Egypt´s new president, Mohammed Morsi, delivered a severe blow to the Egyptian military´s political ambitions this week, and sent clear message to Egypt and beyond: his civilian Islamist government is now in charge.

Taking advantage of widespread shock in Egypt over the brutal gunning down of 15 Egyptian soldiers by jihadi terrorists in the Sinai desert last week, Morsi and the Muslim Brotherhood made their move and eliminated the remnants of the old Mubarak order.

Morsi sacked Defense Minister Mohamed Hussein Tantawi, a towering figure in Egypt who served in his position for 22 years, as well as Chief of Staff Gen. Sami Enan. Morsi also fired the heads of the navy, the air force, and the air defense force.

By doing so, Morsi dealt a severe blow to the Egyptian military´s quest to retain extensive political power in post-revolution Egypt.

To drive home the point, the Egyptian president cancelled a decree issued by the military´s Supreme Council of the Armed Forces (SCAF) that barred him from dealing with military appointments. No longer can the SCAF decide what powers an elected Egyptian president wields.

The Egyptian military´s political goals may be in tatters but its control over large areas of the Egyptian economy remains intact, however. The military continues to monopolize a broad range of economic sectors, including manufacturing, management of businesses (such as gas stations), and is a major property owner. Undoubtedly, Morsi has set his sights on disbanding the army´s economic empire as well.

The entire maneuver to depose the military chiefs was, of course, fully coordinated with the Egyptian Muslim Brotherhood, which rushed to praise Morsi afterwards.

Israel´s Reaction and Peace Treaty Concerns

Officially, Israeli leaders and military officials have remained silent about the shake-up, thereby maintaining a policy of keeping a low profile when it comes to internal Egyptian developments. Behind the scenes, though, the Israeli defense community watched Morsi´s power play with great surprise, coming as it did in the midst of an Egyptian military sweep of the Sinai Peninsula. That surprise was not, however, accompanied by undue anxiety.

Israeli defense sources told me on condition of anonymity - since they were providing initial assessments - that they do not expect a unilateral Egyptian review of the Egypt-Israel Peace Treaty any time soon, as this would jeopardize badly needed American economic aid to Egypt. Furthermore, these senior Israelis believe that Morsi understands that the Egyptian military is dependent on U.S. military aid.

Recent reports that Morsi is studying whether to amend the Camp David Accords is understood in Israel to be changes to the treaty to allow Egypt to insert more counter-terrorism army forces into Sinai. Any such changes would require Israeli approval, and Jerusalem has signaled its willingness to approve some extra Egyptian forces as it has been calling on Egypt to do more to combat global jihadis operating in Sinai.

Egypt´s New Military Brass

The man Morsi appointed to replace Tantawi, Gen. Abdel Fattah Al- Sissi, was until now the Egyptian military´s intelligence chief. Al- Sissi enjoys close ties with Washington.

The new chief of staff is Gen. Sidki Sobhi, previously commander of the Third Egyptian Army based in Sinai. Troublingly, Sobhi, who appears often in the Egyptian media, has propagated anti-Israel conspiracy theories in recent months, accusing Israel of seeking to create a rift between Sinai Bedouins and the Egyptian state.

All of the new appointments are, like their predecessors, graduates of a secular military accustomed to the approximately $1.3 billion a year in American military assistance and to the major systems that aid has bought and upon which the military depends. These include American tanks, fighter jets, self-propelled artillery, and other large weapon systems.

Sinai Flashpoint

A steady concern for the medium-term future is the possibility that Morsi may order the Egyptian military to turn a blind eye to the jihadis in Sinai, so long as they focus their attacks on Israeli targets only, and leave Egyptian targets alone. This tactic would allow Morsi to cling to the pretense of respecting the peace treaty, while directing trouble in Israel´s direction.

Should that scenario come to pass, Israel would be forced to contemplate pinpoint counter-terrorism operations in Sinai itself to defend its southern border and Eilat. This potential flashpoint would dramatically raise tensions with Egypt.

Will Economic Woes Dictate Egyptian Foreign Policy?

Israeli defense officials do not think of Morsi as a moderate leader. They do believe, however, that he will choose to focus his attention on the most pressing issue currently facing the Egyptian republic: a severe economic crisis. With tourism at rock bottom and foreign investment in shambles, the Muslim Brotherhood, which sought power for so long, must now figure out how to rescue the Egyptian economy.

Some in Israel, such as former National Security Council head Maj. Gen. (ret.) Giora Eiland, have identified counter-intuitive advantages in the current situation. Eiland says Hamas´s offer to Egypt to shut down all of its smuggling tunnels, on the condition that Egypt opens its border crossing with Gaza, is well in line with Israeli interests.

Should that occur, those accusing Israel of maintaining a blockade on Gaza will be forced to admit that Gaza enjoys an open border with Egypt, decreasing diplomatic pressure on Israel, Eiland maintains.

Crucially, however, the question of how Egypt will respond to Hamas´s attempts to bring in weapons across an open Egyptian border remains unanswered. Will Egypt allow the arms through, sparking tensions with Israel, or will it respond to Israeli demands, and American pressure, to cease the weapons smuggling?

Regional rivalries will also demand Egypt´s attention. Morsi´s newly empowered Sunni Islamist government views Shi´ite Iran and its quest for regional hegemony as its top concern, Israeli officials believe.

The Muslim Brotherhood´s Dangerous Ambitions

Taking a longer view of things, one may be less encouraged. The Muslim Brotherhood has always abided by a patient, gradual game plan, and has never swerved from its end goal, and that is the creation of an Islamist fundamentalist state and society.

The plan calls for the seizing of one state institution after another, from the presidency, to the parliament, to the courts, and eventually the education system and the media. The Muslim Brotherhood is intent on creating a state in its own image. In the process, it has mastered the ability to project an image of pragmatism.

The movement that spawned Morsi has never accepted Israel, and remains ideologically committed to creating a regional federation of Islamic states under the banner of a caliphate.

Seeking at all costs to avoid an American decision to cut assistance, and confronted with an unprecedented economic crisis, Egypt will continue to respect the peace treaty with Israel, for now.