Lawyer: Egypt holding Americans over aid dispute

Updated at 12:05 p.m. ET

CAIRO - Americans facing trial in Egypt over activities of their pro-democracy groups have been caught in a dispute between the U.S. government and Egypt over aid, a lawyer representing the Americans said Tuesday.

In a measure of the depth of the tensions, an Egyptian government delegation abruptly canceled meetings in Washington with U.S. lawmakers set for Monday and Tuesday, after angry American officials warned the clash could jeopardize more than $1 billion in annual foreign aid to Egypt.

A senior Egyptian official confirmed that the government has objected for years to the U.S. directing part of its aid to pro-democracy and human rights groups, calling the practice illegal and acknowledging that a cut in U.S. aid could follow.

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The dispute has led to 19 American workers with the groups facing trial and six banned from leaving Egypt. Among the six is Sam LaHood, son of U.S. Transportation Secretary Ray LaHood. A number of Americans have taken refuge in the U.S. Embassy in Cairo.

German Foreign Minister Guido Westerwelle said Tuesday that he summoned the Egyptian ambassador to protest Cairo's decision to prosecute Germans in the case.

The affair began with raids by Egyptian security forces on 17 offices of 10 advocacy groups last month, evoking denunciations from the U.S. and other countries. It also reinforced charges by Egyptian protesters that the military rulers who took over a year ago from ousted President Hosni Mubarak are perpetuating his regime's oppressive tactics.

The investigation into the work of the nonprofit groups is closely linked to the political turmoil that has engulfed the nation since the ouster of Mubarak, a U.S. ally who ruled Egypt for nearly 30 years.

The military rulers charge that the groups fund and support anti-government protests. The military claims that "foreign hands" are behind the opposition to their rule. They frequently depict the protesters as receiving funds from abroad in a plot to destabilize the country.

Lawyer Tharwat Abdel-Shahed said Tuesday that Egypt's rulers objected to the funds for the groups being deducted from U.S. aid to the government. "This has sparked the government's anger," he said Tuesday, putting the total funding directed to the groups at $45 million.

Egypt is the second largest recipient of U.S. foreign aid, after Israel. The U.S. is due to give Egypt $1.3 billion in military assistance and $250 million in economic aid in 2012.

Over the weekend, U.S. Secretary of State Hillary Rodham Clinton said the clash over the advocacy groups has thrown U.S. aid to Egypt into doubt. "We will have to closely review these matters as it comes for us to certify whether any of these funds from our government can be made available under these circumstances," she said.

Fayza Aboul-Naga, the Egyptian minister for international cooperation, said earlier that Egypt has been protesting a "unilateral" U.S. measure to direct part of its economic aid to human rights and democracy groups since 2004, according to her office. She described it as political funding that is not allowed by Egyptian law.

A statement from her office quoted Aboul-Naga as saying it was the duty of the groups not to operate until they get permission. "They know they are working illegally and without license," said Ambassador Marawan Badr, a top aid to Aboul-Naga.

Abdel-Shahed said Egypt is wrong in its interpretation. "The Egyptian government thinks that a prior permission is needed before U.S. directs its money to its recipients," he said, "however, the U.S. government says there are no conditions and it is free to use its money."

A cut in U.S. aid is possible as a result of the dispute.

"It would not be a surprise, since Egyptians and Americans have been talking for years about downgrading and cutting the aid," Badr said. "The strategic relations between Egypt and the United States are based on mutual respect, and they are not limited to one subject."

Talk of cutting aid comes during a critical, year-long downturn in Egypt's economy. On Tuesday, Egypt's central bank said the country's net international reserves dropped by more than $1.7 billion in January, continuing a steep slide that began after the uprising that ousted Mubarak because of continuing turmoil.

Abdel-Shahed said the National Democratic Institute, one of the U.S.-funded groups, has been working since 2005 to obtain a license through the Foreign Ministry, which sent the group a list of documents required for registration.

He said the NDI provided the ministry with lists of names of employees, activities, and sources of funding.

Since then the government has recognized the group's activities, he said, allowing it to observe the recent parliamentary election.

The president of International Center for Journalists, Joyce Barnathan, whose Egyptian staffers are among those facing trial, said that during the application process, her center was asked to open an office to show that it was active.

"Everything was open and transparent," she said on the phone from Washington, D.C.

The center was working on a project to train citizen journalists to cover local news.

"We never had a political agenda," she said. "I am concerned about their welfare of our staffers there."