As Bush visits, U.S. and Egypt grow farther apart

CAIRO (Reuters) - The brevity of President George W. Bush's touchdown in Egypt this week, at the tail end of his Middle East tour, reflects the diminishing importance of the relationship to both Cairo and Washington.

Bush is scheduled to spend about four hours on Wednesday in Egypt, once the cornerstone of Washington's Arab policy and a major recipient of U.S. aid money for the past 30 years.

But the real value of the U.S. aid package has been falling yearly, reducing U.S. leverage over the Cairo government.

Egypt's economy is booming, petrodollars are pouring in from the Gulf and some Egyptians are questioning whether the aid is worth any concessions to the United States.

"You have a juncture where the benefits that have accrued to Egypt because of the relationship have diminished considerably over time," said Shibley Telhami, Anwar Sadat Professor at the University of Maryland.

Egypt, in turn, is no longer as important to the United States as a mediator in the Arab-Israeli conflict and as a logistical gateway for U.S. forces to the Gulf.

The United States provided about $2 billion a year to Egypt for years after it signed the 1979 peace treaty with Israel.

The U.S. aid represented about 1.4 percent of Egypt's gross domestic product in 2006, compared to about 10 percent in 1980.

Investors from the Gulf are using record oil revenues to snap up Egyptian banks and real estate. Oil and gas firms are investing billions for exploration and production in Egypt.

"In all, Egypt has many other ways to mobilize foreign exchange," said Patrick Clawson, deputy director for research at the Washington Institute for Near East Policy. "U.S. aid is no longer essential for that purpose."

MILITARY COMPONENT

The military component of the aid does make a difference, however, by helping to ensure the stability of Egyptian President Hosni Mubarak's government.

Egypt protested last year when U.S. lawmakers threatened to withhold $200 million in military funds, which help Cairo buy military hardware and finance U.S. military training.

"The Mubaraks do not give a damn about the civilian part which has steadily declined," said prominent Egyptian dissident and sociologist Saadeddin Ibrahim.

"But they went bananas when Congress put some mild conditional ties (on the military aid)... The regime is totally dependent on the army's support."

In its regional policy the United States no longer relies so heavily on Mubarak, who in the 1990s used his relationship with former Palestinian leader Yasser Arafat to help negotiate agreements between Israel and the Palestinians.

Egypt permitted thousands of overflights by U.S. warplanes for operations against Iraq and gives U.S. warships preferential treatment in the Suez Canal but the country is no longer as important as it was in accessing the Gulf.

While most analysts foresee no big change in foreign policy under Mubarak, some signs of tension have emerged recently.

Egypt defied U.S. ally Israel earlier this month, allowing Palestinian pilgrims to return to the Gaza Strip without Israeli screening -- a boost for the Hamas government.

"Egypt, which rightly sees itself as a central player in the Arab world, is at a juncture where we are likely to see some big reassessment of the relationship, although it's not likely to happen while Mubarak is in office," Telhami said.

(Editing by Dominic Evans)