By Hani Sabra and John Watling

Egypt's first round of the referendum on the new constitution delivered a blow to the Muslim Brotherhood and boosted the hopes of the non-Islamist opposition. The draft constitution received a strong yes vote with 56 percent support, but it fell far short of the two-thirds majority that the Brotherhood had likely calculated would be the minimum vote it would win. In addition, voter turnout was low at just 31 percent and Cairenes reportedly rejected the draft 58 percent to 42 percent. The most significant point of comparison is the result of the March 2011 vote that set in motion efforts to draft the new constitution. The Brotherhood and other Islamist groups also backed that poll and it was approved by a massive 77 percent of voters while turnout was also stronger at 41 percent.

The implications for the upcoming parliamentary elections are potentially dramatic, with the non-Islamist opposition emboldened, united for the moment, and possibly on track to win a significant proportion of the seats, though it will still probably fall short of a majority. Egypt's electorate is fluid and a plurality of Egyptians are probably unaffiliated. The non-Islamists probably have a core support of around 20 percent, while the Muslim Brotherhood's core support is probably at around 25 percent. The Muslim Brotherhood also retains its robust electoral machine, and likely support from Salafists, who have their own parties but generally support Brotherhood initiatives. However, the Brotherhood's peripheral support among the remaining plurality of the population -- the unaffiliated voters -- appears to have taken a hit and is waning.

The results are likely to push the Brotherhood to take a less conciliatory approach to governing in the short term, as it scrambles to maintain its advantage. Despite rhetoric about so-called talks, Brotherhood leaders, such as Supreme Guide Mohamed Badie, are becoming increasingly nervous about opposition challenges, and do not want to appear as though they are negotiating from a position of weakness with groups they believed were irrelevant. In addition, as protest activity against the Muslim Brotherhood has increased, the movement has looked inward rather than reaching out to the broader Egyptian society.

The referendum results will fuel the tensions between the Brotherhood and the non-Islamist opposition. The confrontation, played out through protests, strikes, and clashes between opposition supporters and police, will make governing even more difficult. This will be compounded by the ongoing battle between the bureaucracy and the presidency.

Hani Sabra is an analyst with Eurasia Group’s Middle East practice. John Watling is a senior editor with Eurasia Group.

By Hani Sabra

Egypt was rocked on October 12 by yet another violent demonstration in Cairo's iconic Tahrir Square, but this time the two groups fighting were erstwhile comrades who had cooperated to bring down the previous regime. The street fighting between Egypt's young secularist revolutionaries and the Muslim Brotherhood's core supporters marks the opening of a rift between the two groups that had been threatening to emerge ever since the heady days after former president Mubarak was forced from power. It also could set the stage for ongoing tensions and perhaps weakening international support for the Islamist dominated government.

The cause of the fighting was a broadening dispute over Egypt's constitution. It's been nearly two years since former president Hosni Mubarak was ousted but the country is only now likely to get a new constitution in the next few months. The document, when it is finally approved, will probably only satisfy the nation's Islamists who are taking the lead given their slim majority in the constituent assembly that is drafting the new constitution and their majority among the population.

Egypt's Islamists have made it clear that they are completely willing to move ahead with their version of the constitution without buy-in from secularists or the Copts. And even if a court order dissolves the current constituent assembly (as was parliament) President Mohamed Morsy would move quickly to appoint a new assembly that would be of a similar makeup.

When the assembly releases a draft for a public referendum, it will pass. The last yes or no referendum in Egypt was in March 2011 soon after Mubarak was ousted. The Islamists then urged their supporters to support the constitutional amendments and the final tally was 77 percent in favor. The secular argument against a more Islamist-leaning constitution and in favor of one that stresses human rights, press freedom, and some separation between religion and state, does not resonate with a majority of the population, which is eager to end the constitutional vacuum.  

Unfortunately, a new constitution will not settle Egypt's transitional woes. Continued tension, instability, and violence are likely to continue given that the young revolutionaries who sparked the movement to oust Mubarak, most of the establishment secular politicians, and their supporters are increasingly unhappy with Islamist efforts to monopolize politics. These groups represent a minority, but they are vocal and their anger is growing as evidenced by the ugly brawl between Islamists and the secularists.

The revolutionary activists are embittered and believe the Brotherhood has betrayed them. Many of these young secularists backed the Brotherhood for the past year and half and even voted for Morsy in the second round of the presidential election when he faced Mubarak confidant Ahmad Shafik. They also supported Morsy's move to sideline the two most senior Mubarak-era generals. In exchange, the revolutionaries believed the Muslim Brotherhood would honor its promise to ensure that the constitution would be broad-based, and that it be a truly democratic founding document. This will not be the case. In fact, early drafts raise concerns on issues such as women's rights, religious tolerance, and freedom of expression, spurring sharp criticism from local activists and international organization such as Human Rights Watch.

The revolutionaries do not have the public support or the capacity to force adoption of a more liberal constitution or bring down the Morsy government. But they can make the next several months difficult for the Muslim Brotherhood, and they probably will. More clashes like the recent episode in Tahrir Square are likely, and will attract exactly the kind of attention that Morsy's government would prefer to avoid, given that it wants to project an air of stability for foreign investors and governments.

Hani Sabra is an analyst in Eurasia Group’s Middle East practice.

By Hani Sabra and John Watling

Egypt's presidential election is devolving into a comedy of errors, but with potentially tragic consequences. It is no longer primarily a contest about who voters believe is the most credible and trusted politician to lead Egypt through a potentially tricky transition. Instead, it is turning into a war of wills between the Muslim Brotherhood and the ruling Supreme Council of the Armed Forces (SCAF). These natural antagonists have accommodated one another for the past year in an effort to marginalize the young revolutionaries who ignited regime change. But the tensions inherent in the relationship have turned them into frenemies. The process has been particularly apparent during the past few weeks as their interests have diverged. When and how that relationship unravels completely -- and the presidential election is a key element -- is critical to Egypt's future.

On 31 March, the Muslim Brotherhood reversed the position it had maintained since Hosni Mubarak's ouster and announced that it was fielding a presidential candidate. The Brotherhood had claimed for more than a year that it would not do so, ostensibly because it wanted to reassure Egypt's political class that it was not interested in dominating power as Mubarak's National Democratic Party had done. The more likely reason was an understanding with SCAF about the division of power; the Muslim Brotherhood would get domestic policy portfolios (the premiership and control of the cabinet) while SCAF would control the security and foreign policy portfolios by having a weak and friendly president. Yet, the Brotherhood became both cocky and nervous. At the same time that it saw broad public support, it was losing confidence that SCAF would hold up its end of the bargain. Finally, the Brotherhood's leaders decided that without a new constitution and with no guarantee that the president's power would be reduced, that the group needed to contest the election. Indeed, the courts today disbanded the assembly that was set to write the constitution, and which was dominated by the Brotherhood and other Islamists, signaling that the Brotherhood was perhaps right to be concerned.

Additionally, in a dramatic scene fit for inclusion in a political thriller, Omar Suleiman reversed his decision not to run and submitted his candidacy papers less than an hour before the 9 April deadline. Suleiman is a stalwart of the old regime; he was Mubarak's right hand man, the director of internal intelligence, a friend to Israel, and a sworn enemy of the Islamists. But unlike Mubarak's other confidantes, who have been arrested, several signals hint at possible military support for Suleiman, including a military escort when he filed his papers. Even though SCAF denies that Suleiman is their candidate, the optics and timing suggest his candidacy is intended at the very least to send a message to the Muslim Brotherhood. While Suleiman is not popular, SCAF still has strong influence over Egypt's courts and other resources that will help his candidacy, like the state-controlled media. 

But the comedy of errors continues. Critics of Hazem Salah Abou Ismail, a hardline Salafist and the only candidate with an explicitly anti-U.S. platform, recently revealed that his mother was a U.S. citizen at the time of her death in 2008 and apparently had even registered to vote in California. Under Egypt's tough electoral laws, he is now technically disqualified from competing in the election. It is also possible that Khairat el Shater, the Muslim Brotherhood's senior policy chief and presidential candidate, will also be disqualified based on his felony conviction during the Mubarak era.

The tragedy is that this maneuvering may mean nothing. Egypt's economy is suffering and none of the candidates has outlined a real rescue plan or a vision for the future. Economic collapse would change the calculus completely, given the likelihood for widespread societal discontent.

Hani Sabra is an analyst with Eurasia Group's Middle East and North Africa practice.

John Watling is a senior editor with Eurasia Group.

Today, we turn to risk #8 in our series of posts on Eurasia Group's Top Risks for 2012 and answer the most common questions we've gotten about it.

Here's a summary:

Egypt's twists and turns: The military has clung to power longer than expected -- sometimes resorting to violence to defend it -- and it appears unlikely to withdraw from politics even after presidential elections in mid-2012. Secular revolutionary activists have grown increasingly disillusioned with the direction of the transition, and a deteriorating economy is making matters worse. The country's importance for the Arab world and its peace treaty with Israel make it crucial for regional stability.

Q- Why has Egypt's post-Mubarak transition taken a turn for the worse?

A- The ruling Supreme Council of the Armed Forces (SCAF) remains Egypt's dominant political actor, and it has underestimated the revolutionary activists who instigated Hosni Mubarak's removal and their commitment to civilian leadership of the country. The military is only now beginning to recognize the activists' determination to push past the removal of Mubarak and to insist on a more fundamental political reform. Dissatisfaction with the political system and the economy is growing. The military has focused on building a relationship with Islamist political parties, who have been more willing than secular activists to share power. But even this accommodation may begin to fray, as some Islamists begin to doubt that they can ever gain true decision-making authority as long as the military maintains its grip on power. The anniversary of last year's uprising, the writing of a new constitution, the Mubarak trial, and the presidential election are all potential flashpoints to monitor in the first half of the year.  

Q- Who are the Islamists? How diverse are the constituencies that make up this broad group?

A- The "Islamist" label in Egypt encompasses a large segment of the population. (Islamists won more than two-thirds of seats in lower house elections). Within this label, there are different, often competing, visions of Egypt's future. The Muslim Brotherhood represents the conservative, organized, and largest sector that has worked with the military to this point. Its leadership, and much of its support base, is largely made up of middle-class professionals or those who aspire to join the middle class: doctors, lawyers, engineers, and others who want Egypt to maintain its Islamic foundations. The Salafi wing, represented by the Nour party, which performed better than expected in elections, is fundamentalist and more radical. Al-Wasat, which won only a handful of seats, represents the most moderate wing of political Islam. By choosing to work with the Muslim Brotherhood, the military council believes it can manage its power, while scaring the non-Islamist population with the possibility of a Salafi rise in the absence of military control.

Q- What's going on in Egypt's economy? How will it affect the political transition?

A- Egypt is quickly running out of foreign reserves as it continues to prop up its currency, which has been under pressure from capital flight. Negative headlines about the political transition will likely exacerbate this trend, especially since tourism, a critical element of Egypt's economy, will suffer. Egypt will conclude a loan arrangement with the IMF, but it will come with strings attached. Fearing public criticism, the military leadership turned down an IMF loan with relatively favorable terms shortly after Mubarak's ouster; worsening investor sentiment will ensure that the latest loan offer will come with more stringent terms. Finally, reforms such as currency devaluation and a reduction in costly energy subsidies will be tough to implement. Doing so could further choke growth and push food prices higher. Egypt's economy and political transition are interrelated, with negative developments in one fueling problems with the other.

Next up, the conflict within South Africa's ruling party.

By Hani Sabra

On Oct. 1, Egypt's ruling supreme military council and several large political parties struck a deal on a new electoral law that effectively restores the military council's relationship with the Muslim Brotherhood and extends the Brotherhood's electoral advantage. The agreement also means that the presidential election may be held 18 months from now. While the presidential election's timing may be a point of contention in 2012, political tensions are also set to rise in the first quarter next year if Egypt's revolutionary youth activists -- who have lost faith in the transition process and who have been shut out of the conversation with the military council-decide to return to the streets in protest on the anniversary of the revolution.

The new law, finalized a day after street protests in which the Brotherhood did not participate, is a clever move by the military. Without getting bogged down in the minutiae of the new legislation, it effectively benefits established political groups such as the Muslim Brotherhood and the Mubarak-era National Democratic Party (NDP). But the changes will hinder the newly established liberal secular political parties, who are still finding their footing. (The new liberal parties were pushing for the whole parliament to be elected through PR.) Under the new system, the Brotherhood's electoral alliance, which includes the old liberal Wafd party, is likely to dominate parliament. The military council will not get as weak a parliament as it would have liked, but the council made the changes to the electoral law in part to appease the Brotherhood, which had threatened to rejoin protests.

The Wafd-Brotherhood alliance is becoming a very convenient partnership. The Wafd is not very popular, but along with the NDP and the Brotherhood, it is the only other party with wide spread name recognition. The Brotherhood is the dominant figure in the partnership, but the Wafd provides the Brotherhood with the cover of a secular, respected ally. If the Brotherhood-Wafd alliance scores a victory in parliamentary elections, it is likely that high-profile government positions will be held by senior Wafd party members, undermining any charges of an Islamist takeover.

The military council may have secured its short-term goal, but the continued alienation of the youth groups means a tricky, complicated transition in the medium term. The military council did not consult with any of the revolutionary youth activists or groups on the electoral law. In fact, the council now has an overtly hostile relationship with groups such as the April 6 Youth Movement and the Revolutionary Youth Coalition, the groups that organized the anti-Mubarak protests earlier this year.

These activists no longer view the transition as credible. They are less concerned with election results than they are about the transparency of the process. Many of the young protestors now believe that they have been frozen out the new power deal in which the Brotherhood runs parliament, the Wafd runs the government, and the military maintains the presidency. In part this is based on the fact that Egypt may be without an elected president until 2013, leaving Field Marshal Hussein Tantawi in control of the country for the next year and half. Tantawi's popularity has plummeted among the revolutionaries since his testimony at former president Hosni Mubarak's trial. Suspicions were also raised when he donned civilian clothes for a visit to downtown Cairo, a move that many young activists perceived as an attempt to build a public profile ahead of efforts to take a clearer leadership role.

Hani Sabra is an analyst with Eurasia Group's Middle East practice.

By Willis Sparks

The unrest now rattling North Africa and the Middle East generates new headlines each day. Today, it's an announcement from Morocco's King Mohammed VI that important constitutional reforms are on the way. It's a report that Qaddafi loyalists have pushed rebels from a couple of important port cities in eastern Libya and news that France has become the first country to recognize the rebels as Libya's legitimate government. It's the news that the Gulf Cooperation Council has promised to provide $10 billion each to member states Bahrain and Oman to help restore confidence in their stability amid ongoing protests.

But beyond the Middle East, the upheaval is producing a lengthening list of winners and losers. Here are a few of them:

Winners

Security hawks within China Security Ministry and military

The Chinese Communist Party leadership is a pretty risk-averse group, and recent turmoil in North Africa and the Middle East has strengthened the argument of those within the security forces and People's Liberation Army who say Beijing must never underestimate the dangers of quickly evolving technological and foreign policy challenges. Given the threat to Arab autocracies splashing across the headlines, we can expect China to devote still larger volumes of state resources to monitor social networking and other tools of modern communication -- and to further develop cyber capabilities generally. And just as the British military was able to evacuate British nationals from Libya, and with more Chinese than ever working abroad in sometimes volatile places, China's military will be in stronger position to win the extra resources it wants to assert China's interests abroad.

Laurent Gbagbo

Four months ago, Cote d'Ivoire's President Laurent Gbagbo stood for re-election against challenger Alassane Ouattara. The United Nations, the African Union, and the European Union agree that Ouattara won a fair contest. But Gbagbo has refused to accept defeat, and efforts at mediation have gone nowhere. The defeated incumbent has shrugged off international pressure for a graceful exit -- or any exit -- and hundreds of people have been killed in the resulting violence. With so much attention on events in the Arab world, there's not much international consensus on what to do about Gbagbo. Cote d'Ivoire is the world's leading producer of cocoa. That might boost international attention if so many of us weren't staring at the price of oil these days. 

Ethanol producers

Turmoil in the Middle East and North Africa, particularly among major energy producers like Libya, Algeria -- and in Bahrain and Yemen, which border the biggest oil producer of them all -- has helped push oil prices past $100 per barrel. That's good news for ethanol producers in the United States, who will profit from a widening separation between prices for ethanol and gasoline.           

Losers

Russian arms dealers

Russian weapons dealers have seen the door close (at least temporarily) on a Libyan arms market worth some $2 billion. Yesterday, Russian President Dmitry Medvedev signed a decree that prevents Russian firms from providing the Libyan government with "all types of arms and related materials, including weapons and ammunition, combat vehicles and military hardware." The move was intended in part to ease international pressure for imposition of a no-fly zone in Libya or any other form of direct military intervention there. We don't know how long the ban will last, but money will be lost in the near term.

Hugo Chavez

Until earlier this week, there was an 11,000-seat football stadium in the eastern Libyan town of Benina named for Venezuelan President Hugo Chavez. But the support Chavez has offered the embattled Qaddafi has angered the Libyan rebels who now control Benina, and they have renamed the arena Martyrs of February Stadium.

Willis Sparks in an analyst in Eurasia Group's Global Macro practice.

By Eurasia Group's Middle East practice

Egyptians are hardly the only people in the Arab world burdened with an economic system that provides them few opportunities and a political system designed to frustrate their aspirations. Just as upheaval in Tunisia captured the imaginations of Egyptians, so the rest of the Arab world is watching as protection of privilege collides with demand for change in the heart of Cairo. Particularly if Hosni Mubarak is forced from power, other authoritarian regimes in the region will be at risk. The most vulnerable are Jordan, Yemen, Algeria, and Bahrain.

In Jordan, the only other Arab government to sign a peace treaty with Israel, King Abdullah faces a serious surge of dissent. His regime is not yet at risk, but if Egyptian protesters are able to force Mubarak from power, Jordan's opposition will demand fundamental and immediate political reform. In recent weeks, thousands of protesters have demonstrated against economic conditions and the monarch's monopoly hold on political power. Abdullah responded by sacking unpopular Prime Minister Samir Rifai and replacing him with Marouf Bakhit, a loyal member of the country's East Bank elite and most recently the king's special advisor on security issues.

Jordan's Muslim Brotherhood has much broader and deeper public support than its counterpart in Egypt. In addition, divisions between Jordan's royal family and tribal leaders on one side and Jordanians of Palestinian descent on the other are growing. The country's large gap between rich and poor and the government's unwillingness to tolerate dissent make Jordan a country to watch if things in Egypt get much worse.

Yemen's stability faces even greater challenges. Its government faces a secessionist movement in the south, a dormant conflict with Houthi rebels in the north, and al Qaeda in the Arabian Peninsula. In most of the country, the Yemeni government is not fully in charge. Unlike the spontaneous uprisings in Egypt and Tunisia, recent protests in Yemen have been organized by the country's largest opposition movement. But if angry, unemployed youth decide to join the protests, Yemen's government could find itself in real trouble.

Like Hosni Mubarak, Yemeni President Ali Abdullah Saleh has been in power for more than 30 years. And like Mubarak, he has moved to limit pressure on his government by declaring on Wednesday that he won't run for another term in 2013 and won't pass the presidency to his son, Ahmed. It remains to be seen whether these concessions will be enough to deflect calls for his immediate resignation.

Pressure is also mounting on the Algerian government. Long-standing economic and political grievances have fueled a recent burst of public unrest, and in the wake of the events in Tunisia and Egypt, opposition parties and civil society organizations have shifted their demands from economic to political reform. About 70 percent of Algerians are under the age of 25, and the majority of young men are unemployed. A few government officials and businessmen control the vast majority of the proceeds from the country's oil wealth. Widespread demonstrations could upset the delicate balance of the country's political and economic structure and possibly provoke divisions within the ruling elite over how to respond. 

As in all these countries, President Abdelaziz Bouteflika has offered concessions intended to bolster his popularity, including an offer on Thursday to end a 19-year state of emergency in the country. Public calls for political freedoms and possibly early elections will dominate an opposition march scheduled for Feb. 12, and uncertainty over who and what will follow Bouteflika will create tremendous political uncertainty. If the unrest can't be managed, it's possible that key military figures will abandon Bouteflika or that junior officers might move against the old guard.

Finally, public frustration in Bahrain, a majority Shiite country ruled by a Sunni monarch, could reach the boiling point if the al-Khalifa family cannot tamp down recent sectarian tensions. Bahrain saw significant unrest last summer and fall in the run-up to parliamentary elections, and Shiite youth clashed with Sunni security forces in nightly riots. There's also a small risk that Iran would exploit further confrontations by providing material support to Bahrain's Shiite population. That's a move that would have serious repercussions for security across the region.

Ayham Kamel, Mohammed El-Katiri, Hani Sabra, and James Fallon are analysts in Eurasia Group's Middle East practice.