Saudi Arabia, UAE announce $8 billion in aid for Egypt

CAIRO -- Saudi Arabia and the United Arab Emirates on Tuesday announced a total of $8 billion in economic aid to help shore up Egypt’s military-backed interim leaders after Islamist President Mohamed Morsi was removed in a coup last week.

The Persian Gulf economic giants had eyed the Morsi government warily, worried that the rise of his Muslim Brotherhood movement would bolster Islamic extremists in their own countries.

Saudi Arabia’s $5-billion pledge and the Emirates’ $3 billion will provide Egypt a much-needed economic lifeline, but analysts said they also would diminish the United States’ already shrinking influence with the new government in Cairo.

“It definitely diminishes our leverage,” said Jeffrey Martini, a Middle East analyst at the Rand Corp. in Washington.

The Obama administration has been in a quiet financial bidding contest with Qatar for influence over Egypt’s leaders since longtime strongman Hosni Mubarak was toppled in a popular uprising in 2011.

The United States and its European allies were trying to persuade the Morsi government to accept a $4-billion International Monetary Fund loan package, which would have required Egypt to reform its economy. Morsi avoided those reforms by accepting the help of Qatar, which put up $8 billion in loans and investments, and Turkey, which offered $2 billion in loans.

U.S. officials reacted cautiously Tuesday to word of the huge gulf offers, saying they needed time to assess what the countries planned to provide. Saudi Arabia and the Emirates both have records of making large pledges but not necessarily following through.

The aid pledges came as Egypt’s interim leaders appointed a caretaker prime minister and urged citizens to support a six-month timetable to revise the country’s constitution and hold fresh elections.

The Obama administration said it was “cautiously encouraged” by the timeline, a further signal that it would not cut off $1.5 billion in annual U.S. aid to Egypt.

The announcement of Hazem Beblawi, a leading liberal economist, as prime minister ended days of speculation after the first choice for the post was abruptly withdrawn because of opposition from conservative Islamists. Nobel laureate Mohamed ElBaradei, the secular opposition leader who was reportedly the initial pick for prime minister, was named vice president of foreign affairs, a new position that will make him Egypt’s face to the West.

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Bengali reported from Cairo and Richter from Washington. Special correspondent Ingy Hassieb in Cairo contributed to this report.