Egypt's Current Crisis (Agenda)
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Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, Stratfor cannot guarantee their complete accuracy.
Video Transcript:
Colin Chapman: Two years ago that combined force of the crowds in Cairo's Tahrir Square and Egypt's generals ousted Hosni Mubarak as president. This weekend the crowds are back again, this time railing against his elected successor Mohammed Morsi of the Muslim Brotherhood. The Egyptian economy is falling apart, and the army chief who is also defense minister is on record as warning of the potential collapse of the state.
Welcome to Agenda, I'm Colin Chapman and joining me to discuss Egypt's grim prospects is Stratfor's vice president of global analysis, Reva Bhalla. Reva, how unstable is Egypt now?
Reva Bhalla: Well, I mean you can see from the footage it's become quite unstable. So just in the past week we've seen riots turned very deadly -- particularly in areas surrounding the Suez Canal, which of course is very important to the Egyptian economy. So the provinces of Suez, Ismailia and Port Said are now all under a 30-day emergency rule. Now the problem is that the protesters are defying those security measures.
Colin: The army chief has had his country could crumble. Under the weight of the ongoing unrest. Is he right?
Reva: So here's the interesting thing. A lot of people took the military chief's statement as a sign that the military, who wants to contain the Brotherhood and the Islamists overall in Egypt, was threatening that the state could collapse as sort of a pretext, using the protests as a pretext, to intervene with the army. Now that's, I think, the wrong interpretation of what he was saying. The military, remember, does not want to govern. They are quite happy seeing the Brotherhood absorb the blame, because remember it's very different to be in the opposition versus being in power. That's a sort of containment strategy for the military against the Brotherhood. And the military doesn't want to have its reputation tarnished by being in this very public governing role and taking the blame itself. So it's happy with the way things are, it's happy to play a behind-the-scenes role, but it cannot afford to allow the streets to spiral out of control. 'Cause remember, the Brotherhood has to rely on the military to control the streets. And the concern for the military is the rise of various vigilante groups. And we've seen signs of this already on the streets, with rival vigilante groups now developing. And if there's more organization to these riots, what the military does not want to see is a situation where even the armed forces can't control the streets. Because if the military loses its cohesion, that's when we're really talking about the threat of collapse.
Colin: What will the military do? They won't want to cop the blame if things get out of control.
Reva: Well, one thing to keep in mind is that the military and the Brotherhood are collaborating on a level that we have not seen in previous flare-ups of violence in the country. So there's been this tussle between the military and the Brotherhood that we've seen over the past two years. Now the Brotherhood and the military are in a place where both realize that neither can afford unilateral moves against one another. They both need each other. And so the two have an interest in working together and preventing the fringe groups on both sides of the political spectrum. So whether you're talking about the ultra-conservative Salafists or the ultra-secular liberal National Salvation Front, who's also interested in containing the military, making sure that they don't gain more space to operate politically. And so there is a lot of common interest between the military and the Brotherhood at this moment. And as long as there is cooperation between the two, I think the unrest can be managed to an extent. Now, that all assumes that the military can actually control the streets. Thus far the military has kept a very safe distance from the unrest, preferring not to tarnish its reputation. As these riots come out, go out of control though, the military's going to be pressured to step in. So we need to see how far they go in using force. We've seen Morsi already turn to tools of his predecessor in implementing the state of emergency. Now, will a state of emergency actually mean anything, and what role will the military play in that?
Colin: The question then is, can Morsi hold the government together, given the economy is worsening, the currency falling and unemployment rising?
Reva: Well Morsi definitely has a big challenge on his plate, and it's not certain that he's going to be able to hold his government together. He's tried a variety of different cabinets, trying to show that he's bringing in technocrats and not only Islamists and so on and so forth. But the fact of the matter is that people are rapidly losing faith in this government. Morsi is, as the face of the government, very easy to blame for all this. And it doesn't matter who's in power, whether it's Morsi, another Brotherhood figure or somebody from the secular camp -- any one of them is going to be dealt the same problems. And, Egypt's problems are only going to worsen, if you look the deteriorating economic conditions in the country.
Colin: One criticism of Morsi is that he sought to enrich the power of the Muslim Brotherhood, rather than concentrate on nation building.
Reva: Well, get into the head of the Brotherhood for a minute. You know, here's an organization that for decades was repressed. And they are a very patient organization. I remember, you know, in past years and visiting with Brotherhood officials while they were still in the opposition, literally escaping arrest by the day, and I was always amazed by how patient they were. You know, even when it didn't look like Mubarak was going anywhere, they knew that eventually their day would come. Now it probably came quicker than they anticipated. And so they are in a very delicate political position right now because naturally they want to institutionalize their power to feel more secure now that they're actually leading the government -- especially when you have a military that's very interested in containing your political role. But as Morsi has found out with his bolder and more unilateral moves, there are some serious checks and balances on him and his organization. And so this is where all these accusations come from. The Brotherhood represents an Islamist faction, a very large and powerful faction within Egypt, that cuts across society. And that has a very polarizing effect on Egyptian society overall. And so there's this need to both be the face of the government, the face of Egypt, and at the same time absorb all the problems and the blame for all the problems that are growing in Egypt, and at the same time look to your own ideological interest, protecting your own organization and trying to institutionalize that power before it slips away. So you can see this is a very difficult balancing act for the Brotherhood. And you can see also why many would regard the Brotherhood as looking at its own interests first.
Colin: Yes, and one of those checks is an election coming up in April. But Morsi appears to be resorting to the tactics of his predecessors.
Reva: Well, and that's not a surprise either, Colin, because what tools does anybody, any Egyptian ruler, have to control this country? I mean it's a very difficult state to control in the first place. You have a very large population centered around the Nile River valley. You have a very polarized population, especially right now. And so it's, if you go back through history and you see the rise of military rule in Egypt and the level of state security and intelligence surveillance on the population to keep check on all of these different groups and factions, it's really no wonder that Morsi, regardless of whether he's an Islamist or secularist or whatever, that he is resorting to same tools that his predecessor did. It's very difficult to control the state. And the military is the center of gravity of Egypt. The Brotherhood, even if it is at odds with the military politically on a certain agenda, it can't avoid working with the military and relying on it. So all the noise and confusion you see coming out of Tahrir Square or Port Said, throughout all of that you always need to take a look at: is the military maintaining its cohesion, and is the main political force of the day working with the military to try to manage the unrest? If that breaks down, then and I think we're in more serious trouble.
Colin: So how do you see events unfolding this year?
Reva: Well in the coming months the biggest question I think is the economic question. So Egypt imports 60 percent of its food, 40 percent of its fuel, it has a growing energy crisis, its deficit is ballooning at this point, and it doesn't know how to cover it. How do you maintain the value of your currency in the face of this ever-growing balance of payments deficit? And that is a huge challenge for the Morsi government, so they've relied on domestic borrowing a lot but that's ballooned its public debt. And so when we look at Egypt's prospects for borrowing, we look primarily to this $4.8 billion IMF loan that's been pending for months now. And that negotiation over the IMF loan has been taking place in fits and starts for good reason. So while the financial markets look at Egypt and say well, it's easy -- they have to increase their taxes, they have to cut their public expenditures, and they have to absorb the cost of austerity -- politically that's not something that the government is capable of doing. Look at how riot-prone the population is already in Egypt and imagine what will happen when you start to cut fuel subsidies, for example. And so this is a very difficult political balance, but the Morsi government cannot avoid the economic policies that need to be implemented to secure these loans to prevent the rapid free fall of its currency. And so, how exactly they manage this is going to be very tough. It's going to require a military presence in the street, I can assure you of that. It may mean that the elections may not come on time. It will involve very intense negotiations with the IMF, and some political negotiation there as well to make sure that the state can hold together under this economic pressure.
Colin: Reva Bhalla. And Stratfor will be watching closely events in Egypt this weekend. Thanks for being with us, bye for now.
