US cutting military aid, hundreds of millions in cash assistance to Egypt

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US suspending some aid to Egypt

James Rosen reports

WASHINGTON – The Obama administration was criticized by an Egyptian government official Thursday in the wake of its decision to withhold hundreds of millions of dollars in cash and military aid in response to the ouster of President Mohamed Morsi and the crackdown by the military-backed government on his supporters.

"The decision was wrong. Egypt will not surrender to American pressure and is continuing its path towards democracy as set by the roadmap,'' Foreign Ministry spokesman Badr Abdelatty told an Egyptian radio station, according to Reuters.

The State Department announced the decision late Wednesday afternoon, after press reports emerged that an aid cut-off was imminent.

The U.S. provides $1.5 billion in aid each year to Egypt. While the State Department did not provide a dollar amount of what was being withheld, senior Senate leadership aides shared with Fox News some of the details of a conference call with staffers from the State Department and the office of the Secretary of Defense.

The U.S. is "holding" -- as in not sending to Cairo -- a dozen F-16s; a similar number of AH-64 Apache helicopters; four M-1/A-1 tank kits (tanks that are shipped in pieces and assembled in the receiving country); and an unspecified number of Harpoon missiles (typically an anti-ship missile).

Also, the U.S. is not proceeding with the planned transfer of $260 million in cash to the Egyptian government. However, these funds were already on hold pending the outcome of talks between the Egyptians and the International Monetary Fund.

The U.S. is also not proceeding with a $300 million loan guarantee slated as part of our foreign military financing programs.

The U.S. is, however, moving forward with an IMET program (International Military Education Traning). And the U.S. is moving forward with education, health, private-sector development and governance-strengthening funding.

Officials said the U.S. will not default on payments to U.S. military contractors and vendors whose services had been engaged for these purposes.

Importantly, officials did not invoke the "coup" clause -- which would be a determination that aid must be cut off because a "coup" was deemed to have taken place.

Officials said they plan to revaluate this decision on a constant basis going forward, to see if the Egyptian interim government is moving rapidly towards a "sustainable, inclusive, non-violent transition to democracy."

The U.S. decision to cut aid to Egypt, though, will create new friction in Washington's already uneasy relations with the government that ousted the first democratically elected Egyptian president. And the consequences won't end there. The move will anger Persian Gulf states, push Egypt to seek assistance from U.S. rivals and upend decades of close ties with the Egyptians that that have been a bulwark of stability in the Middle East.

State Department spokeswoman Jen Psaki said in a statement Wednesday that the U.S. will withhold delivery of certain large-scale military systems as well as cash assistance to the Egyptian government until "credible progress" is made toward an inclusive government set up through free and fair elections.

The U.S. will still provide health and education assistance and money to help Egypt secure its borders, counter-terrorism and ensure security in the Sinai.

The U.S. also will continue to provide parts for military equipment coming from the United States as well as military training and education. The U.S. military has continued shipments of thousands of spare parts for American weapons systems used by the Egyptian forces, including armored bulldozers for border security, radars and missiles.

The U.S. had already suspended the delivery of four F-16 fighter jets to Egypt and canceled biennial U.S.-Egyptian military exercises.

The next military weapons shipment for Egypt was slated to include the Apache helicopters as well as a number of M1A1 tank kits, including machine guns and other equipment used with the tanks. That shipment also was to involve some used missiles -- which have been moved and handled, but not yet fired. They could be used for spare parts by the Egyptian military or they could be refurbished and fired.

The U.S. and Egypt have gotten used to relying on one another. Egypt gives the United States permission to fly over its territory to supply American troops in the Gulf, allows the U.S. to move men and materiel through the Suez Canal without delay and cooperates with American intelligence agencies. It is unclear if cooperation on these fronts will be affected by the aid decision.

The decision also is not just about money. There are fears that the suspension of some aid will embolden pro-Morsi supporters who oppose the current government to stage more protests because they think the military-backed government will be weakened by the cut in aid.

The U.S. has been considering such a move since July, when the Egyptian military ousted Morsi. Ensuing violence between authorities and Morsi supporters has killed hundreds. The scheduled Nov. 4 trial of Morsi on charges that he incited the killings of opponents while in office and the U.S. decision to cut its aid to Egypt threaten to add to the turmoil.

The cutoff of some, but not all, U.S. aid also underscores the strategic shifts underway in the region as U.S. allies in the Gulf forge ahead with policies at odds with Washington. Saudi Arabia and other Gulf states, including the United Arab Emirates and Qatar, are strong backers of Syrian rebel factions and were openly dismayed when the U.S. set aside possible military strikes against Bashar Assad's government. The Gulf states also feel increasingly sidelined as Washington reaches out to their rival, Iran.

Fox News' James Rosen and The Associated Press contributed to this report.