Momentous developments have taken place in the ongoing struggle between the Muslim Brotherhood-dominated government and the military establishment over the control of Egypt’s “deep state.” On August 12, President Mohamed Morsy dispatched Defense Minister and Supreme Commander of the Armed Forces (SCA F) Mohammed Tantawi and a number of other senior military leaders into retirement, and reclaimed the substantial powers which the SCAF had removed from his domain. If Morsy ’s move stands, it will mark a decisive moment in the post-Mubarak era.Ironically, Morsy’s dramatic action came amid a major security operation to reestablish the state’s control over the sensitive Sinai peninsula. Already an arena for Islamist terrorism, human and weapons trafficking and assorted other criminal activity during the last years of Mubarak’s rule, matters had significantly worsened in the 18 months since his fall, reaching a peak in August 2011 with a cross-border terrorist attack on Israeli targets that led to a fatal exchange of fire between Israeli and Egyptian forces.But this was “topped” by a brazen operation on August 5, when at least 35 masked gunmen attacked an Egyptian border police station. Sixteen border guards were killed and two armored personnel carriers were commandeered to launch a cross-border attack on Israel. IDF forces repelled the incursion, killing eight of the attackers, but for Israel, it further confirmed assessments that the Egyptian state was not in full control of its own territory.• The author is the Marcia Israel Principal Research Fellow at the Moshe Dayan Center for Middle Eastern and African Studies, Tel Aviv University.For Egypt, the matter was more complex. The state itself had been humiliated, and Israel’s warnings seemed to have been justified.The possibility that some of the attackers, or at least their ample weaponry, had come from Hamas-controlled Gaza was quickly raised by Egyptian critics of the Brotherhood. Morsy himself could not attend the military funerals for the victims, after his prime minister had beaten a hasty retreat from angry demonstrators. Not surprisingly, then, Brotherhood and Hamas officials both attacked Israel, the “sole beneficiary” of the attacks, as being behind them, in order to destabilize the country, damage Egyptian-Palestinian relations, and prove the need for closer Israeli-Egyptian security cooperation.Indeed, such cooperation was evident in the Egyptian military’s swift response to the attack. With Israel’s permission (required under the terms of the 1979 peace treaty), Egyptian air force units were deployed for the first time in Sinai since the October 1973 war, as part of highly publicized ongoing operations against the perpetrators of the attack and their base of support.But the efforts to pin the debacle on the Brotherhood backfired, goading Morsy into action. Identifying a historic opportunity to gain the upper hand in the struggle to dominate Egypt, he grabbed it. A first hint of intent was given on August 8, when he fired his intelligence chief, the governor of north Sinai and several others.Still, no one was prepared for his subsequent move, on August 12.Not only were Tantawi, Army Chief of Staff Sami Anan, and the heads of the air force, navy and military industries all retired or transferred to other posts, the controversial SCAF decree of June 17 – that had severely circumscribed the powers of the president and expanded those of the military – was annulled. Morsy also appointed a senior judge, Mohammed Mekki, as his vice president, presumably to strengthen his control over the judiciary.Caught by surprise, US officials kept a low profile while also expressing confidence in Tantawi’s replacement, Abdel Fattah al-Sisi, with whom they had dealt as military intelligence chief. America’s recently redoubled efforts to strengthen Egypt’s security forces in Sinai against radical Islamic elements would remain a priority. Israel could only observe from the side, and hope that they would succeed.But the Muslim Brotherhood’s major leap forward in consolidating its domination of the Egyptian state can hardly bode well for the future of Egyptian-Israeli relations.