By Elise Labott
For more than 30 years the United States and Egypt had a pact: America would stuff Egyptian coffers with military aid to ensure Egypt upheld its 1979 peace treaty with Israel.
But now this bargain is jeopardy. Even with former President Hosni Mubarak out of power and on trial, the military leadership continues to rule with a seemingly iron fist and the Muslim Brotherhood has just taken power in a landslide election.
The Obama administration hopes by helping rebuild Egypt's economy, on the verge of collapse, it will endear itself to the new government. Delegations of top U.S. officials have visited Cairo in recent months for meetings with Brotherhood officials to pledge support and show desire to forge a new partnership.
But after the Arab Spring, there is no free lunch. The administration has so far resisted suggestions on Capitol Hill about imposing conditions on U.S. aid to Egypt. But new conditions imposed by Congress dictate that future aid will depend on Egypt's ruling military council showing it is taking tangible steps toward democracy.
The recent tug of war between Washington and Egypt's rulers over the activities of U.S.-funded democracy groups, including the International Republican Institute and the National Democratic Institute, is raising questions about whether it's time to rethink how the United States gives aid to Egypt going forward.
At stake is $1.3 billion in U.S. military aid and some $250 million more in economic assistance for 2012.
Last month, Egyptian authorities raided the offices of these nongovernmental organizations, confiscating cash, computers, documents and other property, accusing them of using foreign funds to support unrest in Egypt. The offices were sealed and the groups are currently not allowed to operate.
Egypt is barring at least six Americans and several other nationals from leaving the country, including IRI's Egypt office director, Sam LaHood, son of U.S. Transportation Secretary Ray LaHood, until an investigation into the group's funding and registration status is complete.
When President Obama called Egypt's top military official, Field Marshal Mohamed Hussein Tantawi, last week to hail the seating of Egypt's democratically elected parliament, the White House said he made clear "that nongovernmental organizations should be able to operate freely."
A day later LaHood was stopped at Cairo's airport.
Already Congress is making threats about the aid.
Sen. John McCain (R-Arizona), IRI's chairman, issued a statement Thursday expressing "outrage" at the action and warned the crackdown on the groups "could set back the longstanding partnership between the United States and Egypt."
Senior officials say they are already feeling the heat, which is why the administration isn't pulling any punches in public by saying Egypt's actions going forward could tie their hands.
Assistant Secretary of State Michael Posner, who is responsible for human rights issues, was in Cairo speaking with Egypt's military rulers about the importance of the issue. Speaking to reporters, he warned "It is the prerogative of Congress to say that our future military aid is going to be conditioned on a democratic transition.
"Obviously any action that creates tension with our government makes the whole [aid] package more difficult," Posner said.
The United States is in a difficult spot - on one hand wanting to protect American citizens and the important work these groups do to promote democracy in Egypt. On the other hand, officials are loath to interfere with Egypt's judicial system, as flawed as the Obama administration finds it to be.
What's more, Secretary of State Hillary Clinton has to certify that Egypt is taking moves toward a genuine transition to democracy before any of this year's funding is released.
Senior U.S. officials say the administration wants to resolve the issue before Egypt comes calling for the aid and Clinton is forced to make a certification.
But given the heavy hand of Egypt's military to date, officials point to a growing debate about whether the many U.S. assistance programs can go forward.