Assistance that is used to pay American companies that sell Egypt military equipment would be suspended if Obama accepts the recommendation, but those firms would be compensated with so-called "wind-up" payments that could amount to hundreds of millions of dollars, according to the officials.
On Tuesday, National Security Council spokeswoman Caitlin Hayden denied reports that the U.S. was halting all military assistance to Egypt. "We will announce the future of our assistance relationship with Egypt in the coming days, but as the president made clear at (the United Nations General Assembly), that assistance relationship will continue," Hayden said.
At the U.N. Obama said the U.S. will continue to support Egypt in areas such as education. But he said the U.S. has held up the delivery of certain military aid, and said future support "will depend upon Egypt's progress in pursuing a democratic path."
In Cairo, Egypt's military chief Gen. Abdel-Fattah el-Sissi described Egypt's relations with the United States as "strategic" and founded on mutual interests, but cautioned that his country would not tolerate pressure, "whether through actions or hints."
In excerpts from an interview published Wednesday by the Cairo daily Al-Masry al-Youm, el-Sissi — who led the coup that ousted Morsi — offered his own interpretation of where the Obama administration stands.
"We need to be clear here and say they (the U.S.) are keen on continuing the aid and that it is not cut off," he said. "They are trying to take measures that conform with the spirit of the law and deal with what happened in Egypt as the outcome of popular will."
Any suspension of U.S. assistance to Egypt would follow months of internal deliberation over how to respond to Morsi's ouster, during which the administration has struggled to enunciate a coherent policy.