U.S. Toughens Stance on Mubarak, Reviews Egypt Aid

The Obama administration increased pressure on President Hosni Mubarak to address the grievances of the Egyptian people and said the government’s response to protests may affect U.S. aid.

Mubarak, addressing the nation on television, said he asked the government to step down, making way for a cabinet reshuffle while still leaving him in control. Mubarak defended his response to a situation he described as “critical” and promised he would press ahead with social, political and economic reform.

U.S. President Barack Obama said that he spoke with Mubarak after the speech and that he told the Egyptian he has “to take concrete steps and actions that deliver on that promise.”

“Our first concern is preventing injury or loss of life, so I want to be very clear in calling upon the Egyptian authorities to refrain from any violence against peaceful protesters,” Obama said in a statement televised from the White House. “Going forward, this moment of volatility has to be turned into a moment of promise.”

Earlier in the day ’’ White House press secretary Robert Gibbs told reporters in Washington that the Egyptian people “have reached a boiling point and they have to be addressed.” The U.S. will be looking at its “assistance posture” toward Egypt, Gibbs said.

Stocks Plunge Worldwide

Stocks worldwide plunged the most since November, crude oil posted the biggest jump since 2009 and the dollar rose versus the euro today.

The MSCI World All-Country World Index of stocks in 45 countries lost 1.4 percent at 4:59 p.m. New York time. The Dow Jones Industrial Average fell 1.4 percent to 11,823.70, preventing its longest weekly winning streak since 1995. Oil futures increased 4.3 percent to $89.34.

The dollar appreciated 0.9 percent to $1.3611. Yields on Egypt bonds due in 2020 surged 22 basis points to 6.51 percent. Gold futures jumped 1.7 percent, the most in 12 weeks.

Egypt’s benchmark EGX30 stock index plunged 11 percent yesterday, the most since October 2008, and has fallen 16 percent in the past two days. The country’s bourse, where companies including Orascom Construction Industries, Talaat Moustafa Group and Orascom Telecom Holding SAE are listed, is the biggest in North Africa by market capitalization.

Toughened Criticism

Starting with an early afternoon statement by Secretary of State Hillary Clinton, the U.S. today toughened its criticism of Mubarak’s methods in suppressing protests that pose the biggest challenge to his 30-year rule. Mubarak, in his television speech to the Arab world’s most populous country, defended his methods for restoring order in a “critical” situation.

“For the U.S., any effort on our part to provide support for Mubarak is going to be read in Egypt as support for a crackdown and support for an undemocratic regime,” said Steven Cook, a fellow at the Council on Foreign Relations in Washington. “We need to be forward looking for this.”

More than 80 percent of U.S. aid to Egypt, or $1.3 billion, is in the form of military assistance, according to data supplied by the U.S. State Department. With President Barack Obama in power, military aid has stayed unchanged and economic assistance has been cut to $250 million from $411 million in 2008 with the phasing out of democracy-linked programs.

The amount of money Egypt receives from the U.S. is exceeded only by Afghanistan, Pakistan and Israel, based on the State Department’s budget request for the current fiscal year.

‘Deeply Concerned’

After four days of demonstrations, the top U.S. diplomat for the first time said the U.S. was “deeply concerned” about the crackdown by security forces and police.

“These protests underscore that there are deep grievances within Egyptian society and the Egyptian government needs to understand that violence will not make these grievances go away,” Clinton read out in a statement in Washington. “We think that moment needs to be seized.”

Clinton urged the Egyptian government to “reverse the unprecedented steps it has taken to cut off communications.” Clinton still referred to Egypt, without naming Mubarak, as an “important partner” in the Middle East.

Outside the White House, about two dozen people gathered along Pennsylvania Avenue, chanting “Hey hey, ho ho, Hosni Mubarak has to go” and holding signs saying “Mubarak’s gang burning Egypt” and “the minimum Egyptians demand is ‘Mubarak out.’”

Egyptian Delegation Recalled

The Egyptian government today recalled a 25-member military delegation, led by Egyptian Armed Forces Chief of Staff Lieutenant General Sami Hafez Enan, that was at the Pentagon for meetings, Defense Department spokesman Captain Darryn James said in an e-mail. Enan had been scheduled to meet Jan. 31 with Admiral Mike Mullen, chairman of the Joint Chiefs of Staff and Obama’s top military adviser.

The anti-government demonstrations started on Jan. 25, when thousands took to the streets of Cairo and other cities, inspired by an uprising that ousted Tunisian President Zine El Abidine Ben Ali on Jan. 14. The government restricted Internet and mobile-phone access in the nation of about 87 million people and detained senior leaders of the Muslim Brotherhood, the main opposition group, before the nationwide demonstrations began.

The house arrest of opposition leader Mohamed ElBaradei, the former head of the United Nations nuclear watchdog agency, is an example of “the type of activities that the government has the responsibility to change,” Gibbs said.

Travel Alert

The State Department issued a travel alert today, urging U.S. citizens to put off non-essential travel to Egypt at this time and advising U.S. citizens in the country to defer non-essential movement and to exercise caution. Delta Air Lines Inc. canceled its flight tonight to Cairo from New York’s Kennedy airport.

Nine people died in the Egyptian unrest, Human Rights Watch said yesterday. Four French journalists were arrested today in Cairo, France’s Foreign Ministry said. They were later freed, Al Arabiya television reported.

“Egypt is an important American ally which took brave and bold steps to make peace with Israel,” said Senator John Kerry, a Massachusetts Democrat who heads the Foreign Relations Committee. “Now, President Mubarak faces a different kind of challenge.”

Obama seeks to balance support for what he called, in his State of the Union address, the “democratic aspirations of all people,” given a risk that extremists will dominate, with continued backing of an ally who shows little inclination to relinquish control. Mubarak was a key component of the U.S. president’s efforts to involve influential Arab nations with his Middle East peace plan.

‘Answer is Reform’

“The answer is not tanks in the street,” White House senior adviser David Axelrod said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “The answer is reform.”

Republican Representative Ileana Ros-Lehtinen of Florida, new head of the House Foreign Affairs Committee, said today she was “concerned that certain extremist elements inside Egypt will manipulate the current situation for nefarious ends.”

Fitch Ratings revised the rating outlook on Egypt to negative from stable. The Egyptian government’s dollar bonds due April 2020 fell, sending yields to a record high. Yields on the debt rose 30 basis points to 6.61 percent at 3 p.m. in London, extending this week’s increase to 89 basis points, according to data compiled by Bloomberg.

The cost to insure the country’s debt against default for five years rose 11 basis points from yesterday, to 387, according to CMA prices.

Oil for March delivery increased $3.70 to settle at $89.34 a barrel on the New York Mercantile Exchange. The contract has risen 0.3 percent this week and 21 percent in the past year.