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A Conversation with Ahmed Aboul Gheit [Rush Transcript; Federal News Service]

Speaker: Ahmed Aboul Gheit, Minister of Foreign Affairs, Arab Republic of Egypt
Presider: Thomas R. Pickering, Vice Chairman, Hills & Company
April 18, 2008
Council on Foreign Relations

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THOMAS R. PICKERING:  (In progress) -- and other wireless devices.  I will make sure that you will be embarrassed if they ring.  (Laughter.)

I'd like to remind the audience that today's meeting is on the record.  The meeting will, as I said a moment ago, have to end a few minutes early to permit the minister to meet his schedule.  Please, I ask you all to remain seated at the end of the meeting until Minister Aboul Gheit has left the room.

The meeting will be conducted with a conversation between the minister and myself for part of the time, and then I will turn to all of you for your questions, at which time the council has told me I will have more instructions for you on how to conduct that portion of the meeting.

It's a pleasure to welcome you all here, and even greater pleasure to welcome a colleague and a very old friend of the United States, Minister Ahmed Ali Aboul Gheit of Egypt.  He has had an extremely distinguished career.  He shares with me both the pride and pleasure and some of the difficulty of having served in New York from time to time.

AHMED ABOUL GHEIT:  And the Soviet Union, too.

PICKERING:  And in Moscow -- and also in Macedonia and Italy, neither of which I ever got to, but both of which were interesting --

GHEIT:  (Inaudible.)

PICKERING:  -- and challenging places.

GHEIT:  -- yesterday.

PICKERING:  I suppose there is still time.

GHEIT:  I'm sure.

PICKERING: In introducing the minister, I want to tell you first that his career is contained in his biography in the handouts you have.  I will not try to reprise that for you.  But I will say that it is extremely important to know and understand how significant our relationship with Egypt has been over all the years, but particularly since we resumed relations back in the early 1970s after they were cut off following the Six-Day War.

I had the opportunity to work for Dr. Kissinger in those days, but I knew and immediately understood, both during my service in Jordan and in Israel, how very significant it was that Egypt was both a partner -- and I would put it this way, an advisor, counselor and friend -- of the United States in the long, difficult, still taxing and still uncompleted search for peace in the Middle East.

It is to that region, and indeed to that subject, that I'd like at least to open our conversation, Mr. Minister.  I think that in many ways, it would be extremely valuable for us to have from you -- if you would be kind enough to give it to us -- your sense of where the situation now stands in the region and how Egypt looks at that situation.  What thoughts and ideas do you have for where this process can and should go?

GHEIT:  Are you focused solely on the Middle East problem -- the Palestinian-Israeli -- or the wider region?

PICKERING:  Well, I can't resist the invitation to have you tell us everything you know.  (Laughter.)  So you're perfectly free to answer that question in any way you like.  And I am not the press and I will not harass you.

GHEIT:  Very good.  I will speak my mind, but I will not tell you everything I know, because we are on the air.  (Laughter.)

But what I want to say is as follows:  We in that region are witnessing very difficult times.  Why is it so?  Let's assume the location of Egypt.  We have a region in turmoil around us.  We have the Palestinian-Israeli dispute that is not yet resolved -- trying to do something there.  We have a country like Lebanon, paralyzed by internal difficulties.  We have a country like Iraq in difficulty -- the least to say.  We have a Palestinian national movement that has been cracked between two forces.  And we have the situation in relation to Iran with all the difficulties that are emanating from the Iranian nuclear file and the ramifications of that nuclear file in relation to the West, as well as in relation to the specific problems we touched upon.

Then, to the south of Egypt you have a country like Sudan, also passing through difficult times.  There has been a civil war, but at the same time, that civil war north-south had resulted in ending of the hostilities, having an agreement -- an agreement that is being implemented and by the year 2011, the Sudanese people will decide in a referendum whether to continue in that union or not.  If they do not continue in the union and you have a separate south, then that will also trigger major developments in that part of the world.  And we have Darfur with the spillover between Darfur, Sudan on one side and Chad.  Then you have Somalia -- the Horn of Africa. 

     And in the context of all of this, you have also the problem of the rise of fundamentalists and activists -- Islamists -- trying to spread their ideology.  And that's what we call the outer tier of the Arab-North Africa countries.  So you have countries such as Chad, Niger, Central African Republic, up to Mauritania.

     So that is a region where we live in and we are responsible -- trying all the time to stabilize that region, to ensure that no war erupts, to ensure that the Palestinian-Israeli dispute that has been tormenting all of us for the last 60 years comes to an end in a just manner for the Palestinian people.  And there, Egypt puts lots of its own resources and its own diplomatic activity trying to ensure that both sides -- Israelis and Palestinians -- would reach that point where they can implement what President Bush spoke about whether in the United Nations or in the resolutions of the Security Council and the General Assembly -- two states living side by side and peace and security for both.  And that is most important -- two states living side by side and peace and security for both.  And there we are faced, of course, with a difficult situation, because the Palestinian national movement has been cracked between Hamas and the Palestinian Authority.

     That is the characterization of the region we are living in right now, but Egypt is big enough -- stability and modernity at the same time.  To give you a kind of -- why do we say stability?  Because Egypt follows moderate policies aiming at ensuring peace, but also development.  And the Egyptian economy today is making 7.2-7.3 in annual growth.  And how would you judge this?  You judge this by the number of mobile phones that are acquired every month.  Yes!  (Laughter.)  Yes, every month -- strangely -- we are increasing our consumption of mobile phones by 900,000, meaning today we have around 31 (million) to 32 million mobile phones for a nation that is 76 million people.  So that is the answer. 

     In 1998, the Internet users in Egypt did not exceed 40,000.  Today, we have 11 million Egyptians, and it is not censored.  Today, we have in Egypt the NileSat that puts in the air everybody who wants to put anything on the air, meaning an Egyptian today can see or follow 500 satellite TV stations.  So it is an open society that wants to embrace modernity and to work for the stability and peace of the region.

PICKERING:  Thank you, Minister.

Let's turn, if we can, to the peace issue that I think you described for us and outlined.  I think we all probably know within some reasonable range what the compromise has to look like to make this happen -- a two-state solution, certainly, critical questions to be resolved with respect to security, Jerusalem borders and refugees.  We know the major issues.  We know that the big impediment is to motivate the governments to move in this direction.  And in the case of the Palestinians, you mentioned the fracture line that has certainly appeared and is very large. 

Over the past months, at least the grapevine tells us that Egypt has been working to try to find a way to repair the fracture line, if not in Mecca or (Sumna ?), somewhere.  Is a unified Palestinian effort required to make an effective peace?  And if so, how will you and your friends in the region be able to help to make that happen?

GHEIT:  Let me tell you, today the Palestinian Authority and Israel are negotiating, and they are trying to reach a certain arrangement or an agreement before the end of 2008.  But while that negotiation is taking place, we see that in Gaza there is a different authority or a different group of organizations run by Hamas who are contesting the negotiations that are taking place, objecting to, as well as, at the same time, engaging the Israelis in a firefight.

So what are we doing there?  We felt that if the situation would continue as such, then the Israelis and the Palestinians, the Palestinian president and the Israeli prime minister, will not be in a position to negotiate in a manner that they would not be completely free because of the pressure, the contest that is taking place between Hamas and Israel and Hamas and the Palestinian Authority. 

So the Egyptian approach is we cannot, for the time being, work for back to the original national unity government.  Our assessment is that that national unity government will not develop back to the original now, for the time being.  But instead, let's go forward to establish a period of quiet.  The Hamas wants to call it a period of quiet, and that sets well with Israelis because they do not want to breach written agreements, a signed written agreement with Hamas. 

So we speak to both Israelis and Hamas.  And the idea is let's have that period of quiet where you, Hamas and jihad and every organization that is within the parameters of Gaza, you do not fire missiles and you do not fire on the Israeli cities or the Israelis.  At the same time, the Israelis will be bound not to target Palestinian activists inside Gaza or fire on Gaza.  There will not be targeted killings or assassinations or what have you.  That is one element.

Second element, there would be an exchange of prisoners.  You know that there are possibly between 10(,000) to 12,000 Palestinian prisoners in Israeli prisons.  So the Palestinians, at the same time, they have an Israeli soldier by the name of Gilad Shalit.  So the Egyptian approach is let's facilitate an exchange where the Israeli soldier is delivered to the Egyptians, they take hold of him and they give him to the Israelis.  And he is still alive.  Our information and whatever we have, he is still alive.

At the same time, there will be a release of possibly a figure around 400 Palestinians.  How are we to name them or to target them?  The Palestinians will be giving lists.  The Israelis will be taking out whoever is to be released.  Or vice versa, the Israelis will put the names to the Palestinians and take them.

A third component is to allow the crossings between Gaza and Israel to be opened and to function according to arrangements that have been agreed upon between both the Authority and the Israelis with the presence of European observers and with the observation of the United States and us.  If the crossings are to be opened, then we would ensure that flow of goods, of people, of material, of everything is allowed, and the Palestinians in Gaza will not feel deprived as they are right now. 

If that is to take place and a period of quiet is established between both, then I think and we think that would lead to a kind of situation that would allow the Palestinians and the Israelis to negotiate and reach agreements soon.  Where are we on that project?  We are making good progress.  But the difficulty we face is that often -- often -- certain trends inside Israel would challenge the idea, and certain trends inside Gaza would challenge the idea.  And maybe -- maybe -- there would be also a foreign element, a foreign element that --

PICKERING:  I can't guess where that might come from.

GHEIT:  You guess right.  (Laughter.)

PICKERING:  Mr. Minister, thank you for that very comprehensive and very useful explanation of what you're trying to achieve and where you attempt to go.  And I congratulate you on your initiatives.  And obviously, we all wish you success.

This morning, coming into work, I had the pleasure of listening on National Public Radio to a debate on the subject of Hamas.  And two very authoritative and intelligent and well-versed Americans were arguing.  And one was arguing that Hamas will never change, it will always remain a terrorist organization, it will always seek to be military in its approach to this particular issue.  And it should be marginalized and isolated and cut away, and that everything should be done to build up the Palestinian Authority, Abu Mazen. 

The other argued that it's inevitable that over a period of time, Hamas will have to be taken into account, but it is not now the time to do that.  You on the other hand have just laid out a very positive expression of views which at least incorporates some element of Hamas in Gaza having to cooperate with the Fabia Comming (sp) or hudna of some kind, a cease-fire for a limited-time basis.

What is your confidence, Mr. Minister, that Hamas represents something that can come into this process and shouldn't be isolated and shouldn't be put at arm's length?  And how do you explain to Americans who are convinced otherwise, some of whom I know you will be meeting shortly, that that is not the appropriate view?

GHEIT:  Let me tell you the following.  Hamas has been elected in open elections where they received the majority.  So they are a democratically elected group of Palestinians.  The moment they have been elected, they have been opposed almost universally.  So they went to democratic elections.  They won.  They were opposed.

Strangely --

PICKERING:  They were opposed externally --

GHEIT:  Yes.

PICKERING:  -- not by the people who elected them.

GHEIT:  No.

PICKERING:  No.

GHEIT:  But strangely, with that haggling between Hamas and Fatah, and with the pressure building up on them, strangely, they carried a coup d'etat and they took power in Gaza, where they were representing the government in Gaza.  And that is the irony of the situation.

Hamas will face the possible future scenario.  You will have the Authority -- the Palestinian Authority -- and the Israelis hopefully reaching an agreement.  That agreement will establish the state of Palestine and will render security to Israel.

That agreement, as it is reached, hopefully within the bounds of 2008, hopefully, the proposition is let's put that agreement to a referendum.  And as we put it to a referendum and the Palestinian people will look into the suggested settlement, they will decide whether they want to proceed with that agreement or they object to it.

If they object to it, then it is a disaster because the conflict would extend over time.  But if they would accept, as I'm sure they would, if it is a just settlement, then they will say, "Okay, we accept to implement whatever agreement."  Then the pressure will build up on Hamas.

And also if the idea of further elections to take place, then they will have to contest the elections.  And that moment people will tell Hamas, "Listen, the independence of the state of Palestine is emerging.  We will have a state of our own.  You will relinquish the gun and (you go for ?) politically.  And then the militia will have to be disbanded.  Lay down your arms and go for a political course."  Hopefully that would happen.

But the original idea with Hamas right now, they have two trends -- a trend that will continue the fight and the confrontation with the Israelis until we achieve the objective; and there is a different trend that says, "Well, if given a state on the basis of the alliance of 1967 and Jerusalem, if Jerusalem, the Palestinian-Arab Jerusalem, then we will go for what they call an extended hudna."

An extended hudna is, they say, 10 (years), 20 years.  In 10 (years), 20 years, new dynamics would have been played to the point that there will not be a reverse of the situation.  So both ways, an agreement or an extended period of hudna, if accepted, then it will play a positive thing.

But I think, over time, Hamas will have to change, because by not changing, then they are damaging prospects for the Palestinian peace.

PICKERING:  You're optimistic.

GHEIT:  Not necessarily.  (Laughter.)  I am optimistic on the final destination --

PICKERING:  Yes.

GHEIT:  -- on the final destination.  I know that people cannot continue fighting with each other for centuries.  There will have to be a point where people will end that fight, especially if you look to both.  And I often look to both an Israeli soldier holding the neck of a Palestinian youth.  They look alike.  They are almost the same in features and in everything.  They are cousins.

But the decision has to be made, I think, in Israel.  Are they ready finally to push for a settlement where a Palestinian state, a neighbor, would emerge, or they are still skeptical, still sensitive to the idea of a neighbor, and possibly the geographic security concerns, if they in Israel decide that "This is the course we will take," and that we'll call for a strong hand, strong leadership, then we will be there, because I think those who have been engaged in discussions on the Palestinian-Israeli conflict and the attempts that have taken place over the last 30 years, since Kissinger's commitment, I think we can draft an agreement that is just within half a day.  We can.  And those who are experienced enough amongst us would draft something in 10 paragraphs that would lead and put the course of a settlement that would be drafted in 100 pages or 1,000 pages to follow.

PICKERING:  Thank you, Minister.  I won't ask you now whether we'll meet President Bush's objective of having either a framework or a complete agreement during the life of his presidency.  But whether we reach that objective or not, the next administration will have to deal with this issue.

What's your advice to America to make the kind of process you speak about work effectively?

GHEIT:  Very simply.  Put an effort, determination, and do what is required.  And at a certain point in time, both parties will need your intervention with your own ideas as a just settlement.  That happened in Camp David in '78.  I was there.  I was a junior diplomat there with the Egyptian delegation.

And President Sadat offered the Israeli prime minister his plan, so the Israelis responded by a plan.  And the Americans said, "Your plan will not play and your plan will not fit.  Let me, the United States, offer you my ideas."  And we kept working on the ideas.  And within 11 days, we had an agreement, the framework that triggered the Egyptian-Israeli peace treaty.  And, sadly, it could have spilled over into the Palestinian settlements.  It didn't.

PICKERING:  My final question to you, before we turn to the audience --

GHEIT:  Do we have to return to the audience? 

PICKERING:  Sure.  (Laughter.)  This is still a democracy, even in the Council on Foreign Relations.  (Laughter.)

Let me ask you, sir, where is Syria?  What should we be thinking about Syria?  Where is Syrian-Israeli peace, in your mind?

GHEIT:  My information is that Syria and Israel are probing each other on possible understandings, agreements.  It is not the first time. 

PICKERING:  No.

GHEIT:  They have been engaged in 1999, in discussions then -- eight or 10 years ago.  It is a possibility.  But the issue is -- again, it is Israel.  Is Israel capable of negotiating on two fronts at the same time?  Would they negotiate on two fronts?  Would they try to play one front against the other?  That is the question.  But the Syrian track I think is much easier than the Palestinian. 

PICKERING:  Closer together.

GHEIT:  A lot also depends on the way the United States looks at that track -- whether the U.S. wishes to see that track active or not.  That does not mean that Israel is subject to American will -- I'm not saying so.  But it is the way things are interacting.

PICKERING:  Thank you, Minister.

Now let me turn to invite the council members who are here today to join the discussion.  When I recognize you, please wait for the microphone and speak directly into it.  Please stand and state your name and your affiliation.  Please keep your questions and comments concise to allow as many speakers as possible to speak.  And I will then intervene only if you get too discursive, and only then to close the meeting.

I see both Arnaud and Barbara have their hands up, and so, Barbara, please -- both members of the press but also members of the council.  Barbara?

QUESTIONER:  Hi.  Barabara Slavin with the U.S. Institute of Peace this year.  Very nice to see you here when I'm not jetlagged, since it's usually in Cairo.

GHEIT:  I'm jetlagged.  (Laughter.)

PICKERING:  You show no sign of that.  (Laughs.)

GHEIT:  I woke up today at three in the morning.

QUESTIONER:  Well, I'll be gentle.  I'll ask you an easy question.  (Laughter.)

GHEIT:  Thank you.

QUESTIONER:  The question is about the relationship between Hamas and Iran.  How do you see that relationship?  Is it really strong?  Is it something that can last?  Is it opportunistic on both sides?  And how much of an impediment is it to a settlement?  Thank you. 

GHEIT:  That is a very sensitive question.  However, I will try to be subtle, and I will try also to answer.

Hamas keeps claiming that they are not within the grip of Iran.  They insist that they have their own relationship with Iran, but at the same time they are a free agent, meaning they have their freedom of action and movement in whatever they do. 

It is rumored that Iran is financing lots of the needs of Hamas.  It is also rumored that Iran is helping Hamas to meet its obligations inside Gaza when it comes to payment of salaries and wages. 

When you pay, and if you have a position that you want to defend, maybe you speak to your friends who received your assistance.  Often the friends listen to the advice.  Period. 

PICKERING:  Arno, do you want to take your question?

QUESTIONER:  Arnaud de Borchgrave, CSIS.  Sir, could you give us your view of what's going on in Iraq and where you come down in this debate about whether we should stay or leave?

GHEIT:  Arnaud affected my understanding of diplomacy very early -- (laughter) -- in the '70s.  Once I was working with the Egyptian foreign minister then, and here it is the correspondent to Time or Newsweek -- Newsweek? -- sends President Sadat 10 questions and 10 suggested answers.  (Laughter.)  And that was for me a revelation.  I didn't know that it was done this way.  I did it for so many other foreign ministers when I was working with them.  (Laughter.)

But to tell you about Iraq:  Iraq I think sadly is still in a very messy situation, and that messy situation will stay with us possibly for half a decade if not a decade.  Iraq is threatened by disintegration, possibly partition, still, despite the fact that we have a government and we have an army and we have police forces and we are trying our best to rebuild the state of Iraq.  But the presence of the militias is the threat to everything that America or Iraq is trying to do.  When you have different militias contesting a country and armed forces that are not able to disband and disarm the militias, and foreign presence that is necessary to ensure that the country does not implode, and at the same time a foreign presence that is inciting people to fire on it, then you have a most difficult situation.  And we have to be very careful, and we have to measure every move we take or we embrace in order not to have finally a civil war that cracks Iraq into more than one entity.  It needs lots of steady hands, patience, perseverance, and you cannot leave. 

America cannot leave for the time being.  There are those who are saying, "Well, let them fight it out -- the Iraqis themselves."  It will not be limited to Iraq, and it will be millions of people losing their lives. 

You went there, so you will have to stay until you help in the stabilization of that country.

PICKERING:  Jim Moody?

     QUESTIONER:  Jim Moody, Merrill Lynch.  Mr. Minister, thank you for your wonderful vision and concepts that you started with.

There's been quite a bit of criticism here in the United States about Israel continuing to build in the occupied areas -- the settlements.  Does Egypt take a position on that?  And if so, do you communicate that to the Israeli government?

GHEIT:  Absolutely.  You see, the Israelis are reminding us all the time by that notion, having the cake and eating it too.  Meaning, they are seeking to have a settlement toward the Palestinians -- and they are talking about a piece of bread, and they are continuously eating from that piece until, at a certain point in time, there will not be the possibility of the Two-state concept. 

You, and the international community, and Israel itself should not allow certain trends, internally, to continue building settlements, or expanding settlements because it destroys the basis for a settlement based on the Two-state concept.  If the Israelis will continue to do so, we will discover, at a certain point in time, that they will have to have a bi-national states -- countries that has two populations.  If that is desired by the Israelis, be it. 

      But, it is better not to have that bi-states, bi-nationality -- two nationalities living in one state, because experience have taught us that they often tend to separate.  Have it Czechoslovakia, have it in lots of -- and former Yugoslavia, yes, of course.  So, it's better to stick to the concept of the Two-states. 

      Hence, there has to be an end to the settlement activity.  We are proponents of this, and we convey this to the Americans, we convey it to the international community, to the Israelis.  We are talking to the Israelis, all the time insisting that bring it to an end as soon as possible.  Stop it. 

PICKERING:  Back over here. 

QUESTIONER:  Shariq Zeffer (sp) with the Department of Homeland Security.

Mr. Minister, thank you.  What are the views of the Egyptian people, currently, towards America?  What's the average Egyptian thinking of our country? 

GHEIT:  The Egyptian people admire the achievements of the America's people, and the achievements of the United States.  There is a recognition that America is the locomotive of development, of modernity, of economic revival -- of whatever that takes the world from one stage to another. 

But there is also feelings of displeasure when people would see that America often endorses Israeli policies as if they are given.  So, there is that kind of -- there has been deep sadness with the envision of Iraq, and the killings that are taking place all the time. 

The Egyptians wish to come to the United States.  We have hundreds and thousands of Egyptian young people eager to come for education.  And often they find it very difficult to acquire visas.  They do not lose, because they can go to Canada, they can go to Britain, they can go to Australia.  They can acquire a very good education that equals what the U.S. can offer.  But the sad thing is that the U.S. itself loses the opportunity of having thousands and thousands of Egyptian boys and girls not having that education and not knowing America. 

I often say we, today, know America more than what America -- or America knows us.  You do not know us -- sadly.  But we know you better.  And we have, because of your culture, lots of what we have been witnessing as the "attitudes of America."  We know you.  And you have to try to know us also -- to know our concerns, how we think, how we operate our societies, traditional, classical societies that are behind in social and development -- social and economic development. 

PICKERING:  Jon Alterman. 

QUESTIONER:  Jon Alterman from CSIS. 

Mr. Minister, it's good to see you again. 

GHEIT:  How are you? 

QUESTIONER:  (Greeting in Arabic.)

I want to ask you about the U.S.-Egyptian bilateral relationship, which falls on this previous question.  A number of people, I think, have observed that this is a relationship whose constituency is narrowing.  There's support in the intelligence community with military, but we increasingly see -- in economics, the FTA got spiked and hasn't really gone anywhere; we see criticism in the Press, in both the U.S. and in Egypt, of the opposite; we see criticism in the U.S. of Egypt's human rights situation, and a whole range of things. 

      It feels to me like this is not the relationship it was when you were at Camp David 30 years ago.  Do you agree that there is a need to broaden the constituencies for this relationship?  And what are your priorities for reaching out to reverse what many people think is a slide in the support for the relationship, both in Egypt and in the United States? 

GHEIT:  You see, I will be very frank with you -- and this is what I conveyed on the Hill.  You have America engaged in a situation in the region, where you have your own boys in Iraq.  And you are today the global power that is engaged on a very wide front.  And in the context of that -- I do not want to name it, or to call it a "war," you call it a war -- I say, well, you are playing your role as the stabilizer of the world, or trying to be. 

In the process -- and you have people opposing you, our part of the world -- and the strange thing is that you're pushing your friends away from you.  If you do not want to have as strong friends as us, that is your business.  But Egypt is a very strong country that serves the objective of, as I said, peace, stability, economic and social development, as well as modernity.  The Middle East needs modernity.  Egypt is the beacon of modernity in that part of the world. 

Why is it so?  Because you have a very large middle class; you have a country that has been modernizing over 200 years.  And, after all, it is a friend of the United States, and it recognizes its weight and its value.  So it is America who should reflect on the relationship with Egypt.

But we will continue to be your friends.  And we will continue to do whatever that is in the interests of the region and in the interest of Egypt.  By consequence, if it is the interest of the United States, be it then. 

PICKERING:  Bob Blake? 

QUESTIONER:  (Off mike.)

PICKERING:  Wait for the mike, Bob. 

QUESTIONER:  A comment on the food situation --

GHEIT:  Yes. 

QUESTIONER:  -- in Egypt.  And how, in a general way, how these new shortages of food will play out in the context of the Middle East? 

GHEIT:  Very good.  That is very good question. 

Let me put it this way, we have right now -- and it is not a secret, we have right now $31 billion in reserves to start with.  We have a supply of flour and grain and wheat that will sustain Egypt for nine months. 

The problem of Egypt is something called the subsidy.  The Egyptian state immediately after 1967 -- the war with the -- with Israel -- decided to subsidize food.  The subsidized food is flour, wheat, bread, oil, sugar, and some other commodities.  The Egyptian state pays around 20 billion pounds just for such subsidies.  But at the same time, we subsidize gas, oil, benzene and all kinds of energy products by 60 billion pounds.  So all together, we have 80 billion pounds as the bill that the Egyptian state takes upon itself to provide its own population with the subsidies because it is a poor population.

At the same time, you have medical care that is free for an Egyptian who wishes to go to a public hospital, and you have education for free -- comes the issue of the bread -- (inaudible) -- and the Egyptian countryside and then Cairo. 

A sack of -- let me put it this way:  Wheat was being bought by Egypt because we produce 7-and-a-half million tons of wheat, but we have decided not to continue by cultivating all our needs, and we rely on importation.  So we import around 8 million tons of wheat.  We import every year 8 million tons of wheat.  The wheat prices soared.  It was 164 per ton -- it went up to 350, 480.  So prices went through the ceiling. 

A loaf of bread in Cairo is for 5 piastres.  Its actual cost is between 25 and 30 piastres.  A sack of flour is 260 pounds.  It is given by the Egyptian state to the bakery for 16 pounds.  Its actual price is 260, so you give it to the bakery for 16 in order to ensure that the bakery would produce bread that would meet the needs of the poor for 5 piastres. 

So many of those bakeries took whatever allotments they were given, baked one-half, one-third, and sold on the black market the rest.  So that created the problem.  The Egyptian state, I assure you, will manage to put things in their order.

We produce 5.5 -- between 4.5 (million) and 5.5 -- according to the year -- million tons of rice.  We consume a million and a half, and we sell abroad 3 million to 3.5 million tons of rice.  We decided not to export our rice, and that sadly created problems for our Asian colleagues who are -- friends who are importing our rice.  Why did we do this?  Because we felt that between macaroni and wheat products and rice, if macaroni will soar, then I will provide my population with a replacement -- the rice.  And the rice prices, strangely, went down by two-thirds in the cost because there is availability of rice. 

I do not think there is a major threat.  However, there is a problem, I have to admit, because every commodity in the world went beyond only the very rich countries would manage to sustain that kind of turmoil.  You will see lots and lots and lots and lots of turmoil in many countries.  I assure you, Egypt will be in a good account because of the ability to produce and the ability to buy, since we have the reserves -- the money.  We have $31 billion that would sustain us for whatever period of time that that difficulty will stay with us.

PICKERING:  The gentleman here.

GHEIT:  I think we have five minutes to go? 

PICKERING:  Seven.

GHEIT:  Seven.  (Laughter.)

QUESTIONER:  Norman Wolf --

GHEIT:  Norman Wolf --

(Cross talk.)

GHEIT:  -- how are you?

PICKERING:  Hi, Norm.  I'm sorry I didn't recognize you today.  Good to see you.

GHEIT:  Do you remember 2000? 

QUESTIONER:  I'll never forget it.

GHEIT:  Very nice.

QUESTIONER:  And I took your advice -- I'm mostly retired.  (Laughs.)

GHEIT:  Good for you.

QUESTIONER:  My question will not surprise you.  I wonder if you would share your perspective with us, Mr. Minister, on nuclear issues in your region, particularly Iran. 

GHEIT:  With Iran? 

QUESTIONER:  Nuclear issues, particularly with Iran.

GHEIT:  Listen, you are an expert on NPT; I am not -- (laughter) -- the nonproliferation treaty. 

We have to allow people the peaceful uses of the nuclear energy.  Their programs have to be transparent and in the clean and in the open.  That is a must.  Iran is a member of that regime.  There are accusations.  These accusations should be solved through diplomacy.  We have to verify that it does not have a military component.  They insist that they do not have a military component.  Okay.  That is part of the problem.  We in the Middle East have a problem.  Why is it so?  Because we have a country in the midst of us that is being accused of having a capability -- a nuclear capability.  I will not say that they have nuclear weapons, but it is established that Israel has a nuclear capability. 

So the regime has to cover all of us.  Its universality has to be established.  If we are insisting that Iran comes clear, then we have also to insist that a country like Israel has to come on board with us and to join the regime.  The moment -- and mark my words -- the moment nuclear weapons will disseminate or spread, it will not be limited to the capabilities right now in Israel or the future capabilities, if it is true -- if it is true -- with Iran or others.  You will see many others trying to create that balance. 

So better stop it, and stop it now.  Why is it so?  The experience of the Soviets and you, the Americans, would take us to the point that you put resources, you put money, you put nuclear weapons, you hide them, you put them in silos, you build the messes, and then you decide to crush them all and to bring them down from 7,000 to 2,000 to 500. 

So why do you originally start?  Just bring it to an end.

PICKERING:  (Laughs.)  We have time for one more question.  Before I take it, I want to remind all participants that this meeting has been on the record.  I think that's left over from when meetings used to be off the record, but it's in there anyway.

GHEIT:  I would have spoken my mind if it was not on the record.  (Laughter.)

PICKERING:  John McLaughlin?

QUESTIONER:  Mr. Minister, John McLaughlin, Johns Hopkins University.  Related to the last question, do you think the United States should be dealing more openly, directly and regularly with Iran?

GHEIT:  That is also a very sensitive question.  I do not want to appear as if I am lecturing, but --

PICKERING:  You won't be the first.  (Laughter.)

GHEIT:  We in the Arab world -- if America will decide to engage in discussions with Iran, that is America's business and Iran's business.  But what is important is that discussion and whatever that would result will not be on the account of the Arab world.  Iran is engaged right now in a confrontation with the West.  Many of the cards and the chips -- the chips that are being used are Arab problems, whether it is Lebanon or Iraq or Hamas or Palestine or lots of other places.  Do whatever you wish to do with Iran.  The Iranians are a Muslim country, and we wish them well.  And if it is to allow them to reach a certain arrangement ensuring their wellbeing, be it.  But we have to be careful when it comes to Arab interests, whether in Gulf or in the midst of the Arab world. 

PICKERING:  Thank you, Mr. Minister, for your insights and your candor and indeed for -- Foreign Minister, I mean this as a compliment -- for your frankness in discussing many, many issues.  (Applause.)

GHEIT:  Thank you very much.     

PICKERING:  Please let me ask you if you would keep your seats while the minister and I disrobe ourselves of electronic impedimenta.  Thanks.  (Applause.)

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