Egypt Snapshot: Why Did US Restore Military Aid? Jobs. (Gaouette/Capaccio)

The Obama Administration may be concerned about the Egyptian regime's crackdown on non-government organisations, including the arrest of US citizens. It may have some thoughts about the suppression of dissent and issues over the political transition after the fall of President Mubarak.

In the end, however, it's the jobs that matter --- specifically, the jobs at US arms manufacturers. Nicole Gaouette and Tony Capaccio write for Bloomberg:

The Obama administration’s decision to begin releasing $1.3 billion in annual military aid for Egypt will avert a disruption in arms sales that might have cost thousands of U.S. jobs and as much as $2 billion in contracting penalties for the U.S. government.

Secretary of State Hillary Clinton, invoking U.S. national security interests,...used her authority to waive congressional conditions on the aid that require Egypt to demonstrate democratic progress. Her decision, assailed by human rights advocates, also took account of domestic factors that are important in an election year.

The administration considered the potential loss of U.S. jobs in Ohio, Texas and elsewhere generated by Egyptian military contracts with companies such as General Dynamics Corp. (GD), which sells M1A1 tanks, and Lockheed Martin Corp. (LMT), which sells F-16 jets, according to State Department officials who briefed reporters on the condition of anonymity. In addition, under the contracting terms, the U.S. government might have been liable for as much as $2 billion if the Egyptian aid money were withheld, according to one of the officials.

“It’s actually quite difficult to shut down that aid because it means jobs for Americans here,” said Ken Pollack, an analyst at The Brookings Institution, a Washington policy group.

National security concerns, including Arab-Israeli peace and the desire to encourage Egypt’s democratic advances, were cited in the waver announcement from State Department spokeswoman Victoria Nuland. The U.S. military is able to fly over Egypt on missions, and the Navy has priority access through the Suez Canal, a conduit for 8 percent of the world’s shipping traffic, including oil tankers bound for the U.S. and Europe.

The waiver decision is “designed to demonstrate our strong support for Egypt’s enduring role as a security partner and leader in promoting regional stability and peace,” Nuland said in her e-mailed statement.

The jobs factor played a primary role as well, according to administration officials who spoke on condition of anonymity. As President Barack Obama campaigns for re-election, he has focused on raising employment.

The Bureau of Labor Statistics reported in early March that 227,000 jobs had been created in February, capping the best six months of job growth since 2006. Yet unemployment remains at 8.3 percent and no modern president has been re-elected with unemployment above 7.2 percent.

“The U.S. economy is trying desperately to get in gear and get moving and there’s a lot of money” involved in the Egypt aid, said Pollack.

While tying domestic economic and political considerations to a foreign policy agenda is nothing new, Clinton has stressed it as a priority during her State Department tenure. Much of her foreign travel involves events to promote U.S. trade, investment and market access, issues she has directly related to the creation of jobs at home.

The Egyptian aid is directly tied to U.S. jobs, as most of the money goes to U.S. defense contractors.

An aid cut-off would disrupt work by Lockheed Martin to build 20 F-16 fighters for Egypt with delivery scheduled this year, Laura Siebert, a spokeswoman for the company, said in an e-mail. The Bethesda, Maryland-based company has been delivering F-16s to Egypt since the early 1980s, she said.

Seibert estimated that there are approximately 570 employees working on the F-16 program at Lockheed Martin, plus workers at suppliers across the U.S.

A cut-off in the aid also would affect Egypt’s contracts to buy 125 M1A1 tanks, which are assembled outside Cairo from “kits” made in the U.S. by General Dynamics with Honeywell International Inc. (HON) of Morris Township, New Jersey, and Allison Transmission Holdings Inc. (ALSN) of Indianapolis, Indiana.

General Dynamics, based in Falls Church, Virginia, is working under a $395 million contract awarded in November for parts deliveries to start in July, according to spokesman Peter Keating. The co-production program began in 1988.

Keating estimates that 107 employees in Michigan, Ohio, Pennsylvania and Florida would be directly affected. Beyond those 107 people are other companies that make and supply parts that General Dynamics uses.

In February 2012, the company conducted a study of the economic impact of its Egyptian contract. Beyond the jobs created and the suppliers employed, the study estimated that the Egyptian contract generates millions of dollars a year in indirect income in Michigan, Indiana, Ohio, New York, Pennsylvania, Oklahoma and California.

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