President Obama is in a tough spot when it comes to deciding his next step on Egypt as he weighs the best way to demonstrate U.S. condemnation of the bloody military crackdown on supporters of deposed President Mohamed Morsi while trying to influence the interim military-run government.

Some critics are calling on the U.S. to cut off the $1.5 billion in annual U.S. military aid to Egypt, but Obama has steered clear of such talk, opting for a far more cautious approach.

While many foreign policy experts disagree with Obama’s overall record on responding to the turmoil in Egypt, there’s a consensus building behind Obama’s reluctance to deny the military aid.

“Delaying deliverables and incremental pressure, negotiating quietly over issues” is far more effective than cutting off all aid, said Anthony Cordesman, the Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies. “There’s a dialogue that goes on between the U.S. and Egyptian military. … If you deprive them of the aid, that dialogue will stop.”

During a break in his vacation on Martha’s Vineyard on Thursday, Obama announced that the United States had canceled longstanding joint military exercises planned for next month.

It was Obama’s second punitive step toward Egypt after first attempting to try to stop the Egyptian military from crushing protests from Morsi’s Muslim Brotherhood supporters by delaying the delivery of four F-16 fighters to the Egyptian Air Force.

Those steps, as well as Defense Secretary Chuck Hagel’s repeated pleas over the last week to Egyptian military leaders to change course, have fallen on deaf ears as Egyptian Gen. Abdul-Fattah el-Sisi’s troops killed hundreds of protesters, and Morsi's supporters retaliated by torching government buildings and Christian churches.

In his remarks Thursday, Obama said only that he has directed his national security staff to consider all options for his next move.

Over the last month, Sen. John McCain, R-Ariz., has said that Egypt has left the U.S. with no choice but to cut off aid and has blasted the Obama administration for not aggressively condemning the military government takeover early on.

A U.S. law requires the cutoff of American assistance to countries where a military coup has toppled an elected leader, but the Obama administration has deliberately avoided deeming the Egyptian armed forces’ power grab a coup and has cautioned that the U.S. supports neither side.

But Obama officials are worried that shutting off U.S. aid would not force Egyptian generals to return to a democratically elected government.

Israeli officials also are worried that turning off the American spigot would destabilize the region and allow Saudi Arabia, the United Arab Emirates and even Russia and China to step in and fill the funding vacuum. Israel’s 1979 treaty with Egypt is based on the U.S. military aid to Egypt.

Saudi Arabia and the United Arab Emirates last month pledged $8 billion in grants and loans to Egypt’s post-Morsi government. Those funds are more than enough to make up for any funding shortfall the U.S. would leave by cutting off its $1.5 billion in aid.

Another complication: Cutting off the money wouldn't have any effect for at least year because the U.S. has already delivered this year’s military assistance.

Heather Hurlburt, executive director of the National Security Network, says worries about Russia and China’s ability to step in are overblown because the U.S. offers the Egyptian military equipment very good deals on military equipment that Russia and China can’t match.

“Let’s not be naïve. There are a lot of weapons suppliers that are eager to sell to them, but the Egyptians get a really good deal from us, and there is not a Chinese tank that is a wonderful equivalent to ours,” she said.

More importantly, she said, the U.S. needs to reset relations by sending a clear message to the Egyptians that abusing its citizens will not be tolerated. She suggested targeted cuts or suspending funds for a finite period of time, such as six months.

“The effect you want isn’t going to be visible in the next two or three weeks — the goal here is to communicate clearly to all parts of the Egyptian society that what just happened is not OK,” she said. “The relationship cannot go forward the way it was. But at the same time the U.S. is not going to take its marbles and go home. What you’re doing is resetting the playing field.”

Michael Rubin, a former Pentagon official and resident scholar at the American Enterprise Institute, is far more critical of Obama’s approach to the crisis in Egypt and his tendency to stand idly by and try to remain neutral.

Rather than canceling military exercises between the U.S. and Egypt, the U.S. should use those strong military-to-military relationships to influence el-Sisi, a graduate of the U.S. Army War College in Pennsylvania, and set the stage for a more solid basis for democracy, Rubin says.

Rubin would cut $300 million of the $1.5 billion in aid that has not been obligated through the Camp David accords.

“We need to choose sides,” he said. “This idea of neutrality and bringing all sides together holding hands … is a fantasy that you can have if you’ve grown up in the University of Chicago bubble.

“Obama only wants to place his bets when he’s seen all the cards on the table,” Rubin argues, but by that time it will be too late to bring about a better democratic government, partner for the U.S. and life for the Egyptian people.