In May, Secretary of State John Kerry quietly sent $1.3 billion in U.S. military aid to Muslim Brotherhood-controlled Egypt, even though the Middle Eastern country wasn’t meeting certain congressionally-mandated democracy standards allowing the aid.

With Islamist President Mohammed Morsi ousted from power by the military, the Obama administration faces a new dilemma which will have a direct impact on future U.S. financial aid to Egypt.

Should it define the events of Wednesday evening as a “military coup”? That’s important, because under U.S. law, the government is not permitted to provide financial aid to a country where the military has overthrown a democratically-elected government.

What Does the Military Coup Mean for Future U.S. Financial Aid to Egypt?

Photo credit: AP

In his carefully-worded statement reacting to the developments in Cairo Wednesday, President Barack Obama stopped short of calling the power-shift a “coup d’etat.”

Reuters reports that at stake is the $1.5 billion in annual U.S. aid to Egypt, almost all of it in the form of military aid.

“If the United States formally declares Mursi’s ouster a coup, U.S. law mandates that most aid for its longtime ally must stop. And that could weaken the Egyptian military, one of the country’s most stable institutions with long-standing ties to U.S. authorities,” Reuters reports.

But Reuters also points out that millions of Egyptians protested in the streets for Morsi to step down and that the military has announced a roadmap to return to civilian rule.

Boris Zilberman, deputy director of congressional relations at the Foundation for Defense of Democracies explains how defining the events as a coup could lead to the suspension of U.S. aid [emphasis added]:

According to Section 7008 of the FY2012 Consolidated Appropriations Act (P.L. 112-74), aid administered by the State Department and USAID is banned to the government of any country where a military coup or decree has overthrown a democratically-elected government.[…]

In President Obama’s FY14 budget request, Egypt is slated to receive $1.3 billion in military aid, known as Foreign Military Financing (FMF). FMF is administered by the State Department’s Office of Plans, Policy and Analysis. Egypt is also slated to receive $250 million in economic aid, which is administered by USAID. The full $1.55 billion in FY14 could be subject to section 7008.

Zilberman provides the relevant wording for Section 7008, which prohibits “any assistance to the government of any country whose duly elected head of government is deposed by military coup d’etat or decree or… in which the military plays a decisive role.”

It also says that, “assistance may be resumed to such government if the President determines and certifies to the Committees on Appropriations that subsequent to the termination of assistance a democratically elected government has taken office.”

However, those funds “shall not apply to assistance to promote democratic elections or public participation in democratic processes.”

In his Wednesday statement, Obama said, “we are deeply concerned by the decision of the Egyptian Armed Forces to remove President Morsy and suspend the Egyptian constitution. I now call on the Egyptian military to move quickly and responsibly to return full authority back to a democratically elected civilian government as soon as possible through an inclusive and transparent process, and to avoid any arbitrary arrests of President Morsy and his supporters.”