By Patricia Zengerle
WASHINGTON (Reuters) - Leaders of the U.S. House of Representatives panel in charge of foreign aid proposed on Thursday that military aid for Egypt be kept at $1.3 billion next year, one of few programs left unscathed in a bill seeking steep cuts in international spending.
The draft spending bill from Republican leaders of the House Appropriations committee puts conditions on the military aid, including that the government in Cairo plans and holds elections and honors its 1979 peace treaty with Israel.
Reflecting Washington's struggle to respond to the upheaval in Egypt, the legislation does not include the annual $250 million in economic assistance that has been appropriated for the most populous Arab nation in recent years. That money was not included for fiscal 2014, which starts on October 1, but has not been specifically prohibited, an aide said.
Overall, the proposed State and Foreign Operations Appropriations bill totals $34.1 billion, which is $8 billion - or 19 percent - below last year's level. It is even $6 billion below the current level of spending, reflecting the steep government spending cuts, with contributions to some international programs, such as the U.N. Population Fund, eliminated completely.
The House state and foreign operations subcommittee begins debate on the bill on Friday, clearing the way for its consideration by the full committee next week, before eventually making its way for a vote by the full House.
An appropriations subcommittee in the Democratic-controlled Senate is due to begin debate on its version of the measure later this month. The House and Senate bills would have to be reconciled before going to Obama for his signature.
Washington has been grappling with the thorny question of how to handle the aid it sends to Egypt since the military ousted elected Islamist President Mohamed Mursi this month.
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 and conducting free and fair elections and protecting freedom of expression, assembly and religion.
The White House has made clear it is in no hurry to cut off aid to Egypt. Its options 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.
Washington still plans to deliver four F-16 fighter jets to Egypt in the coming weeks despite Mursi's ouster.
Other countries have pledged large amounts of aid for Cairo. Kuwait, Saudi Arabia and the United Arab Emirates have each promised $4 billion.
Cuts in the overall spending bill include slashing funding for operational costs of the State Department and related agencies to $14.6 billion from $17 billion last year.
However, the bill fully funds the Obama administration's request for $4.8 billion for embassy security, to help avert more attacks like the one in Benghazi on September 11, 2012, which killed the U.S. ambassador and three other Americans.
House Republicans were criticized in the wake of the attack for having proposed diplomatic security cuts.
The bill would slash bilateral foreign assistance by $5.8 billion to $17.3 billion. Multilateral foreign assistance is cut by 61 percent to $1.2 billion from $3 billion last year.
A State Department spokeswoman said the proposed cuts would cause harm around the world, including dramatically reducing assistance to countries like Afghanistan, Somalia and Burma.
"These proposed cuts, which would be devastating if put into effect, would hurt our ability to stand up for American interests and values around the world. The U.S. can't lead if we retreat in this way," said deputy spokeswoman Marie Harf.
(Corrects name of population fund in paragraph 4, name in paragraphs 7 and 11)
(Additional reporting by Lesley Wroughton.; Editing by Christopher Wilson)