By Lesley Wroughton and Patricia Zengerle
WASHINGTON (Reuters) - The United States on Tuesday adopted a harder line toward Egypt's military-backed government, stressing that its bloody crackdown on protesters could influence U.S. aid to Cairo but denying reports that it has suspended the assistance.
The army's clampdown on supporters of deposed Islamist President Mohamed Mursi over the past week, the "suspicious deaths" of 37 prisoners in custody and the detention of Muslim Brotherhood leader Mohamed Badie on Tuesday have worsened relations between Washington and Egypt's new rulers.
President Barack Obama convened a meeting of his national security team on Tuesday to discuss Egypt and the review of American aid to the country. U.S. officials said they do not expect any immediate decision about the aid.
At issue is the future of about $1.23 billion in U.S. military assistance and about $241 million in economic aid to Egypt, a close U.S. ally for three decades until long-time authoritarian ruler Hosni Mubarak was toppled in 2011 after a popular revolt.
The White House, State Department and Pentagon all disputed a statement by a U.S. senator's office that the U.S. government had decided for now to stop funding to Egypt's military.
But officials made clear that further action, beyond Obama's cancellation of joint U.S.-Egyptian military exercises and a halt to deliveries of four F-16 fighter jets, is not off the table.
Obama and his aides have been trying to navigate a tricky path on Egypt, expressing displeasure with the army's actions while not entirely breaking a relationship crucial to U.S. security interests in the Middle East.
"Our aid and assistance relationship with Egypt is under a review, but it has not been cut off," White House spokesman Josh Earnest said. "A decision to cut off aid would be announced, if it were to be announced, after that review has been completed."
Earnest made clear the United States was displeased the detention of Badie.
"This is just the latest in a series of actions the Egyptian government has taken that doesn't reflect their commitment to an inclusive political process, to respect for basic human rights like the right to protest peacefully," Earnest told reporters.
"Continued violations of basic human rights don't make the transfer of that aid more likely," he said.
The United States will judge the Egyptian government by its actions, not its words, Earnest added. "That would include, as a very first preliminary step, beginning to respect the basic human rights of the Egyptian people and to at least signal a transition to an inclusive political process," he said.
U.S. aid has become a thorny issue for the White House, which has come under pressure from some lawmakers to turn off the aid in response to the bloodshed and detentions of Muslim Brotherhood supporters by Egypt's interim government.
Some in the administration worry that if aid is halted it may be a tough sell to some lawmakers to resume the funding.
As with Obama's balancing act in Syria, where he seeks the ouster of President Bashar al-Assad but has been cautious in backing Syrian rebels in a civil war, the U.S. president's Egypt policy has left many outside analysts unsatisfied.
Elliott Abrams, deputy White House national security adviser under former President George W. Bush, said the United States should have stopped aid to Egypt after Mursi's July 3 ouster.
"This policy has been a disaster because we have seen in the six weeks since the coup that we have managed to alienate every single group in Egypt - the military, the liberals, the Copts," said Abrams, now at the Council on Foreign Relations, referring to Egypt's Coptic Christians.
"It looks as if we are afraid to offend the Egyptian military," Abrams added.
A spokesman for Senator Patrick Leahy, who chairs a Senate subcommittee that oversees State Department and foreign operations spending, said on Monday the panel had been told the aid was being halted.
It was not clear what had given rise to the reports of an aid cut off. A spokeswoman for the State Department said it has not yet transferred $585 million in military assistance and is scrutinizing "a tiny bucket" of economic aid to see if it should be curtailed but denied any decision to halt the funds.
Cutting off the aid could be costly for the U.S. government.
One former senior U.S. government official said the United States could face a bill of about $3 billion if it cancels military aid to Egypt since it is one of two countries, along with Israel, able to order equipment before U.S. funds to pay for them have been approved by Congress.
A current U.S. official said some of the costs would flow from penalties for cancelling the contracts as well as the expenses of winding down such programs.
(Additional reporting by Mark Felsenthal, Arshad Mohammed, Roberta Rampton and Andrea Shalal-Esa; Editing by Warren Strobel and Will Dunham)