Iranian Support for Islamic Terrorism
This issue and its significance for Egyptian-Iranian relations are in dispute on both sides. In Egypt, the security leadership maintains that the improvement of relations should be slower since there are still no unequivocal proofs that Iran has abandoned its support of Islamic terrorism. In contrast, the diplomatic leadership believes that Iranian support for Islamic fundamentalism is on a very low level, permitting Egypt to resume relations with it. There were even assessments in the Egyptian press that Iran has committed itself to avoid supporting fundamentalist elements in Egypt. Furthermore, Egyptian Foreign Minister 'Amr Musa congratulated his Iranian counterpart for Iran's support of Hizbullah in Lebanon and even said that on this matter "the Egyptian and Iranian potential should be used properly." It seems that the Egyptian foreign ministry no longer believes that Iran poses a threat to Arab regimes and that Iranian support for Islamic militants is tolerable as long as it is directed at Israel. Thus, it should not hinder the resumption of Egyptian-Iranian relations.
In Iran, there is also a dispute over supporting Islamic militants and the legacy of exporting revolution. President Khatemi has followed a policy of opening up to the Arab world and Europe – and to a lesser extent, the US as well – in order to free Iran from international isolation. Iranian Foreign Minister, Kamal Kharrazi, declared that "the two pillars of Iranian foreign policy are the dialogue between cultures and détente." Khatemi's policy of "dialogue between cultures" is the antithesis of the clash between cultures that characterized Khomeini's legacy of exporting the revolution, to which the conservatives remain loyal.
The Al-Islambuli Street Affair
The most blatant symbol of the legacy of the Iranian revolution is Al-Islambuli Street in Tehran. This street is named after Khaled Al-Islambuli, leader of the Islamic fundamentalist sect that assassinated Egyptian president Anwar Sadat. To the Egyptian leadership, the street name represents Iranian support for Islamic terrorism and its interference in the domestic affairs of Arab states in the crudest way. In the past year, as relations were warming up, Egypt continually demanded that Iran change the name of this street. About a year ago, an Egyptian parliamentary delegation participated in a convention for parliament members from the organization of Islamic countries held in Tehran, the conservative organization Ansar Hizbulah expressed their dissatisfaction with the presence of the Egyptian delegation in the Iranian capital by unveiling a huge picture of Al-Islambuli that was set next to the Al-Islambuli St. plaque. The leader of Ansar Hizbullah, Hassan Allah Karam, then said that Al-Islambuli should be a model for the youth," a statement that clearly supported a possible assassination of Egyptian President Mubarak.
This well publicized provocation caused great anger in Cairo. The Head of the Foreign Affairs Committee in the Egyptian Parliament, Dr. Muhammad Abd Al-Lah, who headed the Egyptian delegation to the parliamentary convention in Tehran, demanded that the government of Iran reign in the "deviating groups that object to normalization of relations between Egypt and Iran." Dr. Abd Al-Lah stated that despite the provocation, the Iranian authorities treated the Egyptian delegation with great respect, but demanded that the Iranian government act against the extremists "so we would know who we dealing with." 
Although some Iranian officials expressed a willingness to change the name of Al-Islambuli Street, nothing has been done. For those in Egypt who remain skeptical of Iranian intentions, explains the editor of the annual Al-Ahram Strategic Report, Wahid Abd Al-Magid, the Iranian insistence on this issue is perceived as "moral support for terrorism." Abd Al-Magid, who participated in a recent conference in Tehran, criticized Egyptian officials who are willing to give up Egypt's demand to change the name of this street just because the Egyptian regime has defeated the Islamic militants. His conclusion is that "it will be difficult to rebuild relations without a serious discussion of such a request." For the Egyptian security leadership, who set the tone in Egypt, the changing of the name of Al-Islambuli Street is an imperative condition for the resumption of full relations.
Regional Strategic Issues
Another issue that is important to both countries is the situation in the Persian Gulf. Iran froze its renewed ties with Egypt when the latter, along with Syria and six Gulf states, signed the "Damascus Declaration." The Iranians believed this declaration was directed against them, an assumption not totally incorrect due to the American "double containment" policy of the time. Since then, the American presence in the gulf has become a fait accompli and both Iranian and Egyptian policies have crystallized according to their assessments of the future.
Egypt's Gulf policy is based on two main principles: the territorial integrity of Arab states and their domestic stability. In keeping with the former principle, Egypt supports the United Arab Emirates' claim for the three islands conquered by Iran. However, this issue is not a real stumbling block for Egyptian-Iranian relations in light of the improvement of relations between Iran and the UAE itself, which recently sent an ambassador to Tehran. The domestic stability of the Arab Gulf states is an important Egyptian interest. These states employ about a million and a half Egyptians whose annual cash transfers are estimated at more than $3 billion (1997).
Egypt also has an interest in forming an axis with Gulf states, including Iran, that would counterbalance the Israeli-Turkish axis that enjoys American support. In the intellectuals' conference that was held in early July 2000 in Tehran, representatives of both sides expressed joint concerns regarding Turkish ambitions in Iraqi Kurdistan on the one hand, and Israeli nuclear power on the other. On this issue, an editorial from Al-Ahram Weekly stated, "It is Israel, not Iran that must open its nuclear installations to international inspection and join the Nuclear Non-Proliferation Treaty." Egypt aspires to a leading role in an Arab-Islamic front that would offset the Israeli-Turkish alliance within the framework of a regional realignment in preparation for the possible end of the Arab-Israeli conflict.
Nevertheless, there are still Egyptian doubts regarding Iranian ambitions if and when the US withdraws from the Gulf. Egypt, which constantly calls for the removal of sanctions from Iraq, has so far refrained from expressing any objection to the American military presence in the Gulf. Iran, on the other hand, claims that the American presence is illegitimate. Although these differences do not currently impede the improvement of relations between Egypt and Iran, the future of the Gulf is still vague and the possibility of significant differences between Egypt and Iran should not be ruled out. "The current security arrangements are temporary in nature. These arrangements are the result of the Iraqi invasion of Kuwait and cannot continue for long," wrote Wahid Abd Al-Magid, "the problem of the security of the Gulf should be on the agenda of the Egyptian-Iranian dialogue so it does not cause the deterioration of relations in the future." 
The improvement of Egyptian-Iranian relations should be seen in the context of both sides' attempts to improve their positions in the framework of a regional realignment toward the possible end of the Israeli-Arab conflict. Egypt aspires to a leading role in a new Iranian-Arab front that would counterbalance the Israeli-Turkish alliance, but insists that the resumption of relations be in accord with Egyptian terms. It refuses to renounce its relations with Israel or its demand to change the name of Al-Islambuli Street.
However, for the Iranians, the Camp David Accord is still perceived as the seed of all calamities. Although both reformers and conservatives in Iran have managed to agree on relations with Jordan and Oman, which have also signed agreements with Israel, they still demand a significant Egyptian step that would demonstrate its renunciation of Israel.
Egypt however, prefers to seek the golden mean between Israel and Iran.
*Yotam Feldner is MEMRI's Director of Media Analysis.