By Tom Pfeiffer and Marwa Awad
CAIRO (Reuters) - U.S. pro-democracy activists flew out of Egypt on Thursday after the authorities lifted a travel ban, a move that is likely to defuse the worst row between Washington and Cairo in decades.
Egyptian authorities had accused the campaigners, including the son of U.S. Transportation Secretary Ray LaHood, of working for groups receiving illegal foreign funding and prevented them from leaving the country.
U.S. officials said the case, as long as it was unresolved, jeopardized $1.3 billion in annual military aid, a cash transfer that began flowing after Egypt made peace with Israel in 1979. Washington's ties with Cairo were a pillar of its Middle East policy under U.S. ally Hosni Mubarak, who was deposed last year.
A judge said on Wednesday the ban had been lifted. "They (the activists) have left," an airport official told Reuters on Thursday.
The group of 15 people, included eight Americans, among them Sam LaHood, three Serbs, two Germans, one Norwegian and one Palestinian, Egypt's official news agency said. Airport sources said they left on a U.S. plane sent to get them.
The group later arrived in Cyprus, where they were met by U.S. embassy staff and driven away from Larnaca airport in a minibus without speaking to a Reuters reporter. It was not clear where they were being taken and U.S. diplomats referred questions to the State Department in Washington.
Cyprus airport sources said the group's aircraft was scheduled to depart on Friday but there was no information on its destination or passengers.
The United States expressed continued concern over Egypt's crackdown on pro-democracy groups.
"We are very pleased that the Egyptian courts have now lifted the travel ban on our NGO employees. State Department spokeswoman Victoria Nuland said in Washington. The group were on their way home, she said.
"The departure of our people doesn't resolve the legal case or the larger issues concerning the NGOs," Nuland said.
"We remain deeply concerned about the prosecution of NGOs in Egypt and the ultimate outcome of the legal process, and we will keep working with the Egyptian government on these issues."
Secretary of State Hillary Clinton had said on Wednesday she expected a swift resolution to the row.
Judge Abdel Moez Ibrahim told Reuters on Wednesday that, after an appeal by those charged, the case was switched from a criminal court to one handling misdemeanors where the maximum penalty was a fine, not jail.
With that, those involved could post bail of 2 million Egyptian pounds ($330,000) each and the travel ban would be lifted. The NGOs posted bail for their employees.
Sixteen of the 43 people charged are Americans. Some of the U.S. activists had sought refuge in the U.S. embassy, which had no comment on the case.
Egyptian politicians and analysts said ties with the United States would likely recover without major long-term damage. Relations have been strained at a sensitive point when Egypt makes the transition from army to civilian rule.
"There is a realization on all sides that the relationship with the United States is extremely important. For the United States, Egypt is a pivotal country," said Mona Makram-Ebeid, a member of an advisory council appointed by the ruling army and also a professor at the American University in Cairo.
"But this is a long-standing strategic alliance that I think the NGO case could not jeopardize, although we do not agree to any interference or any threat of removing the financial aid." She said the comments by U.S. officials that aid was at risk had angered many Egyptians.
But NGO activists and diplomats said the saga could curtail NGO activities and impact on democratic freedoms.
"The crisis over the NGOs (non-governmental organizations) is more about trimming Egyptian civil society in the coming future. The case poses a threat to Egyptian civil society," said Mohamed Mohie, head of an Egyptian NGO not involved in the case, the Human Development Society.
Two of the groups involved, the National Democratic Institute (NDI) and the International Republican Institute (IRI), are loosely affiliated with the major U.S. political parties.
IRI, which employs Sam LaHood as its Egypt Director, welcomed the lifting of the travel ban but said it remained concerned over Egypt's investigation of civil society groups and hopeful that all charges would be dropped.
It said it remained very concerned about the situation "and the impact it will have on Egypt's ability to move forward with the democratic transition that so many Egyptians have sought."
One Western diplomat said the case may have been used, at least in part, to divert attention from a faltering economy.
"Once ... the media spotlight moves on, the threat remains over the Egyptian employees (of NGOs involved) as does a large question mark over the way that NGOs and civil society are seen in Egypt," the diplomat added.
Alongside charges that NGOs received foreign funds without Egypt's approval, the workers are also alleged to have carried out political activities unrelated to their work and accused of failing to obtain necessary operating licenses.
A judicial source said charges would not be dropped.
The first session of the court that was initially hearing the case took place on Sunday. It had been adjourned until April 26, but a new date will now be set since the case has been transferred to another court, the judge said.
(Additional reporting and writing by Edmund Blair and Michele Kambas in Larnaca; Editing by Giles Elgood)