The United States will withhold the delivery of unspecified major military equipment and cash transfers to Egypt’s military-backed government pending progress on democracy and human rights, the U.S. State Department said Wednesday.
State Department spokeswoman Jen Psaki said the U.S. would withhold delivery of certain large-scale military systems as well as cash assistance to the Egyptian government until “credible progress” was made toward an inclusive government set up through free and fair elections.
The U.S. would continue to provide health and education assistance and money to help Egypt secure its borders, counter terrorism and ensure security in the Sinai.
A congressional source said the U.S. would withhold deliveries of Abrams tanks, F-16 aircraft, Apache helicopters and Harpoon missiles from Egypt as it cuts back on aid.
Washington also plans to halt a $260 million cash transfer and a planned $300 million loan guarantee to the Cairo government, the source said, after members of Congress were briefed by officials from the State Department about the administration’s plans.
The U.S. has been considering a reduction of aid since the Egyptian military ousted the country’s first democratically elected leader in July.
The move marks a dramatic shift for the Obama administration, which has declined to label President Mohammad Morsi’s ouster a coup and has argued that it is in U.S. national security interests to keep aid flowing.
It will also likely have profound implications for decades of close U.S.-Egyptian ties that have served as a bulwark of security and stability in the Middle East.
The move follows a particularly violent weekend in Egypt, as dozens of people were killed in clashes between security forces and Morsi supporters.
President Barack Obama’s top national security aides recommended the aid cutoff in late August, and Obama had been expected to announce it last month. But the announcement got sidetracked by the debate over whether to launch military strikes against Syria.
The U.S. provides Egypt with $1.5 billion a year in aid, $1.3 billion of which is military assistance. The rest is economic assistance. Some of it goes to the government and some to other groups. Only the money that goes to the government would be suspended. 
Egypt has other allies who may be able to fill the financial void.
Saudi Arabia and some of its Gulf Arab partners have been a critical financial lifeline for Egypt’s new government, pledging at least $12 billion so far and aiding in regional crackdowns on Morsi’s Muslim Brotherhood.  Egypt’s interim president, Adly Mansour, visited Saudi Arabia Monday on his first foreign trip in a sign of the importance of the Gulf aid and political backing.
The cutoff of U.S. aid also underscored the strategic shifts underway in the region as its allies in the Gulf forge ahead with policies at odds with Washington. Saudi Arabia and other Gulf states, including the United Arab Emirates and Qatar, are strong backers of Syrian rebel factions and were openly dismayed when the U.S. set aside possible military strikes against Bashar Assad’s government. The Gulf states also feel increasingly sidelined as Washington reaches out to their rival, Iran.
The U.S. had already suspended the delivery of four F-16 fighter jets to Egypt and canceled biennial U.S.-Egyptian military exercises.
The next military weapons shipment for Egypt was slated to include the Apache helicopters as well as a number of M1A1 tank kits, including machine guns and other equipment used with the tanks. That shipment also was to involve some used missiles – which have been moved and handled, but not yet fired. They could be used for spare parts by the Egyptian military, or they could be refurbished and fired.
In Cairo, Gen. Abdel-Fattah al-Sisi, who led the military effort that ousted Morsi, described Egypt’s relations with the United States as “strategic” and founded on mutual interests. But he said his country would not tolerate pressure, “whether through actions or hints.”
His comments were in an interview published Wednesday – before the U.S. decision was announced – by the Cairo daily Al-Masry al-Youm.
“We need to be clear here and say they [the U.S.] are keen on continuing the aid and that it is not cut off,” he said. “They are trying to take measures that conform with the spirit of the law and deal with what happened in Egypt as the outcome of popular will.”
A suspension of U.S. aid to Egypt could feed the wave of nationalist sentiment gripping Egypt since the ouster of Morsi and boost the popularity of Sisi, who has not ruled out a presidential run next year. It will also resonate with Egyptians who believe that the United States was sorry to see Morsi go.
The aid decision was getting mixed reviews on Capitol Hill.
Rep. Eliot Engel, the top Democrat on the House Foreign Affairs Committee, criticized the Obama administration’s expected announcement.
“The Egyptian military has handled the recent transition clumsily, but they have begun a democratic transition which will serve the Egyptian people well in the future and have also worked to maintain regional stability,” Engel said in a statement. “During this fragile period we should be rebuilding partnerships in Egypt that enhance our bilateral relationship, not undermining them.”
Others, including some sharp political opponents of Obama, supported the president’s decision.
Sen. Rand Paul, whose bill to halt aid to Egypt was roundly defeated in the Senate in July, said he was happy to see the administration “finally thinking about following the law.”
Meanwhile, an Egyptian court Wednesday announced that Morsi would go on trial on Nov. 4 on charges of incitement while he was in office.  Morsi was ousted on July 3 and has been held incommunicado at an unknown location since, though he has spoken to his family twice and was visited by the EU’s foreign policy chief, Catherine Ashton, and an African Union delegation.
According to Wednesday’s court decision, Morsi will be tried before a criminal court for allegedly inciting his supporters to kill at least 10 people, use violence and unlawfully detain and torture anti-Morsi protesters.