One result was that a large share of the MEPI program's grants initially went to governments that didn't resist the effort. Nearly two-thirds of the $103 million spent through mid-2004 went to projects that directly benefited Arab government agencies or helped train existing government officials, a Brookings Institution study last fall found. It said the U.S. spent $6 million to modernize Morocco's trade ministry, for instance, and $2.3 million to improve regulatory systems in nations such as Oman and Saudi Arabia. The program was often "subsidizing Arab governments' attempts to build a kinder, gentler autocracy," the study asserted.
Washington at first didn't intend to apply the program in Egypt, since that country was already such a big recipient of American aid. For Egypt, instead of putting MEPI to work, the State Department just told USAID to place more emphasis on matters related to how government functions. What resulted was a new six-year spending plan that aimed to put 16% of Egypt's annual aid packages into governance work, up from 11%.
The projects -- heavy on judicial reform, media training and women's empowerment -- weren't designed to stir up much dust. And by longstanding agreement, all would have pre-approval of the Mubarak government.
But two U.S. senators pushed the administration, in October 2003, to become more active in trying to seed democratic change in Egypt. Democrat Patrick Leahy of Vermont and Republican Mitch McConnell of Kentucky proposed giving $2 million to Egypt's Ibn Khaldun Center, founded by sociologist Saad Eddin Ibrahim, who holds U.S. citizenship. The Mubarak government had ransacked the center in 2000 and arrested its founder. He then spent nearly three years in jail on charges of defaming the state and taking money illegally from European donors, before being acquitted.
To drive their point home, the senators wanted money for the center to come straight from the $575 million in U.S. economic aid that Egypt was set to receive in fiscal 2004. This would help show "that an important front in the war on terrorism includes the pursuit of freedom, democratic institutions, the rule of law and human rights in countries throughout the Middle East," Sen. McConnell said in a Senate speech.
Egypt's government protested strenuously. It appealed to the U.S. embassy in Cairo, and its diplomats in Washington descended on the State Department and Capitol Hill. Egypt said the senators' move would undermine a decades-long precedent under which aid was funneled through the Cairo government.
The State Department took Egypt's side and sought to dilute offending language in the bill, according to Senate staff aides. After weeks of squabbling, Congress and the administration reached a compromise: The U.S. would give about $1 million to pro-democracy Egyptian groups, including the Ibn Khaldun Center, but only a small portion would come from the preexisting aid program.
Sens. Leahy and McConnell later tried to tie Egypt's future aid to progress on political reform. Egypt again raised a fuss, the State Department again took its side, and the provision vanished.
Still, the senators' push forced a shift in the Washington-Cairo aid discussion. U.S. diplomats in Cairo sat down with Egyptian officials in late 2003 for the first of more than a dozen meetings to hash out the details of how a revamped U.S. aid strategy would work. "They were very difficult discussions," says Marwan Badr, from Egypt's Ministry of International Cooperation. He says his side laid down several stipulations, which the U.S. ultimately accepted: that all activities funded by U.S. grants must be legal; that Cairo must be notified of any grants in advance; and that the U.S. would give money only to groups registered with the Egyptian government.
Agreeing to the last point was no small concession. Egyptian law lets the state monitor all activities of registered groups. It can shut down any that run afoul of government wishes.
Mr. Badr says Egypt put up a fuss simply because of "the principle: You are taking money from our bilateral program and giving it to someone else."
By last fall, the U.S. embassy in Cairo was looking for groups to apply for pro-democracy grants. It phoned some potential recipients, word spread, and nearly 30 groups came forward, with proposed projects. By February, the embassy had picked six to fund.
The State Department originally wanted Secretary of State Condoleezza Rice to award the grants in an outdoor ceremony during her visit to Cairo in early March. But in an unusually provocative U.S. move, she ended up canceling the trip -- to protest Egypt's jailing of an opposition party chief.
The U.S. then held the signing deep inside its diplomatic compound. Ambassador David Welch stepped softly in announcing the grants. "This is entirely consistent with Egyptian law, and the Egypt government is fully informed of all aspects of it," he said.
The announcement caused a ruckus nonetheless, in large part because about $400,000 was going to the Ibn Khaldun Center, long a major irritant to the Mubarak government.