Business Side of Egypt’s Army Blurs Lines of Aid From U.S.

By ARAM ROSTON and DAVID ROHDE

In the late 1990s, the Pentagon announced that it would contribute tens of millions of dollars to a 650-bed International Medical Center that the Egyptian military was building in the desert outside Cairo. The money, for medical equipment, training and logistical support, would help improve health care for Egyptian soldiers.
Within a few years, though, an American training team realized that the Egyptian military was benefiting in a different way. The medical center was, as one Pentagon official called it, “a commercial enterprise,” and many of its patients were civilians, not Egyptian soldiers. The hospital was even venturing into medical tourism; its Web site promotes “a lavishly furnished Royal Suite” for international patients.
An American doctor who has worked there, Wayne F. Yakes, recalls what his hosts told him about the hospital: “It was built with U.S. tax dollars under President Bill Clinton.” Put simply, he said, “We bought it for them.”
Eventually, the United States moved to cut off financing and even recoup some of the money, said several former American military officials. The Pentagon, after all, is supposed to pay only for projects with a military purpose.
Yet with Washington giving Cairo $1.3 billion a year in military aid, the hospital episode shows that Egypt’s for-profit military has sometimes found ways to use that aid to further its economic interests. A review of the aid program raises questions about a variety of ventures — from the acquisition of a fleet of luxury Gulfstream jets to a company making Jeeps for commercial sale as well as for the army.
Now, as the generals steer Egypt toward a new civilian government after the fall of President Hosni Mubarak, those questions about the aid program echo a broader uneasiness, especially in the pro-democracy movement: will a military so deeply invested in a system that conferred great economic and political power be willing to let go?
“It will be a very sore point in the near future, I’m sure, that the generals, the Supreme military council, is a de facto, separate government with an economy in its own right,” said Christopher Davidson, an expert on Egypt and a professor at Durham University in England.
Some experts and former American military officials say the aid from Washington — roughly $40 billion since the program’s inception as part of the 1979 Camp David peace accord signed by Israel and Egypt — has served to shore up a military bureaucracy prone to insider dealing and corruption.
Robert Springborg, a professor at the Naval Postgraduate School who studies Egypt’s military, said that by paying for expensive weapons systems, the aid program “has enabled the Egyptian military then to use resources it has for other purposes.”
In part because of concerns about diversion of funds, only a sliver of the money from the American aid program actually goes to the Egyptian military. Instead, the Pentagon directly pays American companies that it has chosen to manufacture and ship the tanks, planes, guns and ammunition to Egypt.
Egyptian opposition groups have said that Mr. Mubarak and senior generals were nonetheless able to divert money. But American officials insist that the design of the program — known as Foreign Military Sales — ensures that money cannot be stolen.
Edward W. Ross, a former official at the Defense Security Cooperation Agency, which oversees the sales, said he was irked by allegations that Egyptians could have pocketed money. “That money goes to the Federal Reserve,” he said, “and then it is only released to a U.S. contractor.”
Keeping Aid Flowing
Even so, the United States has considerably less control over how goods are used once they arrive in Egypt. In interviews, several former American military officials said that keeping the aid flowing often seemed to trump questions of how effective it was. Some of them asked to remain anonymous because they did not want to alienate the Egyptian military. The yearly $1.3 billion, one retired colonel explained, is viewed as “an entitlement.”
At times, American officials have argued with Egyptian generals over whether certain equipment was actually for military use. That was the case with the Gulfstream jets.
The retired colonel, who worked at the American Embassy’s Office of Military Cooperation in Cairo, said that the Egyptians assured him the planes would be used for “mapping,” but that he was skeptical. “It was obvious to us that these were going to be used at least in part for V.I.P. travel,” the colonel said.
Officers tried to block the deal, he recalled, but “our contacts at the Ministry of Defense were applying pressure” to make sure the sale went through.