War badly wounds Egypt's economy WAR IN THE GULF


CAIRO, Egypt -- For six months, Haroon Mohammed has been living on his wife's jewelry.

First he sold her gold bracelets, then her gold necklaces. Each day he goes to work hoping for tourists to buy the paintings on papyrus or the scents from the heavy bottles of Egyptian perfumes that line his narrow shop.

"Every day I go home and she says, 'Was there any business?' It makes me feel terrible to say no," he said. "No business since Saddam."

Egypt was anxious for this war to be over, for reasons other than a sentiment for peace.

The Scarabee, a handsome triple-decked party boat with candy-striped awnings, sits moored on the languid Nile. In normal times, it would be cutting a festive wake with 250 guests on a dinner cruise.

Now the boat may get 10 or 15 passengers and usually does not bother to go out, said Hassam Moustaffa, a purser.

"We hope for death to Saddam. He stopped everything here," Mr. Moustaffa said.

The war has been a jolt to the economy of Egypt. Tourism, estimated at 20 percent of the industry here, has collapsed. More than 1 million Egyptians who worked in Kuwait and Iraq are no longer sending checks home; instead, they have returned here and are looking for work.

Trade with Arab neighbors has slackened. Fees from ship traffic in the Suez Canal have slipped and, if not for the warships, would have dried up more.

"The economy has dipped pretty sharply," said Adel Beshai, an economist. "If the war lasted a long time, there could be tremendous difficulties. But if the war ends now, I think it will reverse very quickly."

There have been signs of political stress, as well. After a period of relative quiet, angry anti-war demonstrations erupted on several college campuses this week.

An estimated 12,000 students demonstrated at Cairo University Tuesday. They hurled rocks at police, who responded with tear gas and truncheons.

Egypt has the largest combat force among the Arab members of the multinational coalition. Soldiers from its 38,500 troops sent to Saudi Arabia were among the first into Kuwait, and the official press has hailed their victories.

There is little evidence that President Hosni Mubarak's firm commitment to the multinational force is seriously challenged. He helped ensure that last fall with mass arrests of potential political opponents.

But there is an ambivalence felt in Egypt for siding with Western nations against mostly Muslim Iraq.

Egyptians are often haughtily independent of fellow Arab countries. But when Egyptian nationalism is not at stake, "you scratch an Egyptian and you'll find an Arab," said Walid Kazziha, head of the political science department of American University in Cairo.

There is no love for Iraqi President Saddam Hussein here as there is among many Palestinians, he said. But Egyptians have flinched as the United States has led the continued bombing even as Mr. Hussein says his troops are retreating.

"There are signs that people here are saying, 'Enough is enough,' " said Mr. Kazziha. "People think this has become Bush's war. It's become very personal for Bush."

There is also a smoldering suspicion that the United States is pushing the war beyond the liberation of Kuwait at the urging of Israel, which has beat the drums for the removal of Mr. Hussein from power, he said.

Egypt's own position on when to end the war is unclear. Mr. Mubarak has promised that Egyptian troops would stop at the Kuwaiti border and would not fight in Iraq.

But his government has taken a hard-line stance similar to President Bush's in demanding that the Iraqi president declare his acceptance of all the U.N. resolutions passed after the Aug. 2 invasion of Kuwait.

And the government-controlled press for the first time has called in recent days for the removal of Mr. Hussein.

If the Iraqi dictator stays in power, it could put a cloud over the harvest of benefits that Egypt can expect for its role as a strong and steadfast partner in the multinational effort.

Already the United States and other countries have forgiven more than $7 billion in Egyptian debt, and "we hope there will be measures to forgive most or all" of an additional $25 billion owed to the West, said Ashraf Ghorbal, former ambassador to the United States.

There was little likelihood that much of that debt would have been paid anyhow. But with it off the books, Egypt may be able to attract the investment it needs, he said.

Politically, Egypt can expect to be a pivotal player in any "new Middle East order" that follows the war. The United States is anxious to rely on Arab countries to enforce stability in the region, and Egypt's loyalty and military strength would enable it to do so.

"I think the necessary elements are there for a leadership role," Mr. Ghorbal said. "The future looks brighter."

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