全球智库信息集成服务系统

The Egyptian military has gained unprecedented power since overseeing the ouster of two Egyptian presidents, Hosni Mubarak in 2011 and Mohamed Morsi in 2013. With its major political rivals sidelined, more than $20 billion in Gulf aid, and widespread domestic support for General-Turned-President Abdel Fattah el-Sisi, the Egyptian Armed Forces (EAF) has restarted its defunct industrial operations, secured control over massive infrastructure projects, and inserted generals at virtually all levels of government. But political overreach and internal rivalries may prove obstacles to long-term EAF control.

Regaining Lost Ground

• Since the uprising that removed Mubarak, the EAF has proved itself the ultimate arbiter of Egypt’s economic and political system.
   
• By protecting the strategic assets of its major investment partners during periods of unrest and taking control of the bidding process for major government procurement, the EAF has become the primary gatekeeper for the Egyptian economy.
   
• Morsi’s Muslim Brotherhood government acquiesced to many of the EAF’s key demands. But that temporary pact broke down when Morsi tried to sideline the military on megaprojects such as the Suez Canal development plan and Toshka, a land reclamation project.
   
• Sisi continues to attract substantial support from international investors and foreign governments, notably Saudi Arabia and the United Arab Emirates, which have replaced the United States as the regime’s top patrons.

Future Scenarios

Divisions within the military could surface. The EAF’s new allies and heightened influence may bring out cleavages that had been submerged, as factions struggle to stake a claim to new economic and political turf.

Evidence that the military worked behind the scenes to foment protests and weaken rivals could undercut its power. Revelations that began to emerge in late 2014 about the military’s direct role in financing anti-Morsi protests, as well as the leadership’s overt manipulation of the legal system and the media, may ultimately drive a wedge between the regime and its liberal supporters.

Institutional survival may trump the military’s economic and political aspirations. The EAF’s greatest concern is not a threat to its economic empire but the return of widespread antigovernment protests. If a military-led government must call on its own troops to violently put down protests, it risks both an internal schism and a legitimacy crisis.

The U.S. government is likely to continue military assistance despite the program’s failure to elicit reform from or enhance accountability of the EAF. This partnership, underscored by the March 2015 lifting of a temporary U.S. ban on weapons to Egypt, will become an even greater political liability for Washington as violence against Egyptian civilians continues.

Introduction

The Egyptian Armed Forces (EAF) is often referred to as a “black box”—especially with regard to the institution’s role in the domestic economy. Most of the military-controlled economy is off the books, and many of the EAF’s sources of influence are obscured—such as its control over parliamentary seats titularly reserved for peasants and workers.¹

However, close observation of typically opaque institutions during periods of political upheaval can reveal significant insights that are not readily apparent under everyday conditions. This is certainly the case in Egypt, where the once obscure military hierarchy has assumed increasingly overt and powerful political roles since the 2011 revolution that ousted Hosni Mubarak. It was the Supreme Council of the Armed Forces (SCAF), a small body of top officers that convenes only in times of war or emergency, that took power and ruled the country until the Muslim Brotherhood’s Mohamed Morsi was elected president in June 2012. When Morsi was ousted in a coup one year later, a military-backed interim government (nominally headed by civilians) took control, tasked with overseeing a new round of voting that ended with the election of former defense minister General Abdel Fattah el-Sisi as president in May 2014.

The EAF’s assumption of formal political power forced the institution’s leadership to take a number of extraordinary steps, not least of which was the issuance of official statements in defense of the military’s economic operations, which had previously been considered state secrets. In a press conference held by the SCAF in spring 2012, then assistant minister of defense for financial affairs Major General Mahmoud Nasr divulged the annual revenue of the military’s businesses ($198 million) and its take of the state budget (4.2 percent).² Nasr stopped short of providing any evidence to support these figures, but the military’s decision to formally respond to very public criticism of its involvement in the economy marked a departure from the past.

The EAF’s efforts to maneuver between Egypt’s other political power brokers—primarily the Muslim Brotherhood and the so-called feloul (or leftovers) from the Mubarak regime—played out against a backdrop of authoritarian breakdown that made the economic resources and political practices of the military visible in a way they never had been before. The military’s subsequent struggle to reclaim control over critical enterprises has highlighted how the EAF uses its institutional influence to finance its operations, provide perks for its officer corps, and otherwise shape Egypt’s domestic political economy.

Many global actors—from the Gulf states to Russia to Japan—are now vying for influence with the country’s new political leadership, and presenting a fundamental challenge to the decades of diplomatic primacy enjoyed by Washington policymakers. The response of the U.S. policy community has been to call for increased military assistance and a light-touch approach to criticizing the new government.

Many global actors are now vying for influence with the country’s new political leadership, and presenting a fundamental challenge to the decades of diplomatic primacy enjoyed by Washington policymakers.

But even if Washington doubled its $1.3 billion in annual military aid, the sum would still be dwarfed by an estimated $20 billion in Gulf financial assistance that has flowed into regime coffers since 2013. For now, neither Washington’s money nor its rhetoric is likely to elicit major changes from the Egyptian government. A wiser bet would be to pressure the United States’ Gulf allies to check the regime’s most extreme excesses, including the continued violent repression of opposition activists.

The Evolution of Egypt’s Modern Military Economy

The Egyptian Armed Forces’ contemporary influence must be situated within the broader context of mid-twentieth-century Pan-Arab nationalism and the prevailing development model, which identified the military as a key protagonist in indigenous industrialization and economic modernization. Under the theory of state-led development, the public sector was central to economic growth, and Egypt’s military became the engine of industry and the supplier of public services. Even the U.S. Agency for International Development treated the EAF as a preferred contracting partner.

Under President Gamal Abdel Nasser, who led Egypt from 1956 to 1970, the resources of the state were steered toward the military, whose engineers and contractors took the lead in land reclamation projects, public infrastructure, the provision of basic commodities, and the domestic manufacturing of consumer appliances and electronics, as well as the production of industrial and agricultural inputs like steel and fertilizer. High-ranking members of the officer corps were also appointed to replace civilian factory managers;³ the presence of these military administrators in various state-owned and quasi-public enterprises created an influential constituency primed to support a continued EAF presence in the economy.

The military’s productive activities shifted slightly under Nasser’s successor, Anwar el-Sadat, to concentrate more narrowly on defense-related manufacturing. Not only did Sadat establish the Arab Organization for Industrialization (AOI) for the primary purpose of manufacturing military aircraft, he also shifted Egypt’s diplomatic focus from the Soviet Union to the United States, in part because the Americans were a more reliable source of military equipment, technology, and training. And, while the Soviets had emphasized the transfer of finished products, the U.S. military aid dollars that accompanied Sadat’s 1979 peace with Israel were channeled specifically into indigenous defense production, including the rehabilitation of armament factories built by the Europeans decades earlier.⁴  

Under Hosni Mubarak, who became president after Sadat’s 1981 assassination, the EAF’s historic position as the architect of Egypt’s modernization began to erode in earnest. The military did manage to maintain a long list of financial and industrial privileges, including subsidized fuel inputs, control over lucrative real estate, conscript labor, capital equipment transferred under arms sales agreements, preferential access to state contracts, and the use of special permits to exercise extralegal oversight in sectors ranging from petrochemicals to tourism. But the economic return on these privileges decreased as the Egyptian state lost market power relative to private investors and international lenders. At the same time, a precipitous decline in public investment chipped away at the established avenues the military used to support its manufacturing base and provide jobs to its own personnel.

Attracting Investment in the Mubarak Era

In order to hedge against the Mubarak government’s campaign of economic liberalization and privatization, Egypt’s military leaders diversified their formerly statist economic portfolio with financing and technology from foreign and domestic private sector sources, as well as joint partnerships with a variety of nonmilitary businessmen and foreign interests.⁵  

These novel funding and technology sources gained the EAF entry into global supply chains in industries ranging from automobile manufacturing and the production of computer hardware to wastewater recycling and solar panel fabrication. The EAF also worked to maintain its role as a domestic supplier and subcontractor in infrastructure projects—such as wind farms—financed by foreign donors.⁶ In addition, the EAF succeeded in securing small shareholdings in some of the high-profile projects that formed an important component of the Mubarak regime’s economic program—including the privately operated cargo container facilities that were being built at Egypt’s maritime ports.

These joint ventures represented significant new investment from state banks and international lenders and, in the case of maritime transport, some of the world’s largest shipping conglomerates. The enormous private investment in Egypt’s port sector triggered growth in complementary industries in which the military remained active, such as inland rail and the network of river barges that provides transport along the Nile.⁷ And because many of these joint ventures were organized in holding companies under the authority of the Ministry of Investment, the Egyptian state was liable for potential financial losses while the EAF had de facto control over revenues.⁸ This arrangement was not lost on regional investment analysts, who highlighted the “full support” of the government that these holding companies enjoyed as a factor for potential investors to consider when examining the viability of subsidiaries and joint ventures.⁹

It was precisely such investor confidence that the military had in mind when it deployed to protect the strategic assets of high-profile private sector investment partners during the unrest of 2011–2012, actions that included the violent repression of labor demonstrations that threatened production at critical sites.

Protecting Investment Partners and Production Sites

The immediate power vacuum resulting from Mubarak’s ouster—amplified by decades of repression and surveillance of political opposition—left the military as Cairo’s preeminent power broker. And the fluidity of the Egyptian political landscape that followed dramatically increased the military’s perceived value as an investment partner. The SCAF-managed transition allowed the EAF to send several signals to potential investors:

1. The military is able to secure continued immunity from government oversight for its enterprises (and business partners).
    
2. During periods of volatility, investing alongside the coercive arm of the state provides added security for costly assets.
    
3. The potential marginalization and prosecution of Mubarak’s disgraced business associates could open up new space for investment and lead to the resale of previously privatized state assets, including land.

Many international firms and investors proved receptive to these messages and eager to placate the generals in hopes of exercising influence in the postrevolutionary economy.¹⁰ One proximate result was the rapid intensification and expansion of weapons coproduction contracts that were signed in the final days of Mubarak’s rule and during the SCAF’s early tenure.

Although joint production between the EAF and foreign defense firms had been ongoing for years, it failed to generate any significant export contracts for the Egyptian military, aside from deals to send surplus or repurposed systems to poor countries that could not afford better alternatives or sales pushed through under U.S. auspices.¹¹ However, that began to change in the waning years of Mubarak’s rule. A 2010 report from the U.S. embassy in Cairo showed that technology transfer requests from the Egyptian Armament Authority had increased considerably over the previous year. This reflected the generals’ desire to expand the export of weapons that contained U.S. technology, including potential sales of M1A1 tanks to Iraq, ammunition to Saudi Arabia, and technical support for Turkey’s arsenal of Hawk missiles.¹² During this same period, EAF officials also requested U.S. permission to give tours of military production facilities to officials from Iraq and Tunisia.¹³  

As Mubarak’s power waned, the military doubled down on its efforts to secure joint production agreements with foreign defense firms, which meant not only a better chance at future exports, but also access to new technologies and potential positions for officers in prestigious new ventures. For example, in February 2011—just as Mubarak teetered on the brink of a forced resignation—the Egyptian navy renegotiated a $13 million contract with the U.S. firm Swiftships that had originally been signed in 2008. The revised contract, which came at an increased cost of $20 million for the same four patrol vessels in the original contract, provided for an Egyptian shipyard to participate in the assembly and production of the vessels. Such conditions entail significant institutional benefits for the military, including technology transfer, the construction of new facilities, the import of additional capital equipment, long-term contracts for spare parts and repairs, and new personnel training.

The ultimate sign that the EAF remained open for business came five months later in July 2011, when—despite continued violence against demonstrators and hundreds of thousands in Cairo’s Tahrir Square protesting the SCAF government—the United States announced the eleventh installment of the $1.3 billion M1A1 tank coproduction program.

In September 2011, amid continued demonstrations, the Turkish company Yonca-Onuk JV signed an agreement with Egypt to manufacture six armed patrol boats at the EAF’s shipyard in Alexandria.¹⁴  Prior to this deal, collaborative arms production between Egypt and Turkey had taken place on one occasion—and even then only at the behest of Washington.¹⁵ However, the combination of the EAF’s magnified influence and the perceived inviolability of the U.S. military assistance program (which provides for the bulk of Egypt’s defense procurement budget) increased the EAF’s allure as a partner for foreign defense firms.

To buttress the confidence of its investment partners, the EAF issued various signals that it would work to maintain order at all costs, including by vilifying labor activists as thugs, violently breaking up strikes, and issuing bizarre threats—such as an intention to end a railroad worker strike by conscripting the offenders directly into the army. When work stoppages made the news, military officials were quick to reassure observers that ordinary operations would not be disrupted.¹⁶

The EAF also deployed troops to secure the assets of its corporate partners. During the 2011 uprising, the Egyptian subsidiary of the Kuwait-based Kharafi Group, which has a number of joint ventures with the EAF,¹⁷ was provided with an armored guard to ensure safe delivery of equipment to its al-Shabab power plant. According to the company’s newsletter:

The Egyptian military provided forces, reinforced with tanks, to protect the client’s major power sites in Al Shabab and Damietta. The Egyptian military also used armed military personnel to escort the transportation of large pieces of equipment for the gas turbines from Al Ismailiya Port to the Al Shabab site.¹⁸ 

Despite the unrest, the Kharafi Group quickly announced an $80 million investment to expand its industrial infrastructure in Egypt.

Similarly, while many financial deals were put on hold amid the uncertainty surrounding Mubarak’s successor, private equity firms whose deals included companies and investors with military connections were less likely to be delayed by the SCAF government. One firm, Citadel Capital (now Qalaa Holdings), bought into a large logistics company in 2009 whose chairman was a retired general, and in fall 2011—despite heightened unrest and continued uncertainty—was able to secure a major loan backed by the U.S. government’s Overseas Private Investment Corporation.¹⁹

Private equity firms without a history of doing business with the military—such as those associated with Hosni Mubarak’s youngest son, Gamal—were less fortunate.²⁰ Equally unfortunate were businesses known (or believed) to be affiliated with members of the Muslim Brotherhood. Just as the presidential palace and major public hospitals were strategically abandoned by military police in an effort to undermine Morsi’s authority (and personal safety) at key junctures, these Brotherhood-linked enterprises were denied the type of police and security protection provided to army-partnered businesses like the Kharafi Group.²¹

The EAF also repressed labor demonstrations that took place in the vicinity of large economic operations in which the military had direct financial stakes—including petrochemical processing plants, export zones, maritime ports, and multinational manufacturing ventures. This was particularly true in Suez, where military police (and plainclothes police from the Interior Ministry) clashed repeatedly with protesters and striking workers.²² Work stoppages at Cairo Airport—where executive and upper-level management positions have been increasingly reserved for retiring officers as a sort of unofficial pension program²³—were also broken up by military police.

By contrast, during Morsi’s presidency, the military was slow to intervene. Protests and labor demonstrations succeeded in disrupting operations at Ain Sukhna (on the Red Sea) and shut down the East Port Said facility for three days in spring 2013; several large maritime shipping companies actually switched their routes to off-load in Israel to avoid delays. Work eventually resumed at both locations after the conclusion of negotiations with union leaders. But when agreements went unfulfilled nearly one year later under Sisi’s new government, riot police and troops from the Third Army were dispatched to disperse strikers at Port Said, and in Ain Sukhna, military personnel off-loaded and serviced the waiting vessels themselves.²⁴ The stark contrast in the military’s propensity to intervene suggests a purposeful strategy designed to exacerbate the economic failures of the Brotherhood’s Freedom and Justice Party (FJP) government.²⁵

Throughout the postrevolutionary period, the SCAF also used its strategic investments to influence news coverage. In public statements highlighting what he said were the EAF’s charitable contributions to the Egyptian economy, Major General Nasr cited a $58 million cash infusion for the Egyptian Radio and Television Union. But what Nasr did not point out was that the military’s Arab Organization for Industrialization is invested alongside the union in the Egyptian Satellite Company. The company, known as Nilesat, proved to be a reliable counterrevolutionary partner for the military in the fall of 2013 when it blocked the Al Jazeera news station from using a Nilesat satellite to broadcast images of the ongoing crisis in Egypt.²⁶ (That is not the only time Al Jazeera was targeted. Three journalists from the Qatar-based station were sentenced to lengthy prison terms in June 2014 after they were convicted on broadly discredited charges of falsifying news and aiding the Brotherhood.)²⁷  

A Coalition With the Muslim Brotherhood

Actions taken by the EAF leadership to shape the post-SCAF political system also helped the military maintain and expand its institutional control over critical economic resources. The military succeeded in obtaining assurances of support (or at least noninterference) on key issues from the elected leadership of the FJP. Military leaders also tried to steer high-level economic policy in a direction that would selectively benefit their own operations, and they engaged in deft political maneuvering meant to marginalize or co-opt many of the power centers from the previous regime.

Many postrevolution policies pursued by both the SCAF and Morsi—such as slashing fuel subsidies to industrial manufacturers—posed little threat to the military’s economic activities, because the military’s subsidies are off the books and therefore would not be affected by the cuts.

Many postrevolution policies pursued by both the SCAF and Morsi—such as slashing fuel subsidies to industrial manufacturers—posed little threat to the military’s economic activities, because the military’s subsidies are off the books and therefore would not be affected by the cuts. Because the military’s balance sheets (and therefore also its energy costs) are kept secret, SCAF looked like a collection of fiscally responsible decisionmakers, but in reality the burden fell disproportionately on the military’s competitors.

Perhaps most importantly, the SCAF ensured that the major political parties participating in Egypt’s new electoral regime would support the military’s continued immunity from budgetary oversight. Despite some early demands for accountability,²⁸ Egypt’s Illicit Gains Authority was unable to secure jurisdiction over military officers, in part because many influential legal scholars prioritized prosecuting Mubarak’s business cronies over bringing the military under civilian legal authority.

Amazingly, the same constitutional principles enshrining legal immunity for the military that originally elicited harsh condemnation from the FJP were ultimately included in the constitution that was submitted by Morsi in December 2012.²⁹ Also guaranteed in subsequent constitutions was an exemption from the ban on forced labor (allowing for the continuation of the military’s conscript labor system) and secrecy for the military’s institutional finances. Earlier, the Muslim Brotherhood had actively reined in its young supporters, discouraging them from participating in anti-SCAF protests in the months leading up to the parliamentary and presidential elections of 2012 and removing much of the momentum from demands for military accountability.³⁰

This modus vivendi between the FJP and the military would prove to be brief, but it was visible in an array of areas, from the end of a de facto ban on the promotion of openly religious soldiers (including the admission of Morsi’s nephew to a military training academy in March 2013) to Morsi’s vocal support for the military hierarchy in the aftermath of a damning 2013 government report showing that soldiers and police had committed serious crimes during the revolution and the unrest that followed.³¹ Egyptian media also reported on the terms of alleged deals between the SCAF and the FJP that included “safe exit” provisions providing legal immunity for SCAF members; an agreement that the FJP would not put forth a presidential candidate that the military leadership deemed unacceptable; and an arrangement that would grant the military control over high-level economic policy and leave jurisdiction of the service ministries (education, youth, culture, etc.) to the Brotherhood.³²  

Morsi’s unilateral declaration of an end to the privatization of public-sector companies also fits the narrative of an EAF-FJP accord, because military factories would likely have been in line for the next round of sell-offs. The same goes for Morsi’s deft hand in reshuffling some of the military hierarchy (including SCAF members), sending high-ranking officers out with lucrative and influential posts in the Suez Canal Authority, the Arab Organization for Industrialization, and positions in the Defense Ministry, and choosing their replacements from among the ranks of senior commanders.³³ In addition, Morsi promised to address some of the military’s top grievances, vowing to reestablish a military presence in the Sinai and diversify Egypt’s sources of foreign weaponry and training.³⁴

Beyond this list of accords, the most telling examples of the military’s success in enhancing its economic position through an alliance with the FJP were found in a few high-profile projects announced during Morsi’s brief tenure.³⁵ A February 2013 announcement posted on the FJP’s official party website revealed that the Ministry of Military Production had “acquired” the defunct (and highly indebted) Al-Nasr Automotive Manufacturing Company (Nasco).³⁶ The manufacturing and assembly of passenger cars and other nonmilitary vehicles has always been central to the economic fortunes of Egypt’s military, as the technologies, facilities, and equipment made available through the collaborative manufacturing of military vehicles can also be used in the production of civilian vehicles sold by the military on the domestic market.

A genuinely indigenous automobile industry was originally envisioned as a critical component of Egypt’s economic modernization, so the resurrection of Nasco was highly symbolic.³⁷ Another sign of goodwill between the FJP and the EAF came during Morsi’s visit to Russia in April 2013, when he elicited a promise from Moscow to invest Russian state funds in the ailing automobile enterprise,³⁸  whose assets the EAF likely acquired for free.

Although small-scale industrial projects like automobile manufacturing and tablet assembly were fertile ground for agreement between the Egyptian military and the Muslim Brotherhood, the massive Suez Canal Corridor Development Project proved too much for the uneasy alliance.

The short-lived economic partnership forged by the FJP and the military can also be seen in the much-hyped “Egyptian iPad”—a tablet computer called the Inar. Although this project had been in the works for years, little progress was made until the summer of 2012, when the FJP-led government issued a large public tender for tablets. According to the Daily News Egypt,³⁹ bids were placed by three consortia, two of which included foreign multinationals. What the article did not make clear was that all three consortia included military-owned firms, among them the AOI, the Benha Electronics Company (part of the Ministry of Military Production), and the Arab Company for Computer Manufacturing, whose shareholder list includes AOI, Benha, and the Ministry of Military Production.

Like the plan to revive Nasco, the Egyptian tablet project was announced on the FJP’s official website, which also boasted of advance export orders for the tablet from Kuwait, Qatar, and Saudi Arabia, in addition to enormous orders placed by various Egyptian government ministries. The tender was ultimately awarded to Benha, although many in the Egyptian tech sector saw the Inar as an overhyped PR stunt and questioned the ability of the winning consortium to program a basic operating system for the new tablet.

The Suez Canal Project and Strains in the Relationship

Although small-scale industrial projects like automobile manufacturing and tablet assembly were fertile ground for agreement between the Egyptian military and the Muslim Brotherhood, the massive Suez Canal Corridor Development Project proved too much for the uneasy alliance.

Turning the Suez Canal into a major logistics hub and center of heavy manufacturing has long been an aspirational goal of the military’s economic planners, who had made various proposals to establish solar, wind, and geothermal power stations in and around Suez to capitalize on the area’s industrial manufacturing potential. The military’s own companies would (of course) play key roles in constructing and providing equipment for such projects, as both the Ministry of Military Production and AOI have factories capable of manufacturing things like towers, gearboxes, and fiberglass blades used in wind turbines. When FJP officials announced plans in late 2012 to turn the canal into a global logistics hub, it seemed the political will and state support for such a project was finally available.⁴⁰  

However, just as the FJP announced the canal plans, an Egyptian government consultant revealed that oversight of the expansion would be in the hands of a single chairman who would have the rank of deputy prime minister and report directly to Morsi, relegating the EAF to just one among many government bodies involved in the effort.⁴¹ This move to marginalize the milit