The US is restoring military aid to Egypt that its withheld since 2013

WASHINGTON (Reuters) - President Barack Obama on Monday said he would ask the US Congress for $1.3 billion per year in military aid for Egypt and said he would lift holds on aircraft, missiles and tanks for Cairo in place since October 2013, the White House said in a statement.

Obama also said that the United States would discontinue starting in fiscal 2018 Egypt's use of cash flow financing, a financial mechanism that allows Egypt to buy equipment on credit, the White House said.

Obama spoke with his Egyptian counterpart, former general Abdul Fattah el-Sisi, on March 31st and informed him of the decision.

The US suspended some of its military assistance to Egypt after Sisi deposed elected president Mohammed Morsi during a wave of popular protests in July of 2013. Although US officials have never referred to Sisi's takeover from the Muslim Brotherhood leader as a "coup," Obama withheld a planned delivery of F-16s, tanks, Harpoon missiles, and budgetary assistance the following October.

The suspension signaled US displeasure at Sisi's crackdown on Muslim Brotherhood members and supports, which included two massacres in Cairo in August of 2013. Section 508 of the Foreign Assistance Act also prevents the US from providing military aid to a government that takes power from the previous "duly elected" leadership by coup, although this principle is inconsistently applied.

The situation in the Middle East has changed since then Sisi's takeover. Under Sisi, Egypt has carried out military operations against Islamist groups in Libya, stepped up its security efforts along the border with the Hamas-controlled Gaza Strip, and faced an ISIS-linked insurgency in the Sinai. And last week, Egypt joined in the Saudi-led operation against Iranian-backed Houthi rebels in Yemen and even raised the possibility of launching a ground invasion.

Egypt has increasing defense needs and is a lynchpin in a military operation led by one of the Middle East's wealthiest and most powerful states. In restoring aid, Washington may be reassuring its partners in both Cairo and Riyadh - at the same time it's negotiating a nuclear agreement with Iran what might be making those same allies nervous.

Here's the full readout of Obama's conversation with Sisi: