Arms Sales Monitor No. 21, 15 July 1993

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No. 21 (15 July 1993)

Contents of this issue:

Clinton Admin. Watch

Naval Intelligence Says Arms Market Drives Threat

3 May---The Director of the Office of Naval Intelligence (ONI), Rear Admiral Edward Sheafer, releases the ONI's annual threat overview. He cites the instability and warfare spawned from nationalism, ethnicism, tribalism and religious fanaticism as the main threats facing the US today. ONI's job, he says, is to help determine how threatening these potential conflicts really are. The key is "what weapon systems are (and will be) available for purchase on the international arms market? By whom will they be purchased and how well will they be maintained and used?"

Sheafer outlines ONI's threat analysis procedure as follows: 1) defining threatening military technologies; 2) estimating how much of these threatening technologies a particular country can afford to buy; 3) determining what sort of a military requirement a given country has; and 4)characterizing how well the country can integrate, operate and maintain the military technology. He concludes that "future [US] operations are likely to face an increasing number of regional powers with relatively sophisticated weapons and sensors. Weapons proliferation has become a fact of life; more worrisome are the levels of sophistication of the systems---at times approaching that of US [deployed] equipment---and the speed at which they are becoming available to potential adversaries."

Sheafer lists the conventional arms trade---and in particular Russian sales---as one of the major"threats and challenges of the 1990s." "Russia will continue to be an important source of advanced military technology for other countries. This reality substantially increases the technological challenge to US Navy operating forces worldwide." According to Congressional Research Service data released in July, Russia sold $1.3 billion in arms in 1992.

State Dept. Makes Business its Business

8 May---Secretary of State Warren Christopher sends an unclassified cable on "Advancing US Business and Economic Interests" to all US Ambassadors. While not as explicit as his predecessor was that overseas embassies should aid directly US industry to make arms sales, Christopher reminds Ambassadors that "The President has identified promotion of America's economic security as the first pillar of our foreign policy." He adds that "Advancing US business and economic a job in which not only economic and commercial sections, but all sections and all agencies in your mission have a role to play....Here FY94 in Washington we will work closely with our colleagues in the Departments of Commerce and Agriculture, Defense, EXIM Bank, OPIC, and other agencies to give you the best support possible....Undersecretary for International Security Affairs Lynn Davis will oversee our defense trade. She will be supported by the Bureau of Political-Military Affairs, as well as other offices on specific issues. Deputy Secretary Wharton and I intend to play an active direct role in this effort, both in the US and in our trips overseas."

Meanwhile, Pentagon leadership is sounding more cautious on the arms export business. Deputy Secretary of Defense William Perry told a 24 May meeting at the Center for Naval Analysis that "The government should be willing to help [promote sales] in certain limited ways, provided that we can assure sales [do] not risk proliferation of weapons of mass destruction, particularly nuclear technology, and we are not aggravating an unstable region in which regional wars are likely." He went on to say, however, that high levels of FMS are "a false illusion" and will not sustain the current American arms industrial base. Due to the glut of equipment on the market and the fact that US equipment is so costly, "Industry should not count on [export sales] as salvation." Rather, he advises, companies should diversify into other products. <Defense News 7-13 June 93; Aerospace Daily 25 May 93>

DSAA Confirms Record Arms Sales in FY93

June---The FY94 Congressional Presentation Document (CPD) estimates that during the current fiscal year (FY93) a whopping $28 billion in government-negotiated Foreign Military Sales (FMS) of weapons and related services will be finalized. On 11 June the spokesman for the Defense Security Assistance Agency, the Pentagon office in charge of the FMS program, said FY93 FMS may reach as high as $30 billion. Either estimate is by far the highest current year dollar total ever achieved, with the previous record at $23.8 billion in FY91 <Defense News 14-20 June 93 p. 2>. The bulk of this year's record sales comprises: $8.2 billion Saudi F-15 sale, $6 billion F-16 sale to Taiwan, $1.9 billion sale of M1A2 tanks to Kuwait, $3.1 billion Patriot sale to Saudi Arabia and $1.3 billion F-16 sale to Greece. <Aerospace Daily 17 June 93>

According to the CPD, sales are expected to drop precipitously to $12 billion in FY94. Last year's CPD, however, dramatically underestimated FY93 sales, predicting only $11 billion.

In addition to the government-brokered FMS, the State Department's Office of Defense Trade Controls licenses arms exports negotiated directly by arms manufacturers. The CPD estimates $5.335 billion in deliveries of directly-negotiated sales in FY93.

FMF No Longer to Be Used for Direct Buys

8 June---A new Pentagon policy signed by Deputy Secretary of Defense Perry, prohibits using Foreign Military Financing funds (military aid) to pay for arms purchases negotiated directly with US arms manufacturers. After 1 January 1994, all FMF aid must be spent through the Pentagon's FMS program. The policy change comes in response to Pentagon and GAO audits which identified oversight problems with the direct sales program. <Defense News 14-20 June 93>

The new policy affects all FMF recipients. Israel, which routinely uses FMF for direct purchases from industry, is reportedly seeking an exemption from the policy.< Jane's Defence Weekly 19 June 93 p. 5>

Some US industry and FMF recipients are complaining about the change, saying the FMS program involves too much paperwork and unwanted oversight. In practical terms this change might well result in slower transactions and lower profit margins for US industry. Of the policy change, an unnamed industry source reportedly said, "We have already seen what some countries, like the Saudis, will do if they are forced to go through FMS. ...They will go somewhere else...where they ask fewer questions and can deliver faster." [ed. note: The Saudis have purchased some $20 billion of weapons through FMS in the past three years.]

In response, an unnamed DOD official points out that the new rule "is not going to affect the Saudis or the [West] Europeans, or any of the big-ticket customers...because they're paying cash....[W]e're talking about a very limited customer set. And they will do whatever the rules say because we are paying the bill. Anybody who's whining about this change hasn't really thought it through....If they don't like the rule, they don't get the equipment. And they want the equipment, so they will live with it." <Aerospace Daily 18 June 93 p. 483>

Paris Air Show 1993

11-20 June---The DOD leases seven aircraft to their manufacturers for display at the Paris Air Show: an F-15E, F/A-18, AH-64 attack helicopter, UH-60A Blackhawk helicopter, UH-1 helicopter and 2 F-16 fighters. One of the F-16s was the only aircraft to make an aerial demonstration at the show. All of the aircraft except the UH-1 were flown to the show as government supported training missions, at no cost to industry. Industry, however, is paying for the ramp space, towing fees, airfare for the pilots back to their bases, guarding the weapons, etc. <Defense Daily 8 June 93; Aerospace Daily 8 June 93>

In a speech in early May, Deputy Secretary of Defense Perry said that his decision to limit DOD participation at the air show was in direct response to Section 1082 of the FY93 DOD authorization act, which directs that the Pentagon must explain the national security interests that merit high level government participation at an international air show (see ASM No. 18 p. 3). "The policy we took is that we would go as far as we could to support industry participation without invoking that clause," Perry said. <Defense News 10-16 May 93 p. 14>

Commerce Secretary Ron Brown intends to push for fuller government participation at future arms bazaars. <Defense Daily 11 June 93 p. 410>

State Department Allows Sales of Shoddy Weapons

21 June---Senators David Pryor and William Roth write to Secretary of Defense Aspin to inquire whether the Pentagon has officially changed a May 1992 policy against approving exports of weapons that have not passed operational testing. It was reported in May (1993) that the State Department had granted a commercial munitions export license for the Airborne Self Protection Jammer (ASPJ) to some unnamed destination. Korea, Egypt, Greece, Turkey, Finland, Kuwait and Switzerland are all reportedly interested in acquiring the electronic countermeasure system, for use on F/A-18 or F-16 aircraft.

After 16 years of development by the Navy, funding for the ASPJ was ended last fall, after the system failed operational testing. "[W]e question the wisdom of approving foreign sales of ASPJ just months after it flunked operational tests....Certainly we would not want to send defense systems to our allies overseas unless we fully know that the systems are suitable for combat," the Senators write.

Because recoupment fees previously levied on commercial exports were recently abolished (see ASM No. 18 p. 4), and because neither the Navy nor the Air Force ever deployed the system, US taxpayers have underwritten development of the system in effect solely for the profit of ITT Avionics and Westinghouse, the producers of the ASPJ. <Inside the Navy 31 May 93; Defense Daily 1 July 93>


House Passes Foreign Aid Bills

In June the House passed the foreign aid authorization and appropriations bills and the State Department authorization act. A summary of arms sales and military aid-relevant policy from the bills follows.

Military Aid Provisions

Need for reform.

Title I of H.R.2404 states the need for dramatic reform in the legislation governing foreign aid. A major revision of those laws, the Arms Export Control Act (AECA) and the Foreign Assistance Act (FAA), has been attempted twice during the recent past, but Congress has failed to pass a foreign aid authorization bill, which would be the logical legislative vehicle for such revision, since 1985. This bill is recognized by both parties as transitional. In order to facilitate the passage of a reform bill either in the FY95 budgeting cycle or before, H.R.2404 directs the President to submit to Congress his plan for comprehensive reform of foreign aid programs within 60 days after H.R.2404 enters into law.

Security Assistance Overview.

In security related ESF, H.R.2295 cuts $217 million from the Administration's FY94 request, and rescinds $185 million in FY93 and prior year ESF. Total ESF for FY94 is $2,364.5 million. $3,221.5 million in FMF is appropriated, $46.5 million of this in the form of loan subsidies, which will support loans of $769.5 million. The funding request of $42 million in IMET for 125 countries is halved to $21.2 million.

Prohibitions on security assistance.

H.R.2295 specifically prohibits military aid to Zaire, Sudan, Liberia, Guatemala, Peru and Malawi; it prohibits all foreign aid to Cuba, Iran, Iraq, Libya, Serbia, Syria and Vietnam. Unless waived by the President, Section 539(a) of H.R. 2295 bans all assistance under the FAA to any country not in compliance with UN Security Council sanctions against Iraq.

H.R.2404 bans the provision of security assistance to countries which "consistently" oppose the United States' position in the UN General Assembly, defined as voting in accord with the US position less than 25 percent of the time. Security assistance includes ESF, FMF and IMET.

Due to human rights abuses in East Timor, Congress banned all IMET to Indonesia in FY93.Although H.R.2404 does not prohibit IMET for Indonesia in FY94 (because the Administration requested none), H.R.2295 does specifically ban it. However, it doesn't seem to really matter anyway. The FY94 Congressional Presentation Document notes: "Although the Administration is not requesting IMET For Indonesia in FY94, Indonesia plans to purchase professional military education, resource management and Naval Post Graduate School courses through FMS."

H.R.2404 conditions IMET to India on Presidential certification that the Indian Government "is taking steps to address the human rights problem in India, such as providing access to international human rights organizations, establishing a human rights commission, holding military personnel accountable for violations of fundamental human rights and prosecuting human rights abusers."

Security aid to the Middle East.

H.R.2404 and H.R.2295 fully support the Administration's request for Middle Eastern countries and programs. See the funding levels below. Despite overall aid reductions, security aid levels to Israel and Egypt will be maintained at their usual high levels, together accounting for 98 percent of all military aid in FY94. Unlike other aid recipients, all of Israel's ESF and FMF are to be disbursed within 30 days after H.R.2295 enters law or by 31 October 93, whichever is later. The authorization report notes that this lump-sum cash transfer adds approximately $30 million to the value of the assistance. Also unique to Israel, $475 million of the military aid may be used to procure Israeli-made defense articles and services.

In addition, Section 406 of H.R.2404 authorizes that unfilled FY93 authority for additional war reserve stocks in Israel---to be used by either the US or Israel in an emergency---may be fulfilled in FY94, but the aggregate value of additions in both fiscal years is not to exceed $200 million. H.R.2295, however, appropriates an additional $200 million in stocks for Israel in FY94. The Administration had not requested additional stocks for Israel, but rather sought an additional $72 million for South Korea and $20 million for Thailand.

Also relevant to the region, H.R.2404 directs that at least $10 million in ESF is to be used for"cooperative projects" among the US, Israel and developing countries; and not less than $7 million shall be made available only for Middle East regional cooperative programs.

While the funding request for Jordan is supported, both H.R.2404 and H.R.2295 sound a cautionary note about the importance of Jordan's adherence to UN Security Council sanctions against Iraq.

Southern NATO countries being weaned from FMF.

H.R. 2295 reduces military assistance for Greece, Turkey and Portugal ten percent below the Administration's request. Further, the bill directs that rather than concessional rate loans as were provided last year, the countries will receive loans with interest rates reflecting the cost of borrowing to the United States Treasury, plus administrative charges.

The appropriations report explains that: "TheCommittee believes that it is appropriate,given the end of the Cold War and given the state of the budget deficit of the United States, to continue the process of `graduation' of the NATO base rights countries form the Foreign Military Financing program....The graduation concept is similar to that of the World Bank. Poor developing countries receive concessional assistance through the International Development Association (IDA), but as their economies prosper, they are graduated to hard loans, and eventually from receiving any loans at all. Turkey, Greece and Portugal all have hard World Bank loans in their debt portfolios. None of the three has been eligible for IDA loans for many years. Many of the loans that each of these countries is currently repaying the World Bank carry interest rates that exceed those which they would likely have to pay for foreign military finance programs even under the recommendations of the Committee." <H.Report 103-125 pp. 19-20>

Gen. Teddy Allen, Director of the DSAA, made the Administration's case for continuing to provide military aid to the three countries before a Senate Foreign Relations Subcommittee on 16 June:

There is a view in some circles that because the Cold War is over, security assistance is no longer important to our interests....Greece, Portugal, and Turkey remain vital to US national security interests. These countries' cooperation, including base access and overflight privileges, are critical to our ability to project power in defense of our interests in the region, which include reliable oil supplies and progress towards Middle East peace. Turkey contributes substantially by its pivotal role in the enforcement of UNSC resolutions, including its hosting of coalition forces patrolling Northern Iraq as a part of Operation Provide Comfort and its closure of an Iraqi oil pipeline. Turkey and Greece play critical roles in containing and resolving conflict in the Balkans, and Turkey is also key to resolving the conflict in the Caucasus.

Excess defense articles. Section 31(d) of the AECA limits the acquisition value of "excess defense articles" (EDA) that may be sold (except for those sold under the routine 36(b) notification process) and given away per year. In FY93, transfers of EDA were limited to $250 million (of acquisition value). Section 402 of H.R.2404 amends Section 31(d) by raising the ceiling of aggregate transfers to $375 million per fiscal year.

In addition, Section 519(a) of the FAA is amended to allow East European countries eligible for economic aid from the US to receive non-lethal EDA.

Fair pricing for purchases with FMF aid. Section 401 of H.R. 2404 directs that weapons and services paid for wholly by FMF grants "shall be priced on the same costing basis with regard to profit, overhead, independent research and development, bid and proposal, and other costing elements, as is applicable to procurement of like items purchased by the Department of Defense for its own use." Price gouging on exports is reportedly due to the high risk of non-repayment, but such risk obviously does not exist with sales paid for by FMF. Israel and Egypt are the main benefactors of this revision, since they receive nearly all of the FMF grant money. The measure becomes effective 60 days after enacted into law and applies only to contracts made after this date.

Arms for Bosnia. Section 603 of H.R.2404, the "Bosnia-Hercegovina Self Defense Act of 1993," asserts that "Bosnia-Hercegovina's right of self-defense includes the right to ask for military assistance from other countries and to receive such assistance if offered." Thus, it permits the President to end the US arms embargo of the Government of Bosnia-Hercegovina, in place since July 1991, upon request by Bosnia and authorizes the drawdown of $200 million in weapons and related services from US stocks.

H.R.2295, however, retains a provision from last years's appropriations bill, which allows the President to provide $50 million in military equipment to the government of Bosnia-Hercegovina only if the UN lifts the arms embargo of the former Yugoslavia.

Military expenditure criticized. The Appropriations Committee is concerned that, "while Congress is asked to provide taxpayer dollars to fund development programs overseas, both directly and through institutions such as the World Bank and the International Monetary Fund, recipient governments spend $200 billion annually on their military forces, far more than what they receive from all sources of foreign aid. The Committee urges the Secretaries of State and Treasury to factor levels of military spending into their decisions on providing US aid or approving international lending....The Committee intends to carefully monitor the level of military spending by developing countries and the impact of the transfer of arms and weapons technology on the third world as the Committee considers future foreign assistance requests." <H.Report 103-125 p.7>

The report later recommends that the Secretary of Treasury instruct the United States' Executive Director of each International Financial Institution to use the United States' voice and the vote to limit the availability of loans to countries that have not signed the Nuclear Non-Proliferation treaty or have not signed "the international agreements related to the control of chemical and biological weapons and ballistic missile technology and component exports." <H.Report 103-125 p.35>

Drug war funds cut substantially. H.R.2295 appropriates $100 million for International Narcotics Control, $71.5 million below the Administration's request. In the bill's accompanying report, the Appropriations Committee is highly critical of the Andean Initiative, which called for spending $2.2 billion in military aid over five years to Peru, Bolivia and Colombia to help fight drug trafficking. The report states that "Despite claims that coca cultivation has leveled off in the Andean region, there are no signs that actual levels of cocaine reaching US shores has changed....The Committee feels strongly that a complete review of our worldwide strategy to combat narcotics trafficking and consumption is in order." <H.Report 103-125 pp. 91-3>

Deob/Reob Authority Granted. Section 510 of H.R.2295 permits in FY94, for the first time, for the reobligation of unused prior year FMF funds.

Arms Sales Policy

Participation in UN register encouraged. Section 191 of H.R.2333, dealing with "Transparency in Armaments," contains sense of Congress language that no sales, or agreements or licenses to sell weapons or related services should be issued for any state "that does not fully furnish all pertinent data to the United Nations Register of Conventional Arms pursuant to the United Nations General Assembly Resolution 46/36L by the reporting date specified by such register [30 April annually]." If a country pledges to report to the register, but has yet to do so, it is the sense of Congress that an arms sales agreement can be negotiated and a license may be issued, "but the actual delivery of such defense article or service should not occur until that nation submits such information."

Unclassified Javits. In addition, the bill's report notes that the annual "Javits List" of arms sales considered likely in the coming calendar year is required by law (AECA Section 25) to be provided in an unclassified form. Failing that, a detailed summary is to be provided in unclassified form. Yet, the report notes, the unclassified data has never been made available. "The Committee strongly encourages the President to make every effort to submit the Javits List in unclassified form." <H.Report 103-126 p. 41>

Revitalization of `Permanent Five' process urged. Noting that the talks initiated in 1991 among the five permanent members of the UN Security Council "present the best opportunity to negotiate qualitative and quantitative guidelines on conventional arms sales to the developing world," Section 192 of H.R.2333 states the sense of Congress that the President should seek to restart the talks "and should report to the Congress on the progress of such talks and the effects of United States agreements since October 1991 to sell arms to the developing world."

H.R.2295's report contains several paragraphs expressing the Appropriations Committee's concern over the militarization of the Third World, and in particular "the surge in United States' arms sales last year." As such, the Committee "urges the new Administration to make the halt of the transfers of conventional and nonconventional weapons, weapons-related materials and the technology necessary to produce such developing nations a major policy priority, both unilaterally and multilaterally." <H.Report 103-125 p. 11>

Arms sales impact statement. Section 193 of H.R.2333 amends Section 36(b) of the AECA, which governs Congressional notification of proposed arms sales, by inserting after the first sentence that "Each certification shall provide an evaluation of the manner in which the proposed sale would meet legitimate defense needs of the foreign country or international organization to which the sale would be made, increase regional tensions or instability, and introduce new or more sophisticated military capabilities into the region." If this bill is enacted into law, this information, which previously was presented to the Foreign Affairs/Relations Committees only upon request, will be provided routinely with sales notifications.

Sales conditioned on ending secondary boycott. Section 407 of H.R. 2404 prohibits arms sales to any country which "as a matter of policy or practice is known to have sent letters to United States firms requesting compliance with, or soliciting information regarding compliance with, the secondary or tertiary Arab boycott, unless the President determines, and reports to the relevant congressional committees, that that country or organization does not now send such letters as a matter of policy or practice." The prohibition is effective one year after the bill is signed into law, but the measure can be waived for one year if the President determines it to be in national interests.

According to the Commerce Department's Office of Anti-Boycott Control, the following countries have sent letters to American businesses urging compliance with, or requesting information about their compliance with the boycott on conducting business with Israel. (The number of letters sent, as of FY92, is in parentheses.) Kuwait (2,864), UAE (1,990), Saudi Arabia (1,568), Syria (522), Bahrain (238), Qatar (208), Jordan (151), Libya (91), Lebanon (80), Egypt (53), Iraq (22), Algeria, Djibouti, India, Iran, Malaysia, Nigeria, Oman, Pakistan, Sudan, Tunisia, Yemen. In June Kuwait announced that it would no longer maintain the secondary boycott of firms doing business with Israel.

H.R.2295 contains similar, but weaker, language. It notes the sense of Congress that the President should encourage Arab League member countries to renounce and end the boycott and "take into consideration the participation of any recipient country in the primary boycott of Israel and the secondary and tertiary boycotts of American firms that have commercial relations with Israel when determining whether to sell weapons to said country." The President is directed to report on steps to end the boycotts.

ACDA given veto role in licenses. Following a contentious debate this Spring over its continued existence as an independent agency, funding for the Arms Control and Disarmament Agency is authorized under Title III of H.R. 2333. The bill mandates the ACDA Director's participation in export decisions taken under Section 38(a)(2) of the AECA. The Director will assess whether an arms export will "contribute to an arms race, aid in the development of weapons of mass destruction, support international terrorism, increase the possibility of outbreak or escalation of conflict,or prejudice the development of bilateral or multilateral arms control or nonproliferation agreements or other bilateral arrangements." No decisions to sell weapons may be made over the Director's objection until he/she has been informed in writing as to why his/her opinion was not considered sufficient to block the sale and given an opportunity to appeal the decision.

SDAF dried up. In a move heavily opposed by the arms industry, both H.R.2404 and H.R.2295 phase out, upon the Administration's request, the Special Defense Acquisition Fund. The SDAF was created with appropriated funds in 1981 to procure and stockpile popular weapons for ready export. By 1987 it had become a self-sufficient revolving fund of receipts from sales of SDAF stocks. Since then, the foreign aid appropriations bill has set a ceiling on the amount of money that could be obligated to the SDAF annually. In FY93, $225 million was approved for the fund. None was approved for FY94. Funds from sales of the remaining SDAF stocks in excess of authority obligated prior to FY94 will be deposited into the US Treasury as miscellaneous receipts, which the Congressional Budget Office estimates will reduce the deficit by $266 million.

New conditions on aid to FSU. H.R.2295 appropriates $903.8 million in economic assistance for the republics of the former Soviet Union. Section 311 of H.R.2404 adds new conditions for receiving the aid: If the President finds that any of the FSU republics transfer "sophisticated conventional weapons to Iran in numbers and types that are destabilizing," they would be ineligible for the money. Within six months of enactment, and every 31 January thereafter, the President must submit a report on the numbers and types of weapons or military-related goods or services sold by any FSU republics to Iran. The report is to include "weapons of mass destruction and related technology and scientific expertise, "sophisticated conventional weapons" and conventional weapons subject to the reporting requirements of the UN Register on Conventional Arms.

FMS operating budget reduced. H.R.2295 reduces the operating budget for the FMS program from $300 million last year to $290 million for FY94. The funds are derived through an administrative surtax of 3-5 percent of contract value charged on all FMS, as required under Sections 21(e)(1)(A) and 43(b) of the AECA. No budgetary outlay is involved, but the Appropriations Committee sets an annual ceiling on FMS operating expenditures. The Committee expressed concern last year that the use of these funds needed greater scrutiny, and the Committee recommended that estimates of how the FMS surcharge is spent should be included in the FY94 budget submission. The Committee warns that further reductions will be made unless such an estimate is provided. <H.Report 103-125 p.99>

The surtax-derived funds are deposited into a Foreign Military Sales Trust Fund account in the US Treasury. The account must be getting pretty fat. If $28-30 billion in FMS will be finalized during this fiscal year, as the Pentagon is predicting, and a low-end 3 percent surcharge is applied to all of this, at least $840 million will be added to the account. Less the nearly $300 million in administrative budget, and the account nets $540 million this year alone.

Equal treatment for major non-NATO allies. Section 405 of H.R.2404 amends Section 21(h) of the AECA to make major non-NATO allies (Israel, Japan, Australia, New Zealand and South Korea) eligible to receive the same contracting services that NATO member countries receive on weapons sales, including quality assurance, inspections, and contract administrative and audit services.

Peacekeeping and Disarmament

African conflict resolution efforts funded.

Section 303 of H.R.2404 authorizes the President to help establish a permanent conflict resolution capability within the Organization of African Unity and directs that $1.5 million during each fiscal year FY94-98 go to this end. The President is also authorized to provide an additional $1.5 million in ESF per the next four fiscal years in assistance to sub-regional Sub-Saharan African organizations for conflict resolution. Further, during FY94 the President is directed to use $10 million in ESF and FMF to facilitate the downsizing of sub-Saharan African armed forces; the money will be spent to demobilize and retrain the forces.

Voluntary peacekeeping contributions.

The Administration requested $77.166 million in unassessed (voluntary) funds for UN and other regional peacekeeping operations. The request was subject to a slight 2 percent reduction by the Appropriations Committee, bringing it down to $75.6 million. The breakdown of the request is as follows:

Non-Proliferation Fund Gutted.

Citing budget constraints and "the relative uncertainty of how the Fund is to be used," the Administration's request for a $50 million Non-Proliferation and Disarmament Fund was reduced in H.R. 2295 to $10 million. Championed by former Foreign Affairs Chairman Dante Fascell last year, the fund is to be used for education and training of foreign government officials about non-proliferation and to instruct them in effect export controls; weapons destruction and conversion programs and to implement the Chemical Weapons Convention and START; enforcement and interdiction funding to help curb the illicit trade in materials used in weapons of mass destruction; and safeguard and verification programs for international non-proliferation regimes.

Who's In, Who's Out

Taiwan Now a COCOM-ApprovedDestination

27 April---According to a final rule printed in the Federal Register, the Science-Based Industrial Park in Hsinchu, part of the National Science Council of Taiwan, is now a COCOM-approved destination. Hsinchu may, therefore, import from the US militarily useful commodities, which are controlled by the Commerce Department. To become eligible, the Taiwanese government promised to implement an International Import Certificate/Delivery Verification Certificate (IC/DV) system, assuring that it will exercise control over the commodities and ensure that they are delivered to the proper end destinations. Other countries that are subject to IC/DV certificates, and therefore are eligible to import dual use items from the US, are: all NATO members plus all other North and West European countries, Japan,Australia, New Zealand, ROK, Hong Kong, Singapore and Pakistan. <Federal Register 27 April 93 pp. 25553-4>

Arms to Burma, Zaire Suspended

29 April, 16 June---The State Department announces that all licenses and other approvals to export weapons or related services to Zaire and Burma are suspended until further notice. In the case of Zaire, the action comes "in view of the violence and death fueled by the actions of the regime of President Mobutu" <Federal Register 29 April 93>. For Burma, the action is due to human rights abuses being committed by the current government <Federal Register 16 June 93>.

US Switches Sides in Angola

29 June---The State Department ends trade restrictions against Angola, making possible sales of nonlethal military equipment, such as trucks, uniforms and medical supplies to the government of Joseacute; Eduardo dos Santos. A UN arms embargo levied against Angola in 1991 is still in effect.

During Angola's 20 year civil war, the US opposed dos Santos' Marxist government, and funnelled weapons to Jonas Savimbi and his UNITA forces. Dos Santos won the first round of a UN-monitored election held in 1992, but Savimbi refuses to honor the vote and instead resumed fighting.

A Washington Post article reporting on the State Department decision straightforwardly noted that "Angola has money to buy equipment because it exports large quantities of oil from its Cabinda region....The decision to lift the ban on equipment exports allows US companies to compete for sales there, and also sends a message to Savimbi." <Washington Post 30 June 93; New York Times 1 July 93>

Deals in the Works

Recent Arms Sales Notifications to Congress

Foreign Military Sales (FMS) are arms sales negotiated by the US government (through the Pentagon's Defense Security Assistance Agency). After the mandatory Congressional notification,the US government and the foreign government may sign the formal contract for the sale, called a Letter of Offer and Agreement (LOA).

Direct commercial arms sales are negotiated by US arms manufacturers and the foreign purchasing entity. These sales are licensed by the US government through the State Department's Office of Defense Trade Controls. Weapons sold through DCS channels are often identical to those sold through FMS (e.g., combat aircraft and missiles), the main difference being that these sales involve less government oversight.

Notice of the following FMS and commercial export licenses was sent to Congress for approval during late April-June.

27 April, Congress receives notification from the DSAA of the Navy's proposed LOA to Argentina for 36 A-4M/OA-4M Skyhawks, now surplus to US Marine and Navy needs. The planes are manufactured by McDonnell Douglas. Spare engines, training, support and 20 mm ammunition are included in the $125 million deal. According to the Congressional notification, the aircraft are needed to replace the 16 surviving A-4B/Cs sold by the United States to Argentina in the 1970s. <Congressional Record 27 April 93 p. H2057; Flight International 5-11 May 93>

5 May, the Congress receives notice from the State Department of a proposed license for the export of "major defense equipment and services" to Singapore (transmittal no. OTC-20-93). <Congressional Record 5 May 93>

11 May, the DOD notifies Congress of plans to sell Greece 20 Multiple Launch Rocket Systems (20 launchers, 363 tactical rocket pods, 72 practice rocket pods, 36 missile launch pod trainers) and supporting equipment, including 11 M577 command post carriers and 104 Single Channel Ground Airborne Radio System sets for $156 million. Loral Vought in Dallas, TX is the prime contractor for the MLRS. <Defense Daily 12 May 93 p. 234>

8 June, Congress receives notification from the State Department of its intention to license "defense articles" to Kuwait (notification DCT-22-93) and "major defense equipment" to Turkey (notification OTC-30-93). <Congressional Record 8 June 93 H3340> Congress also receives notice from the DSAA that the Navy intends to present an LOA to Malaysia for defense articles and services. <Congressional Record 8 June 93 p. H3340>

11 June, the DSAA notifies Congress of the Air Force's intention to sell Turkey 50 A-10 attack aircraft for $167 million and 5 AH-1W attack helicopters for $110 million (DSAA transmittal nos. 93-07 and 93-13). Grumman and Bell Helicopter Textron Inc. are the prime contractors. <Defense Daily 14 June 93 p. 420>.

14 June, the DSAA notifies Congress of the Navy's proposed LOAs for two deals to Turkey (transmittal nos. 93-06 and 93-14). <Congressional Record 14 June 93 p. H3509>

15 June, the DSAA informs Congress of its intention to sell Turkey spare parts for Turkey's C-130, F-4E, F-5, F-100, F-104, T-33, T-37 and T-38 aircraft for an estimated price of $110 million. DSAA also notifies Congress of the Navy's intended sale of weapons, ammunition and other logistical support related to the proposed lease of four Knox class frigates from the US Navy. Included in the deal are 32 Harpoon missiles, 64 MK-46 Mod-5 Torpedoes; 40 anti-submarine rockets, 4,400 rounds of 20 mm cartridges for the Phalanx Close-in-Weapon System. The prime contractors are McDonnell-Douglas Missile Systems in St. Louis, MO and Alliant Tech Systems in Hopkins, MN. <Memorandum for Correspondents Nos. 194 and 195-M, 15 June 93>

18 June, the DSAA notifies Congress of the Army's intention to sell the Saudi Arabian National Guard $819 million in support equipment and spare parts. Vinnell Corporation of Fairfax, VA is the prime contractor. <Memorandum for Correspondents No. 202-M, 18 June 93> Congress is also notified of Pentagon plans to sell Taiwan 12 C-130H aircraft, six spare engines, support equipment and other logistics support worth $620 million. Lockheed is the prime contractor for the C-130. <Defense Daily 21 June 93>

"Excess Defense Articles" Transferred

Weapons and equipment designated as "excess" by the various military services may either be sold through FMS or transferred under Sections 516, 517, 518 or 519 of the FAA for free. (These provisions principally refer to the modernization of defense capabilities of Southern flank NATO countries and other strategically located allies, and assistance to countries fighting wars against drug production and trafficking.) If given away, the recipient country usually pays only the costs of packing and shipping the weapons. EDA that are sold as FMS usually go for 5-50 percent of the original acquisition price paid by the Pentagon. <FY94 Cong. Presentation Document p. 74>

During April-June, the Director of the DSAA notified the appropriate Congressional committees and subcommittees of the following transfers of excess defense articles:

Turkey will receive "excess armored vehicle maintenance equipment," originally valued at $740,140, and now valued at just under $300,000, for free. <Letter from the DSAA to Congress 29 April 93>

Morocco is slated to receive a naval vessel. <Congressional Record 11 May 93 p.S5750>.

Paraguay will receive excess tactical wheeled vehicles and trailers estimated to be worth $82,740. The original procurement price was $866,260. <Federal Register 25 June 93>

Tunisia will receive 15 M35 series trucks, originally procured by the Pentagon for $701,250, for free. <Letter from the DSAA to Congress 11 May 93>

Altered Terms for the Taiwan F-16 Deal?

The $5.8 billion F-16 deal notified to Congress last September (see ASM No. 17) has run into more opposition in the Taiwanese legislature than it did in the US Congress. After authorizing an initial payment of $100 million on the contract, the Taiwanese legislators withheld an $18 million payment in February and promised to do the same in June if an offsetting deal favorable to Taiwan is not negotiated. In particular, the lawmakers think the deal should involve the transfer of F-16 production technology, as did an F-16 sale to South Korea.

The US government is reportedly not playing any role in the offset negotiations, which are being conducted directly between Lockheed and Taiwan's Committee for Aerospace Industrial Development. Lockheed will not divulge what sort of offset proposals are being discussed. Taiwan has never before insisted on or received an offset to a US arms sale. <Defense News 3-9 May 93 p. 3>

Saudi F-15 and Kuwaiti M1A2 Contracts Signed

3 May---The US and Saudi Arabia sign the LOA for the sale of 72 modified F-15E aircraft (called F-15"S"). Congress was notified of the sale last September (see ASM No. 17). The value of the LOA is nearly $8.2 billion, $5 billion of which is for the F-15s and the remainder for construction and logistics support. The first F-15S will be delivered to the Royal Saudi Air Force in late 1995, and deliveries will continue through 1998. <Aerospace Daily 12 May 93>

Later in the month, on 28 May, US and Kuwaiti MOD officials sign the $1.9 billion LOA for the sale of 218 M1A2 main battle tanks. Delivery of the tanks will begin in one and a half to two years and will continue through 1996. <Defense News 31 May-6 June 93 p. 2> As originally notified to Congress on 5 January, the deal was valued at $4.5 billion and involved 256 tanks (see ASM No. 18 p. 5).

Recent Government Publications

The Aerospace Industry (hearings of the Technology and National Security Subcommittee of the Joint Economic Committee on 3 December 1991 and 27 February 1992) USGPO: June 1993.

Annual Report [to Congress] on the Proliferation of Missiles and Essential Components of Nuclear, Biological and Chemical Weapons, obtained from the State Department, Bureau of Legislative Affairs, March 1993, 26 pp.

The Banca Nazionale Del Lavoro (BNL) Scandal and the Department of Agriculture's Commodity Credit Corporation (CCC) Program for Iraq---Part 2 (hearing of the House Banking Committee on 21 May 1992) US GPO: 1992, 829 pp.

Congressional Presentation for Security Assistance Programs for Fiscal Year 1994, prepared by the Department of State and the Defense Security Assistance Agency, June 1993, 360 pp.

Defense Conversion (hearings of the Joint Economic Committee on 9 April & 19 May 1992) US GPO: 1993.

Defense Conversion: Redirecting R&D, Office of Technology Assessment, Congress of the United States, May 1993.

Defense Industrial Base: An Overview of an Emerging Issues (GAO/NSIAD-93-68) 29 March 1993, 16 pp.

Developments in the Middle East---March 1993 (hearing of the Europe and Middle East Subcommittee of the House Foreign Affairs Committee on 9 March 1993) U.S.GPO: June 1993, 73 pp.

Export Controls: Issues in Removing Militarily Sensitive Items from the Munitions List (GAO/NSIAD-93-67) 31 March 1993, 70 pp.

Foreign Operations, Export Financing and Related Programs Appropriations for 1994: Parts 1, 2, 3, US GPO: 1993 [Part 2 contains the Congressional Presentation Document for FY94].

Future of the Defense Industrial Base (Report of the Structure of US Defense Industrial Base Panel of the HASC dated 7 August 1992) US GPO: 1993.

The Future of US Foreign Policy (Part I): Regional Issues (hearings of the Foreign Affairs Committee during February-March 1993) USGPO: 1993, 494 pp.

Legislation on Foreign Relations Through 1992: Volume 1 [This volume contains the most recently amended versions of the Arms Export Control Act and the Foreign Assistance Act.] (Report of the Senate Foreign Relations Committee, April 1993) US GPO: 1993, 1891 pp.; and Volume 2, USGPO: May 1993.

The Neglected Arms Race: Weapons Proliferation in the 1990s, prepared and published by the Arms Control and Foreign Policy Caucus: April 1993, 67 pp [see box for summary description].

Nomination of Warren M. Christopher to be Secretary of State (hearings of the Senate Foreign Relations Committee on 13-14 January 1993) US GPO: 1993, 237 pp.

Nonproliferation Regimes: Policies to Control the Spread of Nuclear, Chemical and Biological Weapons and Missiles (a report for the House Foreign Affairs Committee, prepared by the Congressional Research Staff, March 1993) US GPO: 1993, 74 pp.

Proposed Sale of F-15 Aircraft to Saudi Arabia and US-Saudi Commercial Disputes (joint hearing of the Arms Control and the Europe and Middle East Subcommittees of the House Foreign Affairs Committee on 23 September 1992) US GPO: 1993, 99 pp.

Regional Threats and Defense Options for the 1990's (hearings of the House Armed Services Committee during 10 March - 5 May 1992) US GPO: 1993.

Security Assistance: Excess Defense Articles for Foreign Countries (GAO/NSIAD-93-164FS) 24 March 1993, 24 pp.

United States Export Policy Toward Iraq Prior to Iraq's Invasion of Kuwait (hearing of the Senate Banking Committee on 27 October 1992) US GPO: 1993, 497 pp.

White House Efforts to Thwart Congressional Investigations of Pre-War Iraq Policy: The Case of the Rostow Gang (hearing of the House Banking Committee on 29 May 1992) US GPO: 1993.

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