AP

U.S. Senator John McCain, R-Ariz, the top Republican on the Senate Armed Services Committee, talks at the American Chamber of Commerce in Cairo, Egypt, Monday, Feb. 20, 2012. MacCain is scheduled to meet with Egypt's military leader, who took over after Mubarak was ousted last year. (AP Photo/Amr Nabil)

Cairo - US Senator John McCain said on Monday that Egypt's military rulers have reassured him that authorities are working “diligently” to resolve a criminal case against US pro-democracy groups that has brought relations between the two allies to their lowest point in decades.

It was the first public statement to indicate the two sides are trying to find a way to move from the brink of a spat that has threatened US aid to Egypt and shook confidence in the country's transition to democracy.

As part of a crackdown on nonprofit organisations, Egyptian authorities have referred 16 Americans and 27 others to trial on charges that include the illegal use of foreign funds, which is expected to begin on Feb. 26. McCain chairs one of the four American groups targeted.

He had met earlier in Cairo with the country's military ruler Field Marshal Hussein Tantawi.

“He gave us his assurance that they are working very diligently to try to resolve the NGO issue,” McCain told reporters after a day of conferences with Egyptian officials, newly elected lawmakers, and members of the country's powerful Islamist group, the Muslim Brotherhood.

It is not clear how the issue can be resolved. McCain said it is up to the administration and the Egypt government to work out this “very important and delicate” matter.

“We are confident that people of good faith in this country and our country and many others can and will find an acceptable resolution to the present situation,” McCain said.

McCain, who is leading a Congressional delegation visiting various countries in the Middle East as well as Afghanistan, has tried to send reassuring message about the importance of relations between Egypt and Washington.

McCain said threats to cut US aid to Egypt, that now includes an annual $1.3 billion to the military and about $250 million in economic aid, may be counterproductive.

US officials and legislators have threatened to cut Egypt's $1.5 billion package over the crackdown on the democracy groups. The case began in December with raids on the groups' Egypt offices, and Egyptian judges and officials subsequently accused them of using foreign funds to foment unrest in the country through supporting political activities and protests.

“The way we approach this issue of NGOs is with some guarded optimism that we will resolve this issue fairly soon,” he said. “We don't think it helps progress, on this very difficult situation for American citizens, to make threats (to cut aid). We are not making threats. There is plenty of time to make threats,” said McCain.

Egyptian officials were mute on the subject on Monday. The state official news agency only said Tantawi discussed changes in US-Egypt relations with McCain's delegation, as well as the nature of activities of civil society groups in Egypt in light of the democratic transition.

Egypt under Mubarak was Washington's closest Arab ally in the Middle East and a loyal partner in the fight against Islamic extremism and terror. Mubarak also kept the 1979 peace treaty with Israel, a cornerstone of US foreign policy in the Mideast.

But with the military on the defensive over criticism that it has bungled the transition to democracy and with the rise of an Islamist-dominated parliament, Egypt's transitional rulers appeared to be more ready to publicly challenge the US and Israel, even at the risk of losing critical foreign aid. That stance taps into widespread anti-Israel and anti-US sentiment in Egypt.

The ruling Supreme Council of the Armed Forces has regularly accused “foreign hands” of backing continued protests against its rule. And the Islamist parties that control over two-thirds of the newly elected parliament have threatened to review the peace treaty with Israel if US aid to Egypt is halted.

Visiting Senator Lindsey Graham, R-SC, said the accusations against the organisations were “ridiculous” and laid the blame on a single “politically motivated” figure.

Graham, who is on the board of the International Republican Institute, didn't name the person in question. But nonprofit members have previously told Congress that Faiza Aboul Naga, a Mubarak holder who heads the ministry in charge of nonprofit organisation affairs, was to blame.

“This was a politically motivated action. The person who brought this forward I think has an agenda that is not helpful, and as an American I am offended that people would say things about these organisations,” Graham said. “I am hopeful this gets behind us. The people we talked to understand that they want it to be behind us also.”

At the same time, Graham tried to fend off much of the criticism directed against Egypt's military.

“What is at stake here? the Egyptian military has its problems. But the reason we are not talking about Egypt in the same breath as Syria is because of the military. This relationship between the US military and the Egyptian military has been invaluable,” Graham said.

Graham also said that Brotherhood members reassured the visiting delegation that they are committed to changing a restrictive law governing civil groups operating in Egypt, which the senators said was a sign that the new dominant force in Egypt's parliament is committed to democratic reform. - Sapa-AP