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EXCLUSIVE-U.S. quietly observes coup law on Egypt aid, but shuns term

By Arshad Mohammed and Patricia Zengerle

WASHINGTON (Reuters) - Despite withholding most military aid to Egypt until it makes progress on democracy and human rights, the U.S. government is still tying itself in knots over whether to describe July's army overthrow of President Mohamed Mursi as a "coup."

The administration's latest rhetorical gymnastics came to light when U.S. officials briefed Congress this week on their decision to withhold deliveries of fighter planes, tanks, helicopters and missiles - as well as $260 million in budget aid to Egypt.

During the briefing, the officials told congressional aides they had quietly decided to respect a law that bars aid to the Egyptian government in the event of a military coup - even though the administration decided over the summer it was under no obligation to decide whether or not a coup had taken place and so did not have to apply the law.

Congressional aides said officials from the State Department, Pentagon and Agency for International Development who discussed Egypt on Capitol Hill still refused to use what they wryly termed "the C word" to describe the ouster of Morsi, an Islamist and Egypt's first freely elected president.

"They made very clear that they were not calling it a coup," one House of Representatives aide said after a briefing.

The language issue illustrates what some analysts see as a tortured U.S. policy toward Egypt, where the desire to be seen as supporting human rights and democracy has clashed with a hope of retaining influence in a strategically vital country and not upsetting the Egyptian army.

"There are a thousand and one ways to describe the intersection between our interests and our values here," said Jon Alterman, director of the Middle East program at the Center for Strategic and International Studies think tank in Washington.

Despite this week's aid suspension, President Barack Obama plans to keep providing some assistance to Cairo, including military spare parts, training for military officers and funds to promote health, education and economic development.

Transferring that money, however, will require Congress to give Obama authority to spend it, one reason he chose to try to avoid irritating lawmakers by respecting the law against giving aid to countries where a coup has taken place, officials and congressional aides said.

"They did not want to poke their finger in the eye of Congress," said an official.

U.S. lawmakers were annoyed earlier this year when Obama sidestepped a decision on whether to call the army's overthrow of Mursi a "coup." Such a designation would have meant automatically suspending about $1.55 billion in annual aid.

The State Department's avoidance of the term "coup" became fodder for late-night television comedy and raised questions about whether the United States was acting hypocritically by refusing to call a spade a spade.

(Editing by Peter Cooney)