By Patricia Zengerle
WASHINGTON (Reuters) - Leaders of the U.S. House of Representatives panel in charge of aid to Egypt proposed on Thursday that military aid be kept at $1.3 billion next year, subject to conditions including that the government in Cairo plans and holds elections.
However, the bill proposed by the Republican leaders of the House Appropriations subcommittee that oversees foreign aid did not include the annual $250 million in economic assistance that has been appropriated for Egypt in recent years.
The $250 million was not included in planning for fiscal 2014, which starts on October 1 this year, but the money has not been specifically prohibited as Washington struggles to respond to the upheaval in the most populous Arab nation, which has been an important ally.
The subcommittee is to meet on Friday to begin debate on the bill, which could clear the way for its consideration by the full committee as early as next week.
Washington officials have been grappling with the thorny question of how to handle the annual aid it sends to Egypt since the military ousted elected President Mohamed Mursi early this month. The appropriations bill is among the first indications of what lawmakers would like to see.
U.S. law bars aid to countries where there has been a military coup, a determination that must be made by President Barack Obama's administration, not Congress. But many U.S. officials want to preserve ties to Egypt's military and do not want to risk contributing to further upheaval.
The proposed House bill requires that Egypt "demonstrate a commitment to a pluralistic and inclusive democracy," including planning for and conducting free and fair elections, protecting freedom of expression, association, assembly, religion and due process of law.
It also requires that the Cairo government take action to eliminate smuggling networks between Egypt and Gaza and to combat terrorism. It preserves existing language making the aid contingent upon Egypt's government respecting the 1979 peace treaty with Israel.
A Senate Appropriations subcommittee is due to begin considering its version of the measure this month. The two bills would have to be reconciled before going to Obama for his signature.
Other countries have pledged large amounts of aid for Cairo. Kuwait, Saudi Arabia and the United Arab Emirates have each pledged $4 billion.
The White House has made clear it is in no hurry to cut off U.S. aid to Egypt, despite the military's role in toppling Mursi. Its options to avoid doing so range from putting off the decision on whether there was a military coup, to finding that a coup took place but winning authority from Congress to keep the money flowing.
U.S. defense officials said on July 10 that Washington was still planning to go through with the delivery of four F-16 fighter jets to Egypt in the coming weeks despite Mursi's ouster.
(Editing by Jackie Frank and Christopher Wilson)