A Salafist Fatwa Blocks International Credit over Forbidden Interest

While trying to perform creditably as the leader of the most populous Arab power of 85 million inhabitants, Egypt’s President Mohamed Morsi is dragged down by his country’s tragic condition: Egypt is bankrupt. He has spent the last few weeks, cap in hand, scrounging for crumbs which more affluent world leaders may be willing to cast his way.
This week, Morsi made a detour to Beijing on his way to Tehran in the hope of loosening Chinese purse strings. He reminded Chinese leaders of their promise to invest $4billion in Egypt and mentioned their consent to “nuclear cooperation” with Egypt – a euphemism used by Arab and Muslim rulers when referring to deals for China to develop uranium enrichment projects for building nuclear weapons. Only the Saudis and Turks have so far carried off this kind of cooperation with success.
Wednesday, Aug. 29, Chinese Vice President Xi Jinping told his Egyptian guest that China “places “tremendous value on his visit.”
That value amounted in dollars and cents to $200 million in credit, a paltry scrap that would soon disappear in what diplomatic and financial circles call “the bottomless pit of the Egyptian economy.”
On arrival in Tehran Thursday for Leader's Day at the Non-Aligned Movement’s summit, he explained to his Iranian hosts he could only stay four hours before departing for Cairo.

Egypt is in desperate need of US aid

As the first Egyptian president to visit Tehran since 1979, when Iran broke off relations with over Cairo’s peace treaty with Israel, the Iranians had planned to hype Morsi’s visit up with meetings with their leaders and high-profile foreign participants.
But DEBKA-Net-Weekly's sources in Washington report that a four-hour stay was the Egyptian president‘s limit. The Obama administration had demanded that he refuse the invitation to Tehran. But when, in tough negotiations, he explained he could not afford to be absent from the Non-Aligned Summit of which Egypt was chairman until the Tehran conference, US officials said that four hours would be enough for him to make a speech and leave.
Morsi had no option but to agree. It was also implied that if he proposed to use his Tehran visit for détente or resumed diplomatic relations with the Islamic Republic, he might have to forego a visitor to Cairo whom he desperately needed to see.
And indeed, Tuesday, two days before his trip, US Undersecretary of State for Economic Affairs Robert Hormats kept his date and arrived in the Egyptian capital for resumed negotiations on an economic aid package for keeping the government in Cairo afloat for the next four months.
He came on the heels of the International Monetary Fund’s Managing Director, Christine Lagarde. When she met Morsi in Cairo Aug. 22, she told him the IMF was willing to positively consider the Egyptian request for a $4.86 billion loan at low 1.5 percent interest. It was agreed that an IMF technical team would come to Cairo in September to discuss the technical details of this loan.

The Salafis’ credit crunch

But that life-saver for the Egyptian economy began fading too because of a top-secret snag revealed here for the first time by DEBKA-Net-Weekly's Middle East and Washington sources.
Shortly after Ms Lagarde left Cairo, threatening messages from Salafite leaders were handed in to the offices of the president and prominent Muslim Brotherhood figures, warning them of a secret fatwa against accepting the IMF loan, because it carried interest – in violation of Muslim precepts.
If the president nonetheless accepted IMF terms for the loan, the Salafists would publish the fatwa and proclaim from every Muslim rooftop that Mohamed Morsi and the Muslim Brotherhood of Egypt were in violation of Muslim tenets.
Oddly enough, Obama officials sympathized with their predicament. Undersecretary Hormats was given the job of concocting a financial mechanism for bypassing interest payments on the IMF loan in order to appease the ultra-pious Salafis.
This was the formula he came up with: The Egyptian government will ask the US to forgive the $3.2 billion debt that Egypt owes the US, and to allocate $1 billion to open credit lines for Egyptian goods or to ensure Egyptian bonds issued internationally.
That’s life in the Middle East after the Arab Spring.

Print Friendly, PDF & Email
Font Resize
Contrast