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U.S. holds up aid to Egypt

WASHINGTON How to deal with Egypt since the military coup has been one of the most vexing foreign policy questions for the Obama administration, and a policy shift appears to be under way.

Hundreds of millions of dollars in military aid to Egypt is being held back. Of the $1.3 billion in foreign military financing that the U.S. gives each year, around half has already been handed over. The remaining $585 million has been effectively suspended, instead of being released into an Egyptian government bank account in New York.

The administration stresses that the hold does not indicate a decision has been made to halt all military support.

"Reports that we are halting all military assistance to Egypt are false. We will announce the future of our assistance relationship with Egypt in the coming days, but as the president made clear at U.N. General Assembly, that assistance relationship will continue," said National Security Council spokeswoman Caitlin Hayden.

The funds are in flux while the administration decides whether to hold on to the already-pledged money as leverage, or to spend parts of it. The White House is also mulling how to fulfill existing contracts held by U.S. defense companies that sell military hardware to the Egyptian military. Congressional sources say the administration has not yet informed them how it will handle the wind-down of those funds, or whether some of the money will be used to fund projects deemed important to U.S. security interests.

The administration is withholding the bulk of the remaining aid due to the actions of the Egyptian regime. Since the military ousted President Mohammed Morsi from power in July, hundreds of people have died in political violence. Last Sunday, 59 people were killed. In the last three months, the military-led government has arrested nearly 2,000 people, mainly Morsi supporters.

The United States has consistently urged the Egyptian government to hold elections soon and make democratic reforms. Neither has happened, and the violence has escalated.

The administration is walking a fine line: It does not want to cut off its relationship with the Egyptian military, but it also won't accept the status quo.

The failure to immediately cut off U.S. aid in July was perceived by many in Cairo to signal American acquiescence in the overthrow of Morsi.

"The administration seems to be trying to preserve near-term cooperation while figuring out the long-term trajectory of Egypt," said former State Department official Tamara Wittes, currently with the Saban Center for Middle East Policy at Brookings Institution.

Wittes warned that, without a clear articulation of a shift in U.S. policy, this could be received the same way.

In his U.N. address two weeks ago, President Obama acknowledged the importance of the U.S. relationship with Egypt, but he said the future of U.S. aid was in question.

"The United States will maintain a constructive relationship with the interim government that promotes core interests like the Camp David Accords and counterterrorism," he said. "But we have not proceeded with the delivery of certain military systems, and our support will depend upon Egypt's progress in pursuing a democratic path."

On Tuesday, State Department deputy spokeswoman Marie Harf said no final decisions had been made, but the policy is under review. She said the U.S. would try to decide how it can, "best support the Egyptian people and help move Egypt back toward a democratic process."

It is not clear whether a suspension of U.S. aid would provide the necessary leverage to facilitate that change. Other countries have provided new financial aid to Egypt, including oil-rich Gulf countries which have pumped in $7 billion worth of funds.

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