Egypt at a Crossroads: U.S. Aid and Gaza Conflict

Egypt at a Crossroads: Navigating Trump’s Gaza Proposal

In January 2025, U.S. President Donald Trump proposed a contentious solution to the ongoing Israel-Hamas conflict in Gaza: the forcible relocation of Palestinians to Egypt and Jordan. At the same time, Trump threatened to withdraw U.S. aid if these countries refused to comply with his plan. This bold proposal has put Egypt’s President Abdel Fattah el-Sisi in a delicate position, forcing the country to balance its historical alliance with the U.S. against its national interests and long-standing foreign policy.

Trump and Sisi’s relationship, while complex, dates back to 2019 when Trump referred to Egypt’s president as his “favorite dictator.” However, the prospect of Trump returning to the White House for a second term has caused concern in Cairo, where the government now faces a difficult decision. Egypt has long depended on U.S. aid, but Trump's demands place the regime in an uncomfortable spot.

The Weight of U.S. Support on Egypt's Shoulders

Since the peace treaty with Israel in 1979, Egypt has been a key player in U.S. Middle East policy, receiving nearly $170 billion in military and economic aid. Of this, $1.5 billion is provided annually, with the bulk of it allocated for military purchases from U.S. defense contractors. U.S. support is crucial in ensuring Egypt’s stability, with military aid particularly seen as essential for the survival of its authoritarian regime.

Despite these ties, Egypt’s history of strained relations with the U.S. shows that it has occasionally weathered such tensions. For example, in the aftermath of the 2013 military coup that ousted President Mohamed Morsi, the U.S. suspended military aid, only for assistance to resume after Egypt garnered support from other international powers such as Saudi Arabia and the UAE.

This history suggests that Egypt could eventually adapt to any reductions in U.S. aid, exploring closer relations with countries like China and the Gulf states. The country has shown resilience, particularly during periods of economic and diplomatic adversity.

Balancing Act: Egypt’s Role in the Arab World and Relations with Israel

Egypt’s 1979 peace treaty with Israel marked a shift in the country’s foreign policy. Although the treaty aligned Egypt with Western interests and ensured peace with Israel, it also led to Egypt’s temporary isolation within the Arab world, with the country expelled from the Arab League until 1989. Under President Hosni Mubarak’s leadership, Egypt worked hard to reconcile its Western ties with its Arab identity, at times condemning Israeli actions in Gaza and Lebanon while maintaining its peace with Israel.

This balancing act has continued under Sisi, but the ongoing Gaza conflict presents new challenges. As the war intensifies, Egypt is faced with potential repercussions, such as increased refugee flows and instability at its borders. The presence of Palestinians in Sinai, a region crucial for both Egypt’s security and its relationship with Israel, has become a particularly sensitive issue.

Gaza Conflict and Its Economic Impact on Egypt

The ongoing conflict in Gaza has placed Egypt under increasing strain. The Egyptian government is particularly concerned about Israel’s potential move to forcibly resettle Palestinians in the Sinai Peninsula—a scenario Cairo has vehemently rejected, viewing it as a “red line.” Historical tensions, particularly a 1955 incident where Israeli forces raided an Egyptian military base in Gaza, have shaped Egypt’s policies regarding Palestinian relocation.

Additionally, the economic ramifications of the Gaza war are becoming evident. The Houthi attacks on the Red Sea in 2024 led to a decline in revenues from the Suez Canal, a critical source of foreign income for Egypt. Despite the country’s efforts to leverage European concerns about mass migration, Egypt’s economy remains fragile, and international financial aid alone cannot resolve its deep-rooted economic problems.

Cairo’s role as a mediator in the Middle East is also facing new competition, with countries like Qatar stepping in as alternative intermediaries.

Trump’s Proposal and Egypt’s Delicate Position

Trump’s plan to relocate Palestinians places Egypt in a precarious position. Agreeing to the proposal would contradict Egypt’s core foreign policy principles and potentially spark unrest within the population. On the other hand, rejecting it could damage Egypt’s relationship with the U.S. and jeopardize the support on which Sisi’s regime relies.

Ultimately, the Gaza conflict highlights Egypt’s long-standing entanglement with the Palestinian issue and the complicated balancing act it must maintain to navigate the pressures from both Israel and the U.S. The coming months may determine whether Egypt can continue its role as a mediator in the Middle East or whether it will be forced to realign its foreign policy priorities.