CAIRO: Egypt is working “diligently” to resolve a bitter row with Washington over alleged illicit funding of NGOs for which American and other activists are due to stand trial, U.S. Senator John McCain said Monday.

Egypt’s military ruler Field Marshal Hussein “Tantawi has assured us they are working very diligently to resolve the NGO issue,” he told a news conference in Cairo after meeting Tantawi.

McCain said Monday U.S. relations with Egypt are changing a year after the ouster of Hosni Mubarak but the two countries “must remain friends.”

U.S.-Egypt relations are at their lowest points in decades, strained over the government’s crackdown on foreign-funded nonprofit groups working for democracy in Egypt. Egyptian authorities have referred 16 Americans and 27 others who worked for the various groups to a criminal trial expected to begin on Feb. 26. McCain chairs one of the four American groups targeted.

“Egypt is changing. It is true, and as such, the nature of America’s partnership with Egypt is also changing,” McCain told a room full of U.S. and Egyptian businessmen.

“But ... we must remain the strongest of friends, politically, economically and militarily. We must maintain and strengthen the key pillars of that partnership, especially our commercial and trading relationship and where the people of Egypt and their newly elected government make the right decisions about the policies that will shape their sovereign nation’s future,” he said. “We must be here to ... support them.”

Washington has threatened to cut $1.5 billion in aid over the crackdown on the democracy groups.

Egypt under Mubarak was Washington’s closest Arab ally in the Middle East and a loyal partner in the fight against Islamic extremism and terror. Mubarak also kept the 1979 peace treaty with Israel, a cornerstone of U.S. foreign policy in the Mideast.

But with the military on the defensive over criticism that it has bungled the transition to democracy and the rise of an Islamist-dominated parliament, Egypt appears to be more ready to publicly challenge the U.S. and Israel, even at the risk of losing critical foreign aid. That stance taps into widespread anti-Israel and anti-U.S. sentiment in Egypt.

The ruling Supreme Council of the Armed Forces has regularly accused “foreign hands” of backing continued protests against its rule. And the Islamist parties that control about two-thirds of the newly elected parliament have threatened to review the peace treaty with Israel if U.S. aid to Egypt is halted.

Four U.S.-based nonprofit groups are among those targeted, as well as a German agency. They are accused of operating in Egypt illegally and of fomenting protests calling for the ruling military council to immediately hand over power to a civilian authority.

McCain, a member of the Senate’s Armed Services Committee, is leading a Congressional committee visiting various countries in the Middle East as well as Afghanistan.

Egypt’s state news agency MENA said Tantawi, is discussing with McCain and the Congressional delegation developments and changes in U.S.-Egypt relations, as well as the nature of activities of civil society groups in Egypt in light of the democratic transition.

McCain chairs the International Republican Institute, one of the four American groups targeted. But he didn’t mention the case in his remarks. He instead stressed the importance of the ties between the two countries, focusing on commercial and trade relations.

He said the American people are committed to the success of Egypt’s transition, which he called “a brand experiment in democratic rule and economic empowerment.”

He said one of the main challenges to Egypt’s transition to democracy remains the deteriorating economic situation in the country of 85 million.

“Unless Egypt can create jobs for the millions of young people in this country who desire a future of dignity for themselves, the politics of Egypt will be unsettled and the forces of extremism here could grow more and more powerful,” he said.

U.S. Ambassador to Egypt Anne Patterson said American investors met with newly elected Egyptian lawmakers, some of whom were also businessmen. She said despite the stress in U.S.-Egypt relations, the U.S. businessmen want to be “deeply involved” in the new Egypt.

Meanwhile, airport officials said a U.S. citizen arriving to Egypt from Germany was arrested for assaulting a passport control officer after she complained over being asked to buy an entry visa.

Head of passport control Maj. Gen. Magdy al-Samman said the 31-year old American of Palestinian descent also spat at and scuffled with a policewoman “unnecessarily.”