Because of its location linking Africa and Asia, Egypt has been the target of many invaders, most recently the British, who in alliance with the Turkish Ottomans invaded in 1801. Together they organized the economy, military, and educational system in the Western style. A semi-independent viceroy of the Turkish sultan rules in name, but Britain actually controls economic life as war approaches.
Britain declares Egypt a protectorate at the start of World War I. Britain champions free trade, which favors industrialized countries whose products undersell local goods. Development is stymied, and resentment brews. Britain controls cotton sales, which make up 90 percent of Egypt's exports. At war's end, nationalists call for independence, and deportation of their leaders sparks an uprising.
Without consulting leaders, Britain declares Egypt independent, but retains substantial power until a treaty resolving foreign policy and economic issues can be negotiated. British ally Ahmad Fuad, the last of the protectorate's sultans, becomes king. A constitution is approved in 1923, and parliamentary elections are put in place. Britain's dominion in Egypt, though not its influence, is over.
Power rests with Britain, King Fuad, and the Wafd nationalist party that controls parliament. Fuad's son Faruk succeeds him upon his death in 1936. Egypt signs a treaty that leaves real power with Britain, in spite of taking steps toward independence. Tumbling cotton prices during the Depression prompts Britain to allow Egypt to raise protective tariffs, which encourages industrial development.
At the start of World War II, Egypt is crucial to British defense, though many Egyptians see the war as European and hope to stay out of it. In 1942 the German army advances on Egypt, and Britain tightens control. The Egyptian prime minister demands removal of troops at the end of the war, but the looming Cold War makes the Middle East newly vital to the West and its policy of containment.
Protests and attacks against the British intensify with the establishment of Israel, which Arab nations strongly oppose. Egypt and other Arab nations send troops to Palestine in 1948 and are defeated by the Israelis. Dismay over the army's inefficiency leads young officers, including Gamal Abdul Nasser, to form a secret group dedicated to overthrowing the government.
Militant opposition to the British gathers strength as the Egyptian parliament approves decrees abrogating its treaty with Britain and proclaiming Faruk king of Egypt and Sudan. Rioting in the cities and a guerilla war against the British in the Suez Canal Zone make plain the absence of a strong ruling group, and in July 1952 Nasser's "Free Officers" seize power. King Faruk goes into exile.
In June 1953 Egypt is declared a republic under President Muhammad Naguib, a leader of the Free Officers. In 1954 Nasser ousts Naguib. During his 16 years in power, Nasser is a popular, influential leader who attempts economic reform through socialist policies. But now Egypt's relationship with the West is in crisis. Disagreements over loans and arms sales turn Egypt toward the Soviet Union.
Nasser nationalizes the Suez Canal, until now run by the Paris-based Suez Canal Company. Egypt promises compensation to canal company shareholders and access to all ships. The British and French rely on the canal for transporting oil supplies and, enlisting Israel's help, they invade Egypt. Under international pressure, the three soon withdraw their troops.
President Nasser nationalizes British and French assets, private banks, and insurance, shipping, and manufacturing firms. Income taxes reach 90 percent. Government-funded programs give the working class free education and better job opportunities. A new National Charter emphasizes Egypt as an Arab nation based on Islamic principles and creates the Arab Socialist Union as the sole political party.
Tensions grow between the Arab states and Israel. On June 5 Israel attacks Egypt, Jordan, and Syria, destroying most of Egypt's air force in three hours. By June 8 Israeli troops reach the Suez Canal, and both Israel and the Arab states accept a UN Security Council call for cease-fire. On June 11 Israel's victory is complete: It holds all of historic Palestine, including the Sinai and Gaza.
The war leaves 11,500 soldiers dead and 80 percent of the military's equipment destroyed. The USSR offers Egypt aid. Saudi aid depends on Nasser halting his attempts to destabilize their monarchy. War costs contribute to economic stagnation. Protests erupt. Nasser dies in 1970. Endorsed by the Arab Socialist Union, Acting President Anwar Sadat is elected with more than 90 percent of the vote.
Military spending makes up 25 percent of the GDP. Sadat's proposal that Israel withdraw from land taken in the war garners little support. Student riots break out. In 1973 Egypt launches a surprise attack on Israeli forces across the Suez Canal. In support, Arab oil producers reduce shipments to Israel's backers. The war ends without a clear victor, but it improves morale and Sadat's standing.
An Israeli-Egyptian agreement calls for Israel's partial withdrawal from the Sinai. The Suez Canal reopens. To help recover Egyptian land from Israel, Sadat favors the U.S. over the USSR. The U.S. and Egypt launch a cooperative development program. Sadat announces Intifah ("open door"), which eases controls and encourages private investment. The political process partly opens to multiple parties.
Sadat and Israeli Prime Minister Begin sign the Camp David Accord. The Sinai is returned to Egypt. The U.S. expands economic and military aid, and Egypt becomes a top aid recipient, receiving $24.3 billion by 2000. But the economy remains stagnant. Sadat's popularity declines in the Arab world and at home, where he expands censorship and jails opponents. Islamic extremists assassinate him in 1981.
Hosni Mubarak, Sadat's hand-picked successor, is elected president. He continues the "open door" economic policy and announces that opposition political parties will be allowed to organize slowly. Five parties participate in the '84 elections. Negotiations with the IMF and the Paris Club lead to the rescheduling of billions in debt.
The U.S. forgives $7 billion in military debt after Egypt's help in the Gulf War. Other bilateral lenders follow suit. IMF-sponsored reforms see success: The deficit and inflation are reduced, and debt service improves. Privatization is slow, partly because of state-owned enterprises' debts and overstaffing; layoffs are prohibited. Religious groups demand a strict Islamic state be established.
Tourism suffers after an attack by Islamic militants at Luxor in 1997. Lower oil prices, government investment, remittances, and the Asian economic crisis slow growth. Structural reform of the economy also slows. Although 13 political parties are active, Mubarak's National Democratic Party controls parliament. NDP candidates win 1996 and 2000 elections despite allegations of fraud.
Mubarak enters his third decade in power. Emergency powers established after Sadat's assassination are again extended. Fallout from the September 11, 2001, attacks devastates tourism, Egypt's most lucrative industry, and darkens the investment outlook. In 2003 Egypt allows the currency to float freely: It adjusts on the first day of trading to its black-market value. Structural reforms are stagnant.
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