Washington faces a dilemma in dealing with a major regional ally that controls the strategic Suez Canal and borders Israel but whose Army overthrew the first freely elected president, Mohamed Mursi, after mass protests against his rule.
The US said it would withhold deliveries of tanks, fighter aircraft, helicopters and missiles as well as $260 million in cash aid but left some other aid programs intact.
The US position exposes differences with key Gulf ally Saudi Arabia, which had welcomed Mursi's removal and has lavished extensive financial support to the new government. It also raises the question of where Egypt, the second largest recipient of US aid after Israel, could now turn for more military aid.
“The decision was wrong. Egypt will not surrender to American pressure and is continuing its path towards democracy as set by the roadmap,” Foreign Ministry Spokesman Badr Abdelatty told a private Egyptian radio station Radio FM.
Abdelatty later said the decision “posed serious questions around the United States’ readiness to provide stable strategic support for Egypt's security programs”.
The decision was made pending progress on democracy and human rights but the State Department said it would continue military support for counter terrorism, counter-proliferation and security in the Sinai Peninsula, which borders Israel. It will also continue to provide funding in areas such as education, health and private sector development.
US Defense Secretary Chuck Hagel called Egyptian Army chief General Abdel Fattah al-Sisi last week to tell him about the decision, stressing the relationship’s importance but underscored that Egypt must move towards democracy.
The military denies it carried out a coup, saying it responded to the will of the people. Abdelatty, the Foreign Ministry Spokesman, said Egypt was “keen on continuing good relations with the United States”.
“Egypt will take decisions relating to internal affairs with complete independence, without external influences and will work on guaranteeing to secure its vital needs in a continued and orderly manner, especially with regards to national security,” he added.
For decades, Egypt has been among the largest recipients of U.S. military and economic aid because of its 1979 peace treaty with Israel, which agreed as a result of the pact to withdraw from the Sinai Peninsula it seized from Egypt in 1967.
The United States has long provided Egypt with about $1.55 billion in annual aid, including $1.3 billion for the military.