On 17 September 1978 President Sadat put his signature to the Camp David agreement and Cairo set a diplomatic course at odds with the rest of the Arab world. A quarter of a century later, Egypt is once again re-evaluating its position. As Arab politicians gathered in Cairo to try to forge a common stance on Iraq, the ruling National Democrat Party (NDP) prepared for its annual conference, a test-bed of new policies and increasingly the launchpad for new reform programmes.

Over the course of 25 years, the one-time economic powerhouse of the Middle East has been gradually eclipsed by the oil producers of the Gulf. The same period has witnessed a similar shift in the political balance, although Egypt continues to consider itself the region's prime diplomatic arbiter.

The coalition invasion of Iraq was a low point in the history of pan-Arab diplomacy, and did much to tarnish Egypt's self-image. Unable to resolve a crisis that rapidly polarised the pro and anti-war camps, Cairo found itself occupying a largely empty middle ground. Deference to the US has also cost the government a considerable amount of prestige, both at home and in the wider Arab world.

'The Arab League has failed. We used to have a dialogue with the outside world, but now even the dialogue between Egypt and the US is deteriorating, and has been doing so for some time,' says Ambassador Gamal el-Bayoumi, former assistant minister of foreign affairs and adviser to Arab League Secretary-General Amr Moussa. 'There is an awareness now that we need the Arab League more than ever as an umbrella for Arabs to talk to Arabs and find common ground on issues like Iraq. It can work - if you think about it, the European Union has at least 11 languages, and at least we have one language. But I blame Egypt for not taking the lead for some time, and this is wrong, wrong. Recently I was talking to [one of the Gulf state leaders] and he asked: 'When are you going to take the lead? The smaller brothers and sisters feel they need you there.' At the very least, we can play the honest broker.'

Keeping the peace

The diplomatic machine in Cairo has been able to salvage some dignity in its intercession in the Palestine conflict, where the government was instrumental in bringing militant groups like Hamas to the negotiating table before the ceasefire fell apart. Having initially shied away from US-sponsored peace talks in Sudan, the government has also taken an increasingly active interest in its southern neighbour. 'Essentially these are bilateral peace talks, but Egypt has an interest in their outcome that goes beyond Nile water-sharing agreements,' says a senior European diplomat in Khartoum. 'You are also looking at a potentially powerful economic partner.'

But relations with Washington remain troubled, and the government has begun to realise US economic support is no longer unconditional. The $1,900 million of US aid it receives every year now has the unwritten caveat that a significant proportion is set aside for reform programmes, in particular on those that encourage civic participation in local government and liberalisation of trade.

Washington has displayed little tolerance when Cairo deviates from the agreed script. Egypt's decision in June not to back a US appeal against a decree protecting the European market from US genetically modified food was in the best interests of Egyptian exporters, but was met with a vicious backlash from the US. Washington threatened to suspend indefinitely any talks on a possible US-Egypt free trade agreement (FTA). US trade representative Robert Zoellick told officials in August that the agreement 'isn't going to be handed to them just because Egypt is a big and important country'. Shortly afterwards, he rubbed salt into the wound by announcing the start of FTA negotiations with Bahrain.

Reform is the watchword

In the wake of the Iraq war, the US sees it can no longer rely on shoring up friendly autocracies for the sake of regional security. Political reform, by force or persuasion, is now Washington's overriding concern in the region. The drive for political reform in Egypt has accordingly taken on a sense of urgency, and there has been an unprecedented shift of the democratisation debate into the public realm.

'Our congress is the first real test of our sincere dedication to development and modernisation,' President Mubarak told delegates in his opening speech at the NDP party conference on 26 September. 'Despite the challenges we are facing, we have to continue implementing our ambitious plan towards political and economic reforms and to deepen the concept of our democratic practices to lay the foundations for a multi-party system.'

Most of the key recommendations made at the last annual NDP conference by policy secretariat chairman Gamal Mubarak, the 40-year-old son of the president, became law before the end of the last parliamentary session in June. These include the establishment of a human rights council and abolition of state security courts. The latter were a particular blot on the political landscape as they were responsible for the sentencing to prison of human rights campaigner Saad Eddin Ibrahim in 2001 and 2002. His case was overturned by the Court of Cassation in March, following months of intense US pressure.

The appearance of reform may mollify the US, but in practice the last bout of legislation does little to alter the status quo, which is dominated by the national emergency laws reintroduced following the assassination of Sadat in 1981. Many powers of the state security courts have merely been transferred to the general prosecution, and it is still unclear who the human rights council will represent and what sort of practical jurisdiction it will have.

But the speed with which the latest reforms have been enacted is encouraging. 'This is an extremely short period of time for anything like this to happen in Egypt, and you can be sure there was pressure to push these reforms through from the very top,' says a local businessman. 'But at the moment, there is no way of guaranteeing a mechanism for these recommendations to become party policy. It will be interesting to see whether Gamal Mubarak gains any direct executive powers in the future.'

For the time being, most analysts attribute the father's forward-looking comments as a tacit signal to party loyalists to back the son. The succession question has had prominent exposure since the beginning of the year. Egyptian lawyer and democracy activist Essam al-Islambouli filed a case against the president in June, charging Mubarak with violating the constitution by failing to appoint a vice-president.

Questions have also been asked about the survival prospects of long-serving prime minister Atef Obeid, who has attracted much public criticism for the ailing health of the economy. 'But for all the flak, you could argue he does exactly the right job,' says a local analyst. 'He acts like political flypaper, drawing attention away from other parts of the government.'

Leading role

Cairenes are divided on the question of whether Gamal Mubarak is being groomed for a future presidential role, but it is clear that the young, cosmopolitan and reformist class he leads is making headway in the NDP. He has also taken up a far more visible position on the political scene recently, playing a key role in foreign delegations to Washington and Europe. One of the more unexpected events was a public question and answer session at Cairo's elite American University, where he defended the reformist movement against the 'fierce attacks from those who claim to be the guardians of the limited-income classes'.

All eyes will be on the outcome of the latest NDP gathering to see what the future holds for those classes. The bulk of any new reforms is expected to be economic in nature, although a key indicator of the health of the reform programme will be whether the NDP moves towards elections for senior party bureaucrats. For the time being, domestic issues are likely to prove a full-time preoccupation for the government.

'Egypt needs to take a more active role on the international scene, and in the Arab world in particular,' says Al-Bayoumi. 'But before we talk to our partners, we need to talk to ourselves. It's very easy to talk to those on the other side of the negotiating table, but it's not always so easy to talk to your own people.'

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