Oct. 16, 2006 issue

The anniversary went almost unnoticed. There were no major commemorative events. Only a few perfunctory articles appeared in the Egyptian, Israeli and American press. A quarter century after the assassination of Egyptian President Anwar Sadat on Oct. 6, 1981, the shooting spree that took his life during a military parade has come to seem just another blood-soaked footnote in the long chronicle of Middle East violence and despair.

Yet we know now that it showed the shape of things to come. The shooters were caught and executed. But several of the Egyptian Islamists rounded up in connection with the murder, including Dr. Ayman Al-Zawahiri, would go on to become core figures in Al Qaeda. And radicals on all sides discovered the power to disrupt plans for peace with a single spectacular act of terror. (The murder of Israeli Prime Minister Yitzhak Rabin at the hands of a Jewish extremist would come in 1995.) Today, almost three decades after President Jimmy Carter negotiated the Camp David accords and the final treaty signed by Sadat and Israeli Prime Minister Menachem Begin in 1979, the peace that remains is at best called "cold"—and could be in serious trouble.

Ordinary Egyptians and Israelis, most of whom never knew firsthand the horrific wars between Cairo and Tel Aviv, find Sadat's legacy a source not of hope but of anger. For Egypt's Hosni Mubarak, president for this last quarter century, peace has become synonymous with political stability and a status quo represented by ... himself. In effect, Sadat's heir tells those Egyptians who challenge him—and Americans who criticize him—"Choose: peace or democracy; you can't have both." It's a dangerous game of mixed signals, and it began almost as soon as Sadat died.

Fabrice Moussus, a French cameraman working for ABC television, remembers that day. "The atmosphere was very tense," says Moussus. Sadat had cultivated Egypt's Islamists, but when they turned on his treaty, he turned on them with a brutal crackdown. Now they were taking their revenge. Moussus heard the crackle of gunfire and turned his lens on the action as the killers threw grenades and sprayed the stands with bullets. Dignitaries were dismembered; some were dying. "People were moaning," remembers Moussus, "like the wounded on a battlefield." Hosni Mubarak, then vice president, had been sitting on one side of Sadat in a fresh, colorful uniform made just for the occasion. He was unscathed. Sadat, carried away by the bodyguards who failed to shield him, was nowhere to be seen.

Sadat had been bold. He waged a surprise war against Israel in 1973 and opened the way for a surprise peace with his trip to Jerusalem in 1977. From that, it would seem, Mubarak learned what not to do. He has been much more tentative than Sadat, at times almost duplicitous. Yet the 1979 Egyptian-Israeli treaty has held up. That's the good news. The bad: that its credibility with the public, never high, is eroding dramatically. "From the beginning, the people were not involved," says Egyptian activist and former parliamentarian Mona Makram Ebeid. "People were happy that the war was over, but they did not know what peace was supposed to be." Mubarak has never done much to teach them. To this day, his only visit to Israel was for the funeral of Yitzhak Rabin.

Serious strains began to show six years ago, with the second Palestinian intifada. Mubarak opted for a sort of double strategy that saw him offering his services on the world stage to try to calm the conflict, even as Egyptian state radio played martial airs and state-controlled media railed against the Zionists. "The relationship between Israel and Egypt was at its lowest level ever," recalls Shalom Cohen, Israel's veteran ambassador to Egypt. "It was basically frozen." Yet today? Despite the brutal Lebanon war last summer, which further heightened popular hatred of Israel among Egyptians and other Arabs, Israeli historian Michael B. Oren describes the relationship with Cairo as "better than at any time since 1981."

Well, yes and no. The truth is that relations continue to improve at the top, even as they erode from below. Since early 2005, when the Bush administration stepped up pressure on Egypt to democratize, Mubarak has moved dramatically to warm ties with the Israelis. His government has played up political, economic, diplomatic, security and intelligence cooperation, interceding in one Israeli-Palestinian crisis after another, presenting Egypt as a critical intermediary trying to build a broader peace. The target audience, clearly, is the United States. "I have seen senior Egyptian officials in uncomfortable discussions with the U.S. about political reform in Egypt, and they deflect these criticisms by talking about Israeli-Palestinian issues," says Jon Alterman, director of the Middle East program at the Washington-based Center for International and Strategic Studies. "They feel that if Americans are given a choice between Arab-Israeli peace and democracy in Egypt, they would choose peace."

The list of new initiatives is impressive: Egypt returned its ambassador to Israel after a four year hiatus; ministers began shuttling between Cairo and Tel Aviv to initiate partnerships on military, economic, tourism and agricultural projects. After Israel's withdrawal from Gaza, Egypt stationed 2,500 police and 750 soldiers along the border to help prevent the smuggling of weapons. And this summer the Muba-rak government shocked many of its neighbors by declaring support for Israel during the early stages of its war in Lebanon. In the economic realm, after years of stalling, Egypt has signed on to the U.S.-sponsored Qualified Industrial Zones, which remove tariffs on products jointly manufactured by Egyptians and Israelis. Egypt also closed a deal to export $1.5 billion worth of natural gas to Israel and announced last month that it would be providing electricity to Palestinians living in Gaza.

But all of this remains essentially peace by decree. The mood among the people is rather different. The Egyptian Muslim Brotherhood, closely associated with Hamas in the Palestinian territories, is now by far the strongest opposition party in Egypt. Last year it won 88 seats in Parliament and would have taken more if the government hadn't interfered massively in the election process. The Brotherhood has other issues to exploit besides its hatred for Israel—but that's one of its most potent. Its M.P.s now regularly initiate calls in Parliament to expel the Israeli ambassador from Cairo and cut diplomatic relations.

Even more surprising to Western democracy advocates is the anti-Israel line touted by Egypt's leftist groups, including the much-hyped reform movement Kifaya (Enough). Though the group, founded in 2000, has always been hostile toward Israel, in August it launched a petition to annul the peace treaty. "We are the pro-democracy movement in Egypt, but we are anti-Bush and anti-Israel, and this initiative makes that clear," says Wael Khalil, one of Kifaya's leaders. The group claims to have 100,000 signatures already and is hoping for a million.

The treaty won't be repealed tomorrow, or possibly ever, but the forces set in motion by playing democracy against peace are likely to undermine both. Mubarak is old. And while the issue of who will follow him is often discussed (the most likely candidate: his son Gamal), the real question for Egypt is how long this delicate game of contradictions can be sustained.

Sadat was bold. "Sadat was willing to risk it all, to change the model fundamentally," says Alterman. And Sadat was killed. Mubarak, with the luck to walk away from that reviewing stand unscathed, is cautious and calculating—and has survived. Yet the violent forces of fanaticism displayed on the Egyptian parade ground 25 years ago have since spread far and wide. Countering them—in Egypt, the region and world—requires a Middle East peace. It must be more honest than Mubarak or his Israeli counterparts have been able to offer, and it must go deeper to touch ordinary people, Arabs and Israelis alike.

© 2006 Newsweek, Inc.