Egypt's Military Tightens Control

Egypt's Military Tightens Control Over Regime

By Alaa Shahine

A file photo of Egyptian intelligence chief Omar Suleiman. Photographer: Tara Todras-Whitehill/AFP/Getty Images

Play Video

Jan. 31 (Bloomberg) -- Egyptian billionaire Naguib Sawiris, the chairman of Orascom Telecom Holding SAE, discusses unrest in Egypt. Sawiris speaks from El Gouna, Egypt, with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Play Video

Jan. 31 (Bloomberg) -- Egypt, following days of anti-government protests, “withdrew” from the Internet after Egyptian authorities shut connections to the outside world, and Vodafone Group Plc said it was ordered to suspend mobile-phone services in selected areas. Bloomberg's Emily Chang reports. (Source: Bloomberg)

Egyptian President Hosni Mubarak’s appointment of a vice president for the first time in his 30- year-reign may herald the end of his rule. It probably won’t end six decades of military control.

“Egypt’s government is not so much a Mubarak government as it is a military government,” said Jon Alterman, director of the Middle East program at the Center for Strategic and International Studies, a Washington-based policy group. “Generals and retired generals control much of the government and much of the economy, and they would stand to lose a great deal if Mubarak were deposed.”

Mubarak, a former air force commander facing unprecedented protests demanding his ouster, named Omar Suleiman, a former army general and head of the intelligence services, as vice president. He also appointed Ahmed Shafik, a former air force commander, as prime minister, putting the top three government jobs in the hands of military men. He named Defense Minister Mohammed Hussein Tantawi as deputy premier.

The army deployed across cities in Egypt after looting and mayhem on the weekend following the withdrawal of the police. More than 3,100 looters and escaped prisoners were arrested, state TV said. The week of protests left 150 dead and 4,000 wounded, Al Arabiya television cited a health official as saying.

The Tunisian military, by contrast, precipitated the Jan. 14 ouster of President Zine El Abidine Ben Ali when they chased off his security forces, Ann Wyman, the London-based head of emerging markets research for Europe at Nomura Holding Inc. said. After Ben Ali was forced into exile, Army Commander Rashid Ammar pledged to “protect the revolution.”

Markets Respond

Stocks worldwide fell, with investors concerned that the turmoil may spread to other countries such as the Persian Gulf states, which control more than 50 percent of the world’s proven oil reserves. Egypt’s benchmark EGX 30 Index slumped 16 percent in its last two trading sessions. The stock market was closed today.

Shares in Dubai fell 0.6 percent today, after sliding 4.3 percent in the previous session. Emaar Properties PJSC dropped nearly 2 percent. The Dubai-based company, which says it’s the biggest foreign investor in Egypt’s real-estate industry, plunged 8.3 percent yesterday. Foreign investors hold about $25 billion in Egyptian assets, according to a Jan. 18 report by Barclays Capital.

Ruling Elites

Close ties between the military and the ruling elites in countries such as Egypt, Iran and Syria makes a repeat of Tunisian-style regime change unlikely, say analysts including Egyptian author Moustafa El-Husseini.

Egypt’s military has enjoyed many political and economic incentives since its July 1952 coup that toppled the monarchy, including top government jobs and access to cheap housing and hospitals, El-Husseini, author of “Egypt on the Brink of the Unknown,” said by telephone from Cairo.

“Upon retirement, senior officers are given hefty retirement packages and appointed as provincial governors or head of municipalities,” he said. One example is Magdy Sharawi, a former commander of the air force, who is Egypt’s ambassador to Switzerland.

The appointment of Suleiman and Shafik may help restore stability and reassure investors, said Naguib Sawiris, chairman of Orascom Telecom Holding, the biggest mobile-phone operator by subscribers in the Middle East. “But it will not be enough unless there is a real intention to have a real democracy established here,” he said.

ElBaradei Backed

All Arab countries except Iraq and Lebanon are classified as autocratic regimes in the 2010 Economist Intelligence Unit Democracy Index. Egyptian opposition leaders formed a committee yesterday to negotiate with Mubarak’s government and appointed Nobel Peace Prize winner Mohamed ElBaradei, the former head of the United Nations’ nuclear watchdog agency, as its head.

Protests will persist until the regime acquiesces to the demands of demonstrators, including amending the constitution to ease curbs on the ability of independent candidates to run for president, said Amr Hamzawy, research director and senior associate at the Carnegie Endowment for International Peace.

“Anything short of that people will not go back,” Hamzawy said by telephone from Cairo. “They will continue to protest.”

U.S. Reviews Aid

The protests prompted the White House to say on Jan. 28 that it will put U.S. aid to Egypt under review, ramping up pressure on Mubarak to carry out political and economic reforms. Egypt’s military relies on weapons from companies such as Lockheed Martin Corp. and General Dynamics Corp., the maker of Abrams battle tanks.

Secretary of State Hillary Clinton yesterday backed off the threat to reconsider assistance, saying on ABC’s “This Week” program, “There is no discussion as of this time of cutting off any aid.”

The U.S. contribution of about $1.3 billion a year in defense assistance provides about a third of Egypt’s annual military budget, said Bruce Rutherford, an associate professor of political science at Colgate University in Hamilton, New York. Many Egyptian military officers received training at U.S. defense institutes.

Defense Secretary Robert Gates and U.S. Navy Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, called their Egyptian counterparts over the weekend, Pentagon officials said. Mullen spoke with Lieutenant General Sami Hafez Enan, the Egyptian armed forces chief of staff, who led a delegation that cut short a visit to the Pentagon last week amid the unfolding turmoil.

‘Continued Professionalism’

Mullen praised the “continued professionalism” of the Egyptian military, said U.S. Navy Captain John Kirby. Both said they want to continue the “partnership” between the militaries, he said. A spokesman for Gates declined to provide any details of his conversation.

In Egypt, looting escalated during the night, spreading from central Cairo to more upscale areas such as Heliopolis and Maadi after the police withdrew during the day. Residents armed themselves with sticks, bats and guns, and blocked off roads into their neighborhoods to protect their property.

The army had acted to restore order in the past. During a period of bread shortages that led to deadly riots in 2008, it opened its bakeries to the public and increased production. In the same year, it set up tents to accommodate families evacuated from a Cairo slum after a rockslide.

‘Military Establishment’

“We have to remember that Egypt is essentially run by the military establishment, who control vast swaths of the economy and essentially dictate regional foreign policy,” John R. Bradley, author of “Inside Egypt: The Land of the Pharaohs on the Brink of a Revolution,” said in an interview.

The Egyptian armed forces control factories that make a range of products ranging from weapons to drugs, and even home appliances such as cookers. It’s the largest army in the Arab world, totaling about 450,000 personnel divided into four services -- the army, air defense, air force and navy, according to globalsecurity.org.

Defense spending in Egypt is 3.4 percent of gross domestic product, according to the CIA World Factbook, two percentage points higher than Tunisia, which had the lowest defense spending in the region.

The military in other countries such as Iran and Syria have also supported the ruling elites in times of crisis. In 2009, units of the Revolutionary Guards, a force loyal to Iran’s Supreme Leader Ayatollah Ali Khamenei, quelled waves of demonstrations protesting the re-election of President Mahmoud Ahmadinejad. In Syria, the military suppressed an Islamist rebellion led from the city of Hama in 1982, killing thousands of civilians in the process.