With the political and security situation in Egypt deteriorating, American officials have begun to question whether America’s long-standing Middle East ally can remain a fundamentally stable state.

“There is a real possibility of civil war,” a senior US official briefed on the intelligence was quoted as saying in a dispatch published in The Wall Street Journal Friday. “There is a dangerous possibility Egypt goes the way of Syria.”

In his remarks from outside the Martha’s Vineyard home where he is vacationing, Obama condemned the deadly violence in Egypt and called on its interim government to lift a state of emergency. He also tried to nudge the military and the Brotherhood toward the peaceful beginnings of a broad government. “America will work with all those in Egypt,” he said, insisting “all parties need to have a voice in Egypt’s future.”

The UN Security Council, which met in an emergency session on Thursday night, failed to evolve a response to the killings by Egyptian security forces, reflecting deep divisions among member states.

Worries that Egypt is headed to an extended armed insurrection, and that the US has little power to stop it, help explain President Barack Obama’s weak response to this week’s bloody crackdown by Egyptian security forces on Muslim Brotherhood supporters, US officials say.

In response to violence that has left hundreds dead on the streets of Cairo, Obama on Thursday cancelled a coming US-Egyptian military exercise to show displeasure at the actions of the country’s military leaders-but stopped short of cutting off aid more broadly. But diplomatic observers said Obama’s response was just a slap on the wrist.

US officials fear that Egypt could head in a darker direction. They say the nightmare scenario would be a civil war in Egypt that creates a crescent-shaped arc of instability from Syria and Lebanon to Iraq, Egypt and Libya. According WSJ, Israeli officials have told their American counterparts that, if Egypt succumbs to violence, an already fragile Jordan could be next, jeopardising the Jewish state’s last stable border and its buffer zone with Iran.

Moreover, a stockpile of arms lies in neighbouring Libya, a country in which the security situation is spiralling downward in similar fashion. That impedes the ability of the Libyan government to lock down the arsenal accumulated by the late Libyan leader Moammar Gadhafi.

US officials worry eastern Libya could serve as a springboard for insurgents moving across the border into Egypt, WSJ said. The Egyptian military has appealed to the US for months to help curb the flow of weapons they feared were moving across the Libyan border and on to the militants operating on the other side of Egypt, in the Sinai Peninsula.

Even if an insurgency breaks out, though, many US officials think the Egyptian army could contain it. There are no signs of a split within the military, and intelligence

agencies don’t think the Muslim Brotherhood’s supporters have a large quantity of arms, the newspaper said.

Still, one senior administration official cautioned Thursday: “We are concerned that if they continue down a path of crackdown there could be an escalating cycle of violence…you could have a more unstable situation over time if there’s not a political process established.”

Critics say if President Obama literally washed his hands of Egypt, announcing “Americans cannot determine the future of Egypt - that’s a task for the Egyptian people.” After his Martha’s Vinyard statement on Thursday, the president went golfing.

The statement came 49 months after Obama chose Cairo University in Egypt, under then-strongman Hosni Mubarak, as the site of his chief foreign policy initiative.

“I have come here to Cairo to seek a new beginning between the United States and Muslims around the world; one based upon mutual interest and mutual respect,” he declared in June 2009 to an enthusiastic reception from American progressives and establishment media.

The Obama administration has been carefully-critics say, timidly-calibrating its response. Administration officials and those from allied nations in the region both argue that cutting off all aid to Egypt could make a dangerous situation even worse, prompting the country’s generals to sever ties with the US and emboldening Muslim Brotherhood supporters to step up protests, the newspaper said.

So Mr Obama tried to balance his impulse to keep open lines to the Egyptian government with the mounting pressure at home to take stronger action against it, US officials say.

He urged Egypt’s military leaders to end the bloodshed while also cautioning that he wasn’t trying to encourage the protesters. “We don’t take sides with any particular party or political figure,” he said. In a nod to those in Congress who want to do more to freeze some $1.5 billion in annual US aid to Egypt, most of which goes to the military, he also cautioned: “While we want to sustain our relationship with Egypt, our traditional cooperation cannot continue as usual when civilians are being killed in the streets and rights are being rolled back.”

The administration is employing what amounts to a good-cop, bad-cop approach to try to pull Egypt’s generals back from the brink. WSJ said. While the White House has made clear privately and publicly that it doesn’t want to cut off Egypt’s aid, it has also warned the generals that a growing number of lawmakers may do just that if the violent crackdowns continue.

“Congress has a very important voice here,” a senior administration official was quoted as saying. “We’re going to have to have a dialogue with Congress when they come back in town.”

The violent course of events in Egypt shows the extent to which the Obama administration misjudged the depth of divisions within Egyptian society and the potential for a sustained violent showdown between Islamists and secularists, officials and diplomats say.