Washington Matters


Obama, U.S. Will Feel Fallout from Egypt

David Morris

After Mubarak, oil prices and tensions will rise.



Egyptian President Hosni Mubarak is finished. It’s a question of when, not if.

Even if he can outlast the strident protests for political rights and economic stability -- a seemingly unlikely scenario at this stage -- he’ll be gone by next fall.

No matter what, there are big questions ahead for the United States and for the Obama administration, which has been walking a tightrope between pushing for democracy and backing an old friend who has been an ally in the fight against terrorism.

For the U.S., the worst possible outcome is for the unrest to play out for an extended period, with Mubarak hanging tough and with no end in sight. Extremists could take a larger role in the protests. Ship traffic through the Suez Canal could grind to a halt. Anti-American sentiment could turn from a simmer to a boil. And the protests could expand to other parts of the Arab world.

One certain result of that path: Higher oil prices.

Advertisement

Egypt is not a major producer, but it is a major player in the oil business because of the Suez Canal. According to the U.S. Department of Energy, more than a million gallons of oil -- crude and refined -- pass through the canal each day. A similar amount travels through a trans-Egyptian pipeline from the Red Sea to the Mediterranean.

That oil wouldn’t be lost, but it would be delayed and would be more costly to ship, which would bump up prices. But with it accounting for 2% of the daily supply, we shouldn’t see soaring prices that would undercut the world economy.

Oil would become even more of a problem if the protests spread elsewhere in the region, especially to Saudi Arabia. At first glance, that seems a remote threat. The Saudi government has generally treated its subjects better than many other governments have treated theirs. But the potential exists, and you can bet folks at the State Department and elsewhere in official Washington are watching closely.

A second scenario with a big potential downside would play out if Mubarak left or was driven from office and quick elections were called. Egypt has had a farce of a political system in place for so long that opposition parties are nearly nonexistent. To wage an organized, credible campaign takes time. Rushing an election would boost the chances of winding up with a radicalized government that pays less attention to the U.S., writes off Israel and undercuts world security.

The third path, and the one that seems most likely at the moment, is for Mubarak to announce that he will step down and to call elections for September or later in the fall. This is the outcome that the White House and Secretary of State Hillary Clinton are pushing. In the language of diplomacy, you can’t come right out and directly say something like, “Mubarak is out of touch and he’s no longer useful to us, so he should quit.” But even the indirect statements that Clinton and the White House have been issuing since the weekend have made clear that American officials are no longer willing to stand by their man in Cairo.

A fall election, with neither Mubarak nor his son on the ballot, would still present challenges to the U.S. For starters, any new government in Egypt is likely to be less friendly to America than Mubarak’s regime has been. The frostiness of the new relationship is likely to hinge, in large part, on the post-Mubarak government’s views toward Israel. No matter who runs the country, Middle East peace prospects will be dimmer.

Second, even a peaceful transition will bring with it months of uncertainty, not only leading up to the elections but also at the start of the new government. Oil prices are likely to bounce up and down -- mostly up, if history is a guide -- throughout. Oil traders don’t need a real crisis to raise prices in the short run. The mere hint of one will do.

Still, for now, it seems that the end game in Egypt will be far less troubling for the U.S., in the long run, than was the collapse of the shah’s regime in Iran more than three decades ago. Given the potential for worse outcomes, that may be about as good as it gets.



Editor's Picks From Kiplinger


You can get valuable updates like Washington Matters from Kiplinger sent directly to your e-mail. Simply enter your e-mail address and click "sign up."

More Sponsored Links


DISCUSS

Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy


Advertisement

Market Update

Advertisement

Featured Videos From Kiplinger