By Spengler *
Muslim Brotherhood signaled its intent on Sunday to push the country into economic chaos.
With liquid foreign exchange reserves barely equal to two months' imports and panic
spreading through the Egyptian economy, the Brotherhood's presidential candidate Khairat
al-Shater warned that it would block a US$3 billion emergency loan from the International
Monetary Fund (IMF) unless the military government ceded power.
"We told them [the government], you have two choices.
Either postpone this issue of borrowing and come up with any other way of dealing with it
without our approval, or speed up the formation of a government," Khairat al-Shater
said in a Reuters interview. 
The news service added that al-Shater "said he
realized the country's finances were precarious and a severe crunch could come by early to
mid-May as the end of the fiscal year approached, but that this was the government's
problem to resolve".
Last week, Egypt's central bank reported that total
reserves had fallen to $15 billion, but - more importantly - liquid foreign exchange
reserves had fallen to only $9 billion, equivalent to just two months' imports. Foreign
exchange futures markets expect the Egyptian pound to lose half its value during the next
year, and Egyptians have responded by hoarding diesel fuel, propane gas and other
With half of Egypt's population living on $2 a day or less,
the expected devaluation would push a significant part of the population below minimum
nutrition levels, and balloon the government's deficit as the cost of subsidizing imported
necessities rose. Egypt imports half its caloric consumption.
The IMF loan was a stop gap to delay devaluation, but the
Muslim Brotherhood's al-Shater made clear that Egypt's dominant political party would
spike it. "It is not logical that I approve a loan that the transitional government
would take for two or three months, then demand that I, as a permanent government,
repay," Shater told Reuters." I have to agree to a loan, somebody else gets to
spend it, then I have to pay it back? That is unjust."
As Egypt headed towards chaotic breakdown, Western
observers asked how its economy might be stabilized. This appears to have been the wrong
question to begin with, for the Muslim Brotherhood will not allow the West to stabilize
Egypt's financial position. The right question is: who will benefit from the chaos?
At this writing, the Muslim Brotherhood appears to be the
winner by default, for no other actor has the courage and cold blood to exploit the
emerging crisis. America, by contrast, is locked into the defense of a deteriorating fixed
position. And Egypt's military leaders are more concerned with feathering their nests in
exile, like the Iranian generals in 1979.
The Brotherhood believes that widespread hunger will
strengthen its political position, and is probably correct to believe this. As the central
government's corrupt and rickety system of subsidies collapses, local Islamist
organizations will take control of food distribution and establish a virtual dictatorship
on the streets.
American analysts mistook the protestors of Tahrir Square
for revolutionaries. The Muslim Brotherhood now reveals itself to be a revolutionary
organization on the Leninist or Nazi model.
The Brotherhood's revolutionary program has been gestating
for some time. As food and fuel shortages emerged in the first months of after the
downfall of president Hosni Mubarak last year, Islamist organizations already began to
fill the vacuum left by the breakdown of the old civil regime.
The Ministry of Solidarity and Social Justice began forming
"revolutionary committees" to mete out street justice to bakeries, propane
dealers and street vendors who "charge more than the price prescribed by law",
the Federation of Egyptian Radio and Television reported on May 3, 2011. According to the
ministry, "Thugs are in control of bread and butane prices" and "people's
committees" are required to stop them.
The government already may have curtailed imports of fuel
and other subsidized items, with fuel supplies down by 35% from normal levels, according
to local UN observers. "It has been three months since a fuel shortage hit Egypt, and
people's patience is wearing thin amid fears the crisis could disrupt the production of
subsidized bread," the UN-sponsored news service IRIN reported from Cairo on April 2.
"The government blames hoarding for the crisis," IRIN adds. "Thousands of
cars queue outside petrol stations from early morning, while long queues form outside gas
Whether the government has anticipated a devaluation by
hoarding hard currency, or the public has anticipated a devaluation by hoarding products
that are bought with hard currency, or both, the result is the same: Egypt is running out
of money and faces a chaotic devaluation. Egypt's political actors appear to have moved
past the question of avoiding the crisis, and are positioning themselves instead to
exploit the crisis.
American policy seems entirely unprepared to deal with this
scenario. America has paid out $75 billion in aid to the Egyptian military since the peace
treaty with Israel in 1979, and continues to see the Supreme Council of the Armed Forces
as the fulcrum of stability in Egyptian politics.
This is a bi-partisan stance. Senators John McCain
(Republican-Arizona) and Lindsey Graham (Republican San Francisco) met with Egypt's Muslim
Brotherhood leaders in Cairo in March, evidently in the hope of persuading the Brotherhood
not to challenge the armed forces' control of the government.
McCain made clear that he wanted to maintain reduce
"tensions" between the Islamists and the armed forces regime, as he said in a
March 30 radio interview in Cairo:
The current tension between the military council and the
Muslim Brotherhood may aggravate the situation in the country in the upcoming period
during which the constitution will be drafted ... I'm deeply concerned about the
possibility of an escalation of tensions and the occurrence of more confrontations and
demonstrations [in Egypt]. However, the more important question is whether the Muslim
Brotherhood will adopt a moderate approach, or if some of its extremist members will be
directing the constitution-drafting process and the [presidential] elections. 
That is the default American position, but it appears to
have become obsolete in the week since McCain and Graham went to Cairo. The Muslim
Brotherhood, contrary to earlier promises, was not content to take over parliament, but
also fielded its own presidential candidate, Khairat al-Shater, and al-Shater showed his
hand on April 8.
As a revolutionary organization that rose under the influence of Nazi Germany's wartime
foreign ministry, the Brotherhood has no qualms about exacerbating Egypt's economic misery
if it furthers its agenda. Paul Berman's 2010 book The Flight of the Intellectuals
summarized exhaustive academic research into wartime archives showing that the Brotherhood
was shaped by Nazi ideology. Berman's report evoked outrage, but has stood up well to its
critics.  The New Republic essay that formed the core of Berman's book is available.
A Muslim Brotherhood consolidation of power on the back of devaluation and food shortages
using techniques of the Bolsheviks in 1917 or the Nazis in 1933 seems the most likely
outcome. There seems to be no plan to avert it, for the power of the military will run out
along with the country's foreign exchange reserves.
The US backed away from a fight with the Egyptian regime over the arrest of American
non-governmental organization (NGO) democracy activists, and pushed through a renewal of a
$1.3 billion aid package.
But a Brotherhood coup in Cairo would have implications through the whole Arab world. As
Issandr el-Armani wrote April 2 at The Arabist:
The US is still putting all of its eggs in the military's
basket, as the recent waiver for aid to Egypt and the backroom deal over the NGO affair
showed. Gulf states like the UAE [United Arab Emirates] are in full-blown anti-Muslim
Brotherhood hysteria, reflecting a wider unease in Saudi Arabia, Kuwait and even Qatar
about a Muslim Brotherhood-led Egypt. 
That is an important wrinkle, virtually ignored by the US
foreign policy establishment. To the extent American analysts have examined the links
between the Muslim Brotherhood and the Saudi royal family, they have concluded that
"the Saudis gained newfound influence with the Muslim Brotherhood and its even more
hard-line Salafis", as John R Bradley argued last October in Foreign Affairs. 
The Gulf monarchies have a reason to fear the Muslim Brotherhood: as opposed to the tribal
monarchies of the Gulf, the Brotherhood rebottles Islamic radicalism in the form of a
modern totalitarian revolutionary party. If Egypt starves, the cry will go up from Cairo:
"Our brothers lack bread and the corrupt House of Saud spends in wealth on whisky and
Gulf State officials have made no secret of their alarm. Egypt Independent columnist
Sultan al-Qassemi  reported on February 2, "In a widely circulated video recording
of a recent speech in Bahrain, Dubai's police chief, who enjoys close relations with the
country's prime minister, warned against the Muslim Brotherhood, stating that their
'threat to the region was just as serious as that of Iran's."
A potential conflict between the Gulf States and Egypt will further add to centrifugal
tendencies in the region. They are allies against Iran, but prospective competitors, and
deadly ones. The Muslim Brotherhood's efforts to wrest control of Syria from the
Iranian-allied Assad family may push the the conflict into an entirely new dimension.
Insufficient attention has been given to the prospective collapse of Syria as a motivation
for an Israeli strike on Iran's nuclear program. In the past several days, Israel has
sounded public warnings regarding Syria's chemical weapons stockpile, estimated to be the
As the Financial Times wrote on March 22, Israel has "profound concern that parts of
Syria's vast stockpile of arms, including long-range missiles as well as chemical and
biological weapons, will end up in the hands of militant groups in Lebanon or elsewhere.
 Speaking to the Israeli parliament this week, Ehud Barak, the defense minister,
emphasized the short-term dangers posed by turmoil in Syria. 'We are monitoring events in
Syria, with an eye on any efforts to transfer weapons that would alter the balance ...
Events in Syria increase the uncertainty and the need to prepare for any scenario,' he
Israeli officials warn that an even graver risk would emerge if Iran were to intervene in
Syria with regular forces to support the Assad regime, perhaps in response to actual or
perceived Western backing for the Syrian opposition. In that case, Iranian regular forces
might have control over Syria's chemical weapons, and with it the capacity to retaliate
against any Israeli strike against Iran's nuclear capacity.
There has been extensive mention of Syria's chemical weapons capability in the usual
outlets, for example, Foreign Policy's Middle East Channel blog.  But there has been
virtually no mention of what should be the greatest source of concern. Deterrence has
always worked with the Assad regime: if Syria were to use chemical weapons against Israel,
Damascus would be turned to glass.
The Assad family does not want that to happen, but the mullahs in Tehran do not care much
one way or the other; they have never liked Arabs to begin with. If Iran gains control of
some part of the chemical stockpile, it gains a retaliatory capability against Israel
outside its own borders, and that is something Israel cannot tolerate.
American policy rests on three legs: Use a combination of threats and incentives to
stabilize Syria. Rely on the military council to stabilize Egypt. Use the stick of
sanctions and the carrot of a civilian nuclear energy program to persuade Iran to stand
down from what is widely perceived as nuclear weapons development.
It appears that Washington hasn't a leg to stand on. The Middle East is heading for chaos,
not least because the dominant political force in the most populous Arab country, Egypt' s
Muslim Brotherhood, believes that chaos will work to its advantage.
As traditional American policy tools fail, the alternative to promoting stability is to
manage instability. That is a task for which Americans lack the required cultural skills
and iron stomach. But they will have to learn fast.
If the Muslim Brotherhood proposes to gain from an economic crisis that transfers power
from the old civil institutions to revolutionary organizations on the street, the obvious
riposte is to intensify the crisis, so that the revolutionary organizations cannot manage
it: to fight fire with fire, and discredit the Muslim Brotherhood.
Notes 1. See here.
2. See here.
3. See here.
4. See here.
5. See here.
6. See here.
7. See here. 8. See here.
9. See here.
Spengler is channeled by David P Goldman,
president of Macrostrategy LLC. His book How
Civilizations Die (and why Islam is Dying, Too) was published by Regnery Press in
September 2011. A volume of his essays on culture, religion and economics, It's Not the End of the
World - It's Just the End of You, also appeared this autumn, from Van Praag Press.
This article first appeared at Asia Times.