The White House tried to beat back reports last night that it’s going to financially punish Egypt over the ouster of Mohamed Morsi and actions against the Muslim Brotherhood.

However, the Obama administration has held back about half of the $1.3 billion it would normally pay to Egypt.

“The reports that we are halting all military assistance to Egypt are false. We will announce the future of our assistance relationship with Egypt in the coming days, but as the President made clear at UNGA, that assistance relationship will continue,” National Security Council spokesperson Caitlin Hayden said in a statement last night.

State Department spokeswoman Marie Harf said at yesterday’s press briefing that “no decision” had been made on funding, but “the level of violence that we’ve seen by the interim government since July 3rd, that that’s exactly why this massive policy review has been undertaken, because business can’t continue as usual.”

“What we’re doing right now is taking a look at all of that and determining what makes sense going forward in terms of how we can best support the Egyptian people and help move Egypt towards – back towards a democratic process. That policy decision is going to take into account all of these various things that are going on right now. But I would underscore that that violence is exactly why we’re at this place today where we are talking about what our relationship will look like going forward from a very, sort of, 30,000-foot perspective,” Harf added.

The administration has been putting pressure on Egypt’s interim rulers since the July overthrow to hold snap elections and give the Muslim Brotherhood a place at the table.

Morsi remains in custody as do many of the leaders of the Brotherhood, and the MB has been banned from operating as an NGO by the country’s courts.

A panel amending the MB-drafted constitution to make it inclusive has promised to have the first draft available for review next week.

Morsi’s trial is set to begin Nov. 4. He and seven other Brotherhood leaders faces charge of killing and torturing protesters outside the presidential palace last December. The demonstrators were protesting against a Morsi decree that granted him sweeping new powers.

Egyptian Minister of Defence and army commander Abdel-Fattah El-Sisi told Egyptian daily Al-Masry Al-Youm that he attempted to resolve the political crisis sparked by the massive June 30 protest against Morsi’s rule, but the Muslim Brotherhood refused to negotiate.

From Al-Ahram:

El-Sisi said he met with the Brotherhood’s second man Khairat El-Shatter, who warned him that if Morsi were to leave, terrorists he wouldn’t be able to control – some of whom he claimed he didn’t know – would launch attacks across Egypt.

El-Sisi said El-Shatter’s words greatly disturbed him and he reacted by shouting: “What do you mean you either accept this or die, do you only want to rule us or kill us?”

He added that the 48-hour ultimatum given to the presidency on 1 July, in addition to the 1-week warning given before 30 June, was to provide every chance for reconciliation, which El-Sisi said would have been the best option.

“The mistakes the Brotherhood made lost them a large part of their popular base, and yet I was still hoping until the last moment that the crisis would end,” El-Sisi said, adding that he told Morsi before his ouster that the best solution would be a referendum on his position as president, which he refused.

…El-Sisi said it [the Brotherhood] was attempting to turn Egypt into Syria, where a civil war between the regime and Islamist rebels is being waged.

“Honestly, we were afraid the losses would be greater than this … we told them please leave, but the other party didn’t want to listen or think,” adding that the sit-in dispersal was not a disregard for human life.