Created: 8/17/1967

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To assess the situation in Egypt and the domestic and foreign factors affecting Egyptian policy, and to estimate probable developments over theoonths.


waves from the UAR's humiliating defeat are stillbut no drastic political changes have occurred. The topof the armed forces has been ousted, some seniorreportedly on trial for treason, and there is discontentyounger officers at their elders' incompetence. Nasserbeen confirmed in office and apparently still enjoysof his long rime associates.

war has placed additional strains on an alreadyFood supplies are assured until earlyut ansupply thereafter will require some expenditure of scarceThe loss of foreign earnings will begin to haveeffects about the endhere is unemploymentcities, and this will probably gettringenthas been adopted entailing higher taxes, stricterreduced availability of consumers' goods; pressures forthese controls could lead to some inflation. Suchlikely to cause some discontent In the cities, but are unlikelyinto unmanageable problems of public order.

Egyptians are probably not ready to envisage tieNasser. Yet economic and political stresses, as well asof making progressesolution of the Israelierode Nasser's popular appeal and perhaps encourage the growth

of opposition, or even weaken the prospects of his remairiing in office. All things considered, however, we believe the chances are better than even that he will remain the dominant Influence in the regime for at least the period of this estimate.

UAR is more than ever dependent on the USSR foreconomic aid and for political support This gives Moscow adegree of influence, which is partially offset by Egyptianof foreign adviceertain resentment of Sovietare increased numbers of Soviet military advisors, thoughnot know how far their functions go beyond the technicalits pohtical organization, the UAR mayort ofresembling Soviet and East European models. In part aturging, Cairo seems to beelatively moderateIsrael.

probably believes that the closure of the Canal actslever on the big powers to force Israel to make concessions.the present confrontation along the Canal is likely tobeyond the period of thistheto Egypt and pressures for resolution from both Communistcountries.

essence, the Egyptians are attempting toegreein their foreign policy. They must, in the interest ofdemand and accept Soviet military resupply, but in sowilj seek to avoid Soviet domination. Nasser is attemptinghis position in the Arab world, while keeping open themaking some concessions to Israel. In his dealings with thewill remain distrustful and to some degree inhibited by hison the USSR; yet he will not foreclose someAmerican-UAR relations. Because of these conflictingthe narrowness of the available options, it will probably bebefore he feels able to undertake any very firm policy initiatives.



L The shock waves from Egypt's defeat are itil! spreading, and the country's

prospects, both domestic and foreign, are cloudedumber of uncertainties.

Many of these uncertainties are Inherent in tlie situationumber of difficult dilemmas have still to be resolved, and longstanding relationships within

the regime have almost certainly been strained and unsettled by the traumatic experiences of this summer. Additional uncertainties arise from the fact that the policies of foreignthoinevitably affect Egypt's outlook, and these external factors are still far from clarified. Finally, some uncertainties arise from the paucity of our information concerning the state of affairs in the UAR.

In the weeks immediately prior to the fighting, Nasser was riding high in the Middle East. The efforts of the US and other Western Powers to lift the blockade of Eilat had gotten nowhere. Other Arab states were rallying to the UAR's side. Jordan badefense pact; Kuwait bad sent troops to Egypt: an Iraqi force was on the way to Jordan. There was mass enthusiasm within Egypt for the confrontation with Israel. Then, within four days, tlie Egyptian air force was destroyed, the Egyptian army shattered and routed, and thu entire Sinai Peninsula in Israeli bands. Today, the Israelis sit on the east bank of the Suez Canal andoice in deciding its future.

Despite the profound humiliation and shock of defeat, the war hashrought no drastic political changes within Egypt. Nasser has beenin office and apparently continues to rely on the same group of senior

. officials, mciuding two close collaborators of many years standing, Zakariya Muhi al-Din and AH Sabri. No new blood has been introduced, nor has Nasserany of the liaif dozen former members of the revolutionary command council who had been edged out of the inner circle in tho past decade Only one of Nasser's Inner circle of advisors, Field Marshal Abd al-Hakim Amir, formerly chief of the armed forces and the senior Vice President, has resigned.

this, our information oo the political situation in the UAR isWe do not know whether senior officialsontrollingNasser's major decisions or dreumscribe his authority. Nor do we knowdetail the thrust of their advice.eneral way. Sabri is moreand more disposed to work with the USSR, while Muhi al-Din isdealing with Westerners and Western concepts. Nonetheless,them support Nasser's Arab socialism at home and bis foreign policies ofand Arab nationalism, though they differ in their opiriion as toand how fast socialization should go. and tbe extent to whichsocialist doctrine and 'antiis required by economic andrealities. Both have over the years displayed consistent loyalty to Nasser

and neither has shown signs of aspiring to displace him. In the postwarMuhi ah Din and others Lie himore prominent role.

the military establishment, the changes have been moreonly has Aod al-IIakim Amir departed, but the War Minister and mosttop command of the armed forces have been ousted. The air forcea number of other high-ranking officers are reported to be on trial forseveral hundred officers further down in the military establishment mayretired. There is severe criticism of those officers with upper andbackgrounds for spending more time feathering their own neststo their military duties. Many of the officers who came into theestablishment during theears of the Nasser regime ore reported towith the wartime performance of their elders. The morale of thehas been impaired, and discipline may be more difficult to


Even before tbe war, the UAR faced serious economic problems which centeredoreign exchange shortage. These problems have been sharply aggravated. Prior to hostilities, the UAR could have expected foreign earnings of slightly more than tl billion and expenditures of just3 billion for the calendarince early June, Cairo's foreign exchange receipt* have dropped byillion monthly, due to closure of the Suez0 million in tolls peressation of tourism, and the Ion of oil from fields in Sinai. If the present situation persists, foreign earnings7 are likely to total less0 million. The loss will be partially made up by emergency assistance in cash from other0 million has already been pledged.

If the Canal remains closed beyond the end7 and if the Israelisin control of the Sinai oil fields, curtailment of foreign exchange earnings will become increasingly burdensome. In these circumstances, cumulative loss of foreign earnings probably would0 million byven assuming normal crops and continued implementation of the UAR's plans to' exploit its available petroleum resources. There are reports of pest damage to the cotton crop due to be harvested in the fallhould such damage prove serious, the drop in foreign earnings would be even greater. Cairo will probably receive further emergency assistance during this period, primarily from Arab countries, but not enough to make up for moreodest pari of its losses.

6 The war itself has not seriously aggravated the already tight Egyptian food situation. The Soviets have almost completed deliveryetric tons of whoat promised earlier this year, and have just agreed to supply anons between7 andhis will increase tho UAR's short-term debt to the USSR from lessillion to0 million, but the Soviets apparently are not pressing for repayment. Egypt has also beenotalons of wheat by other CommunistChina andwell as smaller amounts of food from

other nations, and has bought more on the international market. The UAR's current wheat cropillion tons has just been harvested, but most of it will be consumed in rural areas. This domestic crop plus scheduled imports will probably suffice to meet Egypt's grain needs througho cover the following six months, Cairo wiU have to purchase or otherwise acquire one million tons of wheat It can probably do this, but will have to spendf scarce foreign exchange for each ton purchased from Western suppliers.



Domestic EiUrnaleQ* amount of domestic crop

available for urban consumption.

Imported or on order, as of7 .

Estimated0 Normal urban consumption is

tons per month. This rate used for Jsnuary.May period. Lower rateons per month, which UAR could get by on, used forperiod.

Balance! Projected8 ..

question of food willontinuing problem for Egyptand East Europeans are reluctant to assume irsdeflnitely the burdenEgypt's needs. The UAR could find enough foreign exchange tograin in worldcost would be at0 million perupwards ofercent of Egypt's normal hard currency earnings. Butwould of course impair Egypt's ability to finance other imports.

Cairo hasevised budget for the fiscal year endingS. designed to cope with problems created by the war. It includes measures to collect additional revenues of0 million and to slash noomilitsryby0ore than half of the cuts are in the development budget, where all "nonessential" projects are to be postponed. Taxes are being increased; radons of subsidized consumer items are being reduced; salaries are being frozen or even cut In terms of curtailing consumption, reducing imports, eliminating wasteful spending, and reducing inflationary pressures, the announced program is more austere than anything attempted since Nasser came to power, and goes further than anything heretofore advocated by the InternationalFund. The austerity program will undoubtedly cause fairly widespread dissatisfaction.

There is already unemployment in the cities, and. withillion Egyptians reaching working age each year and rural underemployment already common, it is almost certain to become worse. The loss of foreign earnings

1 Appropriation* for military and security purposes have been increased by someilU-n.

has begun to affect the employment picturend It will becomeworsehere is probably considerable unemploymenthe tourist industry and in the Suez Canal region. The governmentto pay the salaries of Canal employees, and it will probably try to absorb other displaced workers in paramilitary and public works. But the government will Dud it bard to do much along these lines within the limits of the austerity budget

repercussions of the war wiD curtail domestic economic growth.gross national product (CNF} grew by five percent;7 as arate of growth probably will be no more than three percent, barelykeep per capita CNP relatively steady. Under present circumstances,of CNP and decline in per capita CNP teem likely, at least byo long as the regime holds to the austerity budget,probably be avoided. Over the longer term, the regime is likely topressures to relax controls.


next year willime of strain within Egypt Shortages ofgoods, rising unemployment, higher taxes, and probably higherlikely to give rise to dissatisfaction in the cities, possibly involvingor riots. The regime is undoubtedly aware of this andto keep shortagesinimum, lt will, of course, rely heavilysecurity services and probably will be able to maintain an acceptablepublic order. Nonetheless, dissatisfaction may be sufficient tosignificant political opposition.

the present. Nasser retains considerable political assets. Heenjoy very broad popular support andnique figure inHis principal aides have so tar given no sign that they wish tohim. It is possiblelique might be formed with the objecthim aside, but it seems more likely that bis associates nowtheir interests ore better served by hanging together under Nasser.

xcept for the regiirae-sponsored Arab Socialist Union, organized politicalllegal and probably not very extensive. Nevertheless, the Muslim Brotherhood, which Nasser believed he had crushed in the, had5 reestablished an extensive cUndesthw apparatus. Altlwugh many arrests were made, the Brotherhood still survives, and its appeal to certain discontented and disillusioned elements could be considerable. At least for the period of this estimate, local Communists are likely to seek increased influence in the regime, rather tlian its overthrow.

he decisive factor, however, will be the attitude of the military estab-Lishment.alace revolution would require the support of substantial elements of the armed forces in order to be successful And. in fact, the armed forces are the most likely source of serious opposition to Nasser. The nucleus of such opposition would prol>ably be those elements within the armed forces

which have do stake in the present regime,hose whose careers have not yet brought them lucrative or powerful appotntments. Shame at theof their seniors in the recent combat couldtimulus to action for members of this group.

does not appear to be widely blamed for Egypt's defeat, andmat the bulk of tbe Egyptian population could not at this pointof an Egypt without him.ove by people in the UARto put him aside or openly restrict his authority* would probably run


into considerable public opposition. In the months to come, economicpolitical dissatisfactions, competing policy pressures, and the hazards of proceeding toward some resolution of the Israeli problem will all add to Ids difficulties and perhaps weaken his popular appeal or his desire to retain office. In this event, he might be forced, or persuaded, to surrender some of his power or even to step aside. All tilings considered, however, we think the chances are better than even that Nasser will be the dominant force in the government for at least the term of this estimate,


Aside from domestic political and economic considerations, several factors bear on the UAR's conduct in the international field. The first of these is its apparently genuine fearew attack by Israel. The Cairo regime is aware that it was soundly beaten in the first week of June. The current disposition of UAR forces is clearly defensive. We do not believe that the UAR contemplates renewing hostilities eitheronventional fashion or through guerrilla warfare at any early date, although there are likely to be skirmishes from time to time.

The UAR is more than ever dependent on Moscow for military supplies to rebuild its shattered forces. It also needs Soviet economic aid as well as assistance in the political field. Therefore, Moscowubstantial degree of influence in the UAR, but this is hard to measure. The USSR Is using its influence to encourage UAR moderation toward Israel. We are not certain how far tbe USSR wishes to go in this direction or in providing political and economic support for Nasser. Mutual disillusionment between the UAR and the USSR has grown, but neither seems to feel that it can abandon the other at this point

are reports of "Sovietizabon' and of growing Communist influence


within the UAR Government. The Communists and the Soviets probablythat theyood opportunity to increase their irmueoce in theArab Socialist Union may develop as an instrument for political regimenwith an organization generally modeled on Soviet and East European

Communist Parties. The UAR armed forces have accepted numbers of Soviet advisors and may have to accept more, though we do not know how far tlie functions of these advisors will go beyond the technical level. At the same time, Egypt is suspicious of foreign advice and intervention, and without more evidence we are not lnchned to believe that Nasser is prepared to accept

Moscow'* dominance. There is resentment In Egypt against the USSR. although far less than against the US. For tbe time being, the UAR may have to accept its dependence on the Soviets, but il will probably search for ways to lessen it

Nasser probably believes that tbe US has consistently sought to thwart his aspirations and over the last two years or so has sought to unseat turn. He sees [he US position before, during and since the recent war as confirmation of his long held suspicion that the US is fundamentally on the side of Israel It is unlikely, therefore, that Nasser's distrust of the US will diminish during the next year. Nonetlteless, be may consider it prudent to keep the door open for some improvement in relations with the US. One motive wouldesire to returnore nonaligned position.

Nasser's stature among the Arabs Is diminished- His roleeader of the revolutionary statesymbol of the radical forces is in question.and especially Algiers are challenging his leadership. Iraq is pulled between the calls of the extremists and its feeling of solidarity with the UAR. Nasser finds himself in the unusual position ofautious approach toward Israel with Jordan's Hussain. But Nasser's dimirdshed role limits his options in respect of Israel, since he Is now more vulnerable to charges by other leaders of being "soft on Israel."

Nevertheless, the UAR is moving ior atemporary accommodation with the conservative Arab states. Nasser has told Hussainautious, nonbelhcose policy toward Israel is mandatory for both. He has supported the holdingonference of all Arab heads of state, despite the oppos-.non of Syria and Algeria. The CAR has offered to reactivate3 agreement it made with Saudi Arabia toettlement of the Yemenightening of its Yemen burden would help Egypt economically, and withdrawal ofpresently numbering aboutimprove its very weak military positionis Israor However, since Nasser would want to leave in Yemen afavorable to the UAR. and Faisal would oppose this, the chance ofIs not great.

The UAR moves seem designed to rally support for its Israel policy from asroup of Arab states as possible. We believe the UAR wants to use such support to counter Algeria's and Syria's advocacy of sustained guerrilla and terrorist actions against Israel and to counter their threat to its leadership. We believe that the UARnited Arab policy toward Israel as having higher priority for the present than the pursuit of its feud against the more con-servatjvfi Arab statos.

The UAR seems to realize that it must make some concessions in order to get Israel to withdraw from Sinai. For example, at the UN it was willing toormula which would imply an end to belligerency in return for Israeli withdrawal Nasser naturally wishes to lose as Utile as possible in getting tbe Israelis to pull back, but be is aware that outside powers are not going to rescue him as they did We believe that Nasser will not consent to formal peace

negotiations with tbe Israelis, but tbat be will strive for some accommodation which limits as far as possible the damage to his prestige.

Despite pressures from Coroinunisl and non-Co mm unist countries forthe Canal, any arrangement to end tbe present confrontation there wiU take considerable time, perhaps longer than the period of this estimate- Economic pressures are not likely to be very compelling, at least for the next six months or so. Nasser probably believes that the closure of the Canal and the suspension of Arab oil shipments to the US and the UK actsever on the big powers to put pressure on Israel to be accommodating.

In essence, the Egyptians are attempting toegree of flexibility in their foreign policy. They' must, in the interests of security, demand and accept Soviet military equipment, but in so doing they will seek to avoid Soviet domination. Nasser is attempting to restore his position in the Arab world, while keeping open the option of making some concessions to Israel. In his dealings with tho US, he will remain distrustful and antagonistic and to some degree inhibited by his relationship with the USSR- yet he will not wish to foreclose some improvement in American-Egyptian relations. These conflicting objectives and tbe narrowness of the available options will not make tbe road ahead easy for him, and it wiU probably be some time before he feels able to undertake any very firm policy initiatives.

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