Amr Nabil  /  AP
Israeli trade minister Ehud Olmert, left, shakes hands with his Egyptian counterpart Rashid Mohamed Rashid on Tuesday in Cairo.
By Producer
NBC News
updated 12/17/2004 4:36:32 PM ET 2004-12-17T21:36:32

Upbeat is perhaps the last adjective that comes to mind when describing Egyptian-Israeli relations, which is why a sudden warming in relations between the neighbors is causing a degree of confusion in Egypt. 

In early December, Egypt's President Hosni Mubarak described Prime Minister Ariel Sharon as the Palestinian's best chance for peace. 

"I think if they [the Palestinians] can't achieve progress in the time of the current prime minister, it will be very difficult to make any progress in peace. [Sharon] is capable of pursuing peace."

Until recently, Mubarak charged Sharon with impeding the peace process rather than advancing it, once calling the Israeli leader a man who "only understands force and war."

With a few more bold political strokes, Mubarak has sparked a thaw in the once icy relations between nations that once waged war. 

Release of Israeli spy
On Dec. 5, Egypt released convicted Israeli spy Azzam Azzam in exchange for six Egyptian students who had been arrested in October for allegedly entering Israel illegally and planning attacks. 

Imprisoned since 1996, Azzam, a Druze Israeli businessman, had worked in a textile factory and was arrested for allegedly passing information to Israel about Egypt's industrial zones. According to Egyptian authorities, he penned some messages in invisible ink on ladies' underwear.

Israel denied Azzam was a spy but Egypt ignored pleas by the Israeli government to release him, saying that Azzam had been legally convicted and sentenced.

But when the unexpected prisoner-swap occurred, Egyptian authorities explained he had been released early for good behavior and denied that it was, in fact, a prisoner exchange. 

The Egyptian government wanted to avoid giving the unpopular impression that it was exchanging a convicted Israeli spy for six students viewed as innocent by most Egyptians. But Egyptians welcomed the emotional homecoming of their young compatriots, broadcast on Egyptian TV. 

Trade agreement
One goodwill gesture followed on the heels of another. 

A few days later, the trade ministers of Egypt, Israel and the United States met in Cairo to sign an historic trade agreement.

The agreement, which took eight years to develop, gives Egyptian goods from specified industrial zones unhampered and duty free access to the lucrative U.S. market, provided they have 11.7 percent Israeli input. 

The accord obliges Israel and Egypt to work together for their mutual welfare. 

Robert Zoellick, the U.S. Trade Representative who helped broker the deal, called it "the most important economic agreement between Egypt and Israel in two decades." 

Egypt hopes the deal will save the struggling textile industry, be the first step to a full Free Trade Agreement and provide incentive to Israel to pull its forces out of Gaza and the West Bank. 

Although officials publicly applauded the economic benefits of the agreement, the creation of 250,000 jobs and potential billions in foreign investment, the government had long resisted signing the agreement. 

Many observers rejected giving Israel economic leverage over Egyptian production and resented Washington's imposition of political conditions on the trade package despite the economic advantages. 

The semi-state run media, normally full of fiery rhetoric against Israel, voiced support for the agreement.  For the first time, the Israeli Embassy spokesman was invited to appear on Egyptian TV in “Topic of the Hour,” an evening talk show. 

Samir Ragab, the editor-in-chief of two Egyptian newspapers, and an outspoken critic of Israel, called the deal "a lifeline for the nation's labor intensive textile business" that "opens up a new window of opportunity for the Egyptian economy."  

He said that the "sincere ruling system whole-heartedly seeks to promote the national interest so all Egyptians should rest assured that the overriding aim is to serve the public's good."

Why the sudden turn around?
But in the absence of an official explanation for the sudden change in political direction, many Egyptians are confused because they saw no obvious improvement on the Israeli-Palestinian track to merit a thaw in relations. 

"The question is what exactly is taking place behind the scenes? What is behind all these deals and more importantly, what are we getting in exchange?" asked Magdi Sarhan, writing in the opposition newspaper, Al Wafd. 

In the prestigious pan-Arab Al Hayat newspaper, Abdul Wahab Badrakhan wrote, "The [trade agreement] is ill-fated because, like almost everything else in Egyptian and generally in Arab policy, it is neither open for explanation or for understanding. The citizen may only know that it was signed and must be content."

Some observers believe that the turnabout is due to Egypt's desire to stabilize the region and avoid violence spilling over the border into Egypt itself.  

Recognizing opportunity
But most analysts believe that Mubarak is seizing the opportunity presented by the upcoming election of a new Palestinian leadership and the re-election of President Bush. 

Israel and the U.S. were both unwilling to deal with former Palestinian leader Yasser Arafat. Now, all sides see a chance to move the peace process forward.

Gamal Abdul Gawad, senior analyst at the Al Ahram Center for Political and Strategic Studies, believes that Israel and Egypt have reached a turning point that began last April when Sharon proposed the idea of withdrawing from Gaza. 

"Egypt has decided to embark on a new active role in revitalizing the peace process," he said. "There is a new evaluation of the situation on Egypt's part. It is a risk but the government is willing to face the risk and face opposition from radicals who describe it as a sell-out."

Israel also is heartened, "We see evidence of a change in the Egyptian policy toward Israel and there is some kind of warming of relations from the Egyptian side," said Israeli Embassy spokesman Israel Tikochinsky. 

He also agreed that Mubarak sees hope in Sharon's plan to withdraw from Gaza.

"Egypt is convinced of Prime Minister Sharon's disengagement plan. He [Sharon] said he is committed to the disengagement plan, the withdrawal from Gaza, the ‘roadmap’ which will lead eventually to the creation of a Palestinian state if the Palestinians will stop violence," the spokesman said. "We feel Egypt understands this and that it is the time to assist Sharon with his disengagement plan and are doing it by warming up relations."

Gawad believes the Egyptian government has changed its philosophy in dealing with Israel.

Now, the government has a higher appreciation of small positive developments and seeks to build upon them.

He also believes the new reformist wing within the Egyptian ruling party, a group of relatively young, Western-educated ministers, has brought with it a new attitude. "The reformists are successful for bringing a fresh way of seeing things to decision making." 

Also, the failure of the peace process, and escalating violence have forced Egypt to change its role.

"Egypt has realized that we must push the peace process as fast as we can," Gawad said. "We came to realize that it is like a bicycle.  It must move forward quickly or it will fall.”

Charlene Gubash is an NBC News producer.

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