The United States had first begun to employ food aid as a major element of its foreign policy in the early 1960s, under the Kennedy-era Food for Peace program. This was an attractive tool of successive US administrations because not only did it help dispose of US agricultural surpluses, it also locked Arab governments into a dependency on imports in a context where the guarantee of cheap food (particularly bread) was an important element of regime legitimacy.42 In 1961, for example, US food aid made up 77 percent of Egyptian wheat imports and 38 percent of total supply, increasing to 99 percent and 53 percent, respectively, by 1962.43 This aid was explicitly political in nature, with the US ambassador to Egypt noting that the intent was to establish a conscious association between Egyptian “policies and attitudes towards the United States and continuation of such [food] assistance in the future.”44 US diplomats openly linked the apparent “moderation” of Egyptian government delegates at a 1962 conference of the Non-Aligned Movement to this food aid dependency.45 Levels of US aid to Egypt dropped in the second half of the 1960s as the Egyptian government distanced itself from US interests through its support for the republican forces in Yemen and its various political and military alliances with the Soviet Union. But Egypt’s defeats in 1967 and 1973 provided an opening for the United States to resume this aid in an attempt to build a closer relationship with Nasser’s successor, Anwar Sadat. From 1973 to 1979, Egypt received around one-fifth of all US food aid globally, a powerful indication of US hopes for Sadat and his subsequent embrace of US foreign policy goals in the region. This aid was further supplemented by other policies to encourage the disposal of US agricultural surpluses to Egypt.
Food aid and cheap wheat sales deeply impacted the nature of agriculture and food production in the Middle East and laid the basis for the neoliberal transformation of agrarian relations, which will be explored in chapter 4. Local farmers were unable to compete with the large, cheaper quantities of grains coming from the United States and elsewhere, and as a consequence, agricultural systems were progressively undermined. Instead of relying on farmers to produce food for domestic consumption, countries across the region became increasingly reliant upon imported grain and other food. In 1960, Egypt had a self-sufficiency ratio (domestic production in relation to consumption) for wheat of around 70 percent. By 1980, the self-sufficiency ratio had fallen to 23 percent as imports rose to massive levels.46 The process was mirrored in Algeria, Morocco, and Tunisia—underpinned in those countries to a greater extent by subsidized grain imports from Europe rather than the United States.47
Food aid and grain imports not only signaled a much tighter integration with the world market (and hence exposure to fluctuating global prices), they also paved the way for growing levels of indebtedness as access to foreign currency became a key determinant of whether a country could meet its food needs. In the case of Egypt, these developments were an important part of Sadat’s decisive turn toward the United States through the 1970s. The 1973 war was estimated to have cost around $40 billion, and the general fiscal squeeze caused by rising food and energy imports led Sadat to seek loans from US and European lenders as well as regional zones of surplus capital such as the Gulf Arab states.48 The latter played a decisive role in bringing Egypt into the US orbit, with Saudi Arabia, Kuwait, the UAE, and Qatar forming the Gulf Organization for the Development of Egypt (GODE) in 1976 to provide aid to Egypt. The condition for Gulf financial aid was the abrogation of Soviet influence in Egypt (the Soviet-Egyptian Friendship Treaty was canceled in March 1976) and the strict control of the US Treasury, IMF, and World Bank over a series of economic reforms, including an end to subsidies and a deregulation of the Egyptian pound (which would raise the cost of imports).49 GODE was initially slow in providing funds, waiting for Sadat to agree to the conditions laid down by the World Bank and IMF, but as the Egyptian government moved to amend laws to allow repatriation of profits, free flows of capital, and tax-free holidays, and attempted to lift subsidies, the money was forthcoming.
Similarly, elsewhere across the region, the combination of global economic turmoil and the rising costs of food and energy imports meant countries were forced to borrow increasing amounts in order to stay afloat. These debt levels accelerated dramatically after the US government sharply raised interest rates beginning in 1979—a move called the “Volcker Shock,” after Paul Volcker, then chairman of the Board of Governors of the US Federal Reserve.50 Because most Arab debt was held in US dollars, the spike in interest rates hit countries in the Middle East very hard (particularly when coupled with the global recession of 1981–82). By the mid-1980s, Algeria, Egypt, Jordan, Morocco, and Tunisia were paying 30–65 percent of their entire export earnings just to service their debt (see table 2.1). At the same time, new loans had to be taken on in order to keep afloat, and so overall debt stock actually rose despite the continual outflows of debt service (see table 2.1). In other words, indebtedness increased each year in tandem with growing debt and interest repayments. Debt thus represented an ever-escalating drain of wealth from the Arab region to the richest financial institutions in the world.
Trapped in the cul-de-sac of debt and balance-of-payment crises, Arab countries attempted to renegotiate payment schedules with US and European banks through the 1980s. They quickly discovered, however, much like Egypt’s earlier experience with GODE loans, that further financial support would be made contingent upon consent from the IMF and World Bank. In order to receive this consent, countries had to agree to lift restrictions on trade, begin the privatization of state-owned enterprises, deregulate labor markets, and demonstrate that they would develop medium-term policy to drop barriers to capital flows (see chapters 3 and 4 for detailed discussions). It was in this context—tied to Western states through a dependency on foreign capital inflows, food imports, and military and economic aid—that Arab countries began to embrace a range of neoliberal restructuring programs in the late 1980s and early 1990s.
By the end of the 1980s, all these changes meant that a range of crucial Arab countries across North Africa and the Mediterranean—notably Egypt, Jordan, Morocco, and Tunisia—were well on the way to being integrated into a framework of US and European interests. Once again, the case of Egypt was particularly striking, as it had been transformed from the leading voice of Arab nationalism to one of the most important allies of the United States. Through the 1980s, Egypt was the second-largest recipient globally (after Israel) of US bilateral foreign assistance, with military aid reaching $1.3 billion a year from 1987 onward.51 These funds were estimated to cover up to 80 percent of the Egyptian Defense Ministry’s weapons procurement costs and one-third of Egypt’s overall defense budget each year.52 As subsequent chapters will examine in detail, the integration of states such as Egypt into the sphere of Western influence represented not just a political realignment, involving a shift in foreign policy alliances, but was above all indicative of a process of class formation—one through which a state-fostered bourgeoisie, strong military elites, and domestic private capital came together as partners sharing a joint interest in the new neoliberal order. In the words of a prominent Egyptian commentator and close confidant of Nasser, “Oil fields began to loom far larger in the public mind than battlefields; tharwa (riches), it was said, had begun to take over from thawra (revolution).”53
The 1990s and 2000s: Imperialism Consolidated
By the early 1990s, US power appeared triumphant. The collapse of the Soviet Union and its satellites from 1989 to 1992 made it much more difficult for those states and political movements that had relied upon Soviet support to pursue independent policies, and the United States utilized the new political context to further extend its influence in the region. The target chosen in this respect was Iraq, which, in the early 1990s, possessed extensive oil reserves (estimated as second only to Saudi Arabia) and the largest unexplored deposits of any country.54 Through the 1980s, Iraq had been locked in a bloody and self-destructive eight-year war with Iran, following the overthrow of the US-backed Shah in early 1979.55 The war had been largely funded by the United States and the Gulf monarchies, which saw Iraq as a useful counterweight to the threat of Iranian influence in the Gulf. By mid-1990, Iraq owed a debt of more than $42 billion, on which it was paying $3 billion annually.56 This was in the context of a major economic crisis—inflation was running