerances, and other key characteristics of surveilled individuals and groups would enable Egyptian policymakers to identify reform-minded actors while improving the targeting of irreconcilable actors. In view of this, the U.S. government should seek to build on existing U.S.–Egyptian intelligence cooperation. But it should do so carefully. U.S. intelligence agencies must take steps to prevent the misuse of any shared information. In particular, they should craft protocols to help ensure that Egyptian actors do not use newly available intelligence to deliberately target reform-minded Islamists. 

Leverage the U.S. administration’s unique credibility, if so required, to persuade Sisi to engage reform-minded Islamists. If economic reform fails to deliver stability – and President Trump is persuaded of the need for Cairo to engage reform-minded Islamists – the U.S. administration would be a uniquely credible advocate for just such engagement. Administration officials have made clear their unyielding commitment to defeating Islamic extremism. They have made equally clear that the U.S. government will use whatever tools are required – including military force – to defeat this threat. President Trump has also emphasized his belief that states should not interfere in one another’s domestic affairs. The U.S. administration’s position on these issues stands in contrast to Presidents Bush and Obama’s past emphasis on democratization and human rights in Egypt. Should economic reform fail to deliver stability, this contrast would allow President Trump’s administration to argue more credibly for the security merits – as opposed to values-based considerations – of engaging reform-minded Islamists.

Conclusion

President Sisi’s handling of internal strife over the next several years will determine whether Egypt remains a pillar of stability in the Middle East. Egypt’s future, in turn, has serious implications for U.S. national security interests in the Middle East and beyond. 

A successful Egyptian counterterrorism strategy must account for the deep roots of the rising threat of homegrown, non-Salafi jihadism. Egypt’s security forces must use force decisively, when necessary. But military efforts cannot win this struggle on their own. They should be complemented by economic and political initiatives designed to erode Egyptian terrorists’ bases of support. Egypt’s adoption of this approach would upend the nation’s long-standing, force-centric counterterrorism strategy. That change will no doubt make many uncomfortable. But Cairo must adapt as quickly as its targets do if it is to emerge victorious. 

The United States can help President Sisi’s administration adjust to this shifting threat landscape. Additional U.S. economic assistance may help to stabilize Egypt’s domestic political situation as the nation pursues economic liberalization. Likewise, the U.S. government has the capacity to help Egypt better target irreconcilable actors while minimizing collateral radicalization. And the Trump administration would be uniquely well positioned to engage President Sisi on the security merits of political inclusivity, if economic reform fails to deliver stability.

If President Sisi can successfully defeat Egypt’s homegrown jihadi threat, it will amount to a strategic defeat for jihadist movements across the Middle East and beyond. The significance of such a success can hardly be overstated in the midst of America’s 16th year fighting against the global jihad.

Acknowledgements

The author is indebted to Mokhtar Awad, Nitin Chadda, Elbridge Colby, Loren DeJonge Schulman, Ilan Goldenberg, Shadi Hamid, Nicholas Heras, and Robert D. Kaplan for their thoughtful feedback. He would also like to thank Maura McCarthy and Melody Cook for their direction of the editing and design processes.