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No. 34 (30 April 1997)
This issue: Your tax dollars at work

FY98 Security Assistance Request

Its budget season in Washington, and a steady stream of State and Defense Department officials have been making the trip to Capitol Hill to defend the administration’s $13.3 billion request for foreign operations—security and development assistance to some 126 countries and a dozen regional organizations—for fiscal year 1998. The current Congress is unlikely to support this request, which is $1.2 billion more than last year’s appropriation. (For comparison to the FY97 appropriated levels, see ASM No. 33 p. 4).

At more than $6.1 billion, security assistance comprises nearly one-half of this year’s foreign operations request. The administrations proposed funding levels for these programs are summarized below. (Note: security assistance programs funded through the Department of Defense budget are not included here.)

FY 1998 Request for Security Assistance $6,132,250,000
Foreign Military Financing $3,340,250,000
Economic Support Fund $2,343,000,000
Voluntary Peacekeeping Activities $90,000,000
War Reserve Stockpiles (Thailand, Korea) $60,000,000
International Military and Education Training $50,000,000
International Narcotics Control $230,000,000
Anti-terrorism Assistance $19,000,000

Foreign Military Financing

The administration is seeking just over $3.3 billion for the Foreign Military Financing (FMF) program, which underwrites the purchase of U.S. weapons and services. The majority of FMF is provided as grant aid, with Israel and Egypt receiving 90 percent of the total.

Israeli FMF will support the procurement of F-15E bombers, SAAR corvettes, and upgrades of Apache attack helicopters, and Blackhawk utility/troop transport helicopters. Egypt will use its FMF to continue buying tanks, F-16 fighter jets, Apache attack helicopters, and frigates. Rounding out arms aid to the Middle East, Jordan’s allotment will allow it to complete the no-cost/low-cost lease of a squadron of F-16 fighter jets.

Also included in the administration’s request are $66 million to underwrite $700 million in loans for weapons purchases. The budget requests $46 million to underwrite loans for arms purchases by Greece and Turkey. As has become customary, this aid will be provided in a 7:10 ratio ($122.3 million of loans for Greece: $175 million for Turkey), in order to maintain some parity in the two nations’ on-going arms race.

The Clinton Administration has targeted Central Europe for the bulk of the remaining money in order to facilitate the expansion of NATO and sustain it’s a Partnership for Peace activities. According to Secretary of Defense William Cohen, "The NATO enlargement process makes it essential that we fund the program at a level sufficient to make the armed forces of the earliest prospective NATO members [Czech Republic, Hungary, and Poland] truly interoperable with NATO, while helping the other partner countries progress."

Afghanistan, Angola, Cambodia, Laos, Eritrea, Ethiopia, Honduras, Mozambique, Namibia, Nicaragua, and Rwanda are slated under the request to receive $15 million in FMF to procure equipment and services for the removal of landmines.

The administration is also seeking $7 million in FMF for a new Enhanced Peacekeeping Initiative. According to budget documents, this program would complement the International Military and Education Training (IMET) program, Department of Defense joint exercises, and giveaways of "Excess Defense Articles," in order to increase peacekeeping readiness and "capabilities of countries which have demonstrated significant potential for greater contributions to international peacekeeping operations." The program is targeted toward South Asian countries, which provide the majority of manpower for the UN’s peacekeeping missions around the world.

Foreign Military Financing   $3,340,250,000
Grants Israel $1,800,000,000
  Egypt $1,300,000,000
  Jordan $45,000,000
  Central/East Europe/Former Soviet $70,000,000
  East Africa (Ethiopia, Eritrea, Uganda) $10,000,000
  Caribbean countries $3,000,000
  Cambodia $1,000,000
Loans Greece $12,850,000

(to underwrite $122.5 million of loans)

  Turkey $33,150,000

(to underwrite $175 million of loans)

  Central Europe $20,000,000

(to underwrite $402 million of loans)

Enhanced Int'l Peacekeeping Initiative   $7,000,000
Demining   $15,000,000
Administrative Costs   $23,250,000

Economic Support Fund

The administration is seeking nearly $2.5 billion in Economic Support Fund (ESF) grants. Some of this money is not targeted for military programs, but ESF aid to Israel, Egypt and Turkey has historically been considered "security assistance," since it is provided out of strategic considerations rather than development needs. In fact, Israel's annual $1.2 billion ESF grant is explicitly provided to allow repayment of past military debt owed to the United States.

The International Criminal Investigative Training Assistance Program which is administered through the Justice Department though funded by ESF—targets Latin American and Caribbean countries in transition to democracy, and seeks to strengthen their civilian police institutions and investigative abilities. While much of the $10 million request will be dedicated to training and infrastructure, some of it will finance exports of police equipment, including guns and ammunition.

The administration has also requested authorization of a new Human Rights and Democracy Fund. The State Department’s Bureau of Democracy, Human Rights, and Labor is seeking (a scant) $8 million, so that the United States will have a dedicated funding source to "respond to conflicts, human rights emergencies, and implementation requirements of international agreements."

Economic Support Fund $2,497,600,000
comprising in part:  
Israel $1,200,000,000
Egypt $815,000,000
Turkey $50,000,000
Haiti $70,000,000
Jordan $25,000,000
Lebanon $12,000,000
Cambodia $37,000,000
International Criminal Justice $10,000,000
Human Rights and Democracy Fund $8,000,000

International Narcotics and Law Enforcement

The State Department has requested $230 million to provide materials and supplies (including weapons) and training to countries (principally Bolivia, Colombia, Mexico and Peru) to fight illicit drug trafficking, terrorism, and international crime. Nearly all of this funding is for anti-narcotics programs which promote law enforcement, institution building, and economic incentives for crop eradication.

The "systems support and upgrade" category refers to the State Department’s anti-narcotics air force, surveillance and transport planes used principally by Latin American countries to combat drug-trafficking. This year’s request of $17 million is a near tripling of the fiscal year 1997 level. The funding will provide support for C-26 aircraft, underwrite an airborne surveillance initiative, refurbish OV-10 Bronco surveillance aircraft, and upgrade UH-1H Huey utility/ transport helicopters.

Int'l Narcotics and Law Enforcement $230,000,000
Narcotics Programs $214,000,000
Asia/Africa/Europe $10,500,000
Latin America $132,700,000
International Organizations $7,000,000
Interregional Aviation Support $32,000,000
Law Enforcement Training $7,000,000
Systems Support and Upgrades $17,000,000
Program Development and Support $7,800,000
Anti-crime Programs $16,000,000

International Military Education and Training

The administration wants $50 million for the training of more than 7,000 members of 120 foreign militaries, a significant increase from FY97 levels. At House and Senate foreign aid hearings, State and Defense Department officials were effusive in their praise of the program, with Secretary of Defense Cohen calling IMET "our single most cost-effective security assistance program."

Members of Congress, however, had a variety of questions about the program, starting with its $50 million price-tag. Most Congressional concern, however, was reserved for the proposed controversial "extended-IMET" for Indonesia. The administration assured Congress that the main component of this program is training in human rights and civil-military relations, while IMET generally involves training on U.S. weapons systems.

Many of the governments to which the administration is proposing to provide IMET are recognized by the State Department as having serious human rights abuse problems (e.g., Colombia, Egypt, Indonesia, Mexico, Morocco, and Turkey). The funding request for individual countries is listed on the next page, with the number of soldiers and others to be trained in parentheses.

Proposed Recipients of Military Training, FY 1998

To See Table Click Here

CBO Outlines Cost-Cutting Measures

The Congressional Budget Office (CBO) recently identified dozens of programs that could be cut from the discretionary (non-mandatory) budget for savings. Among CBO’s suggestions are several that would reduce or eliminate subsidies for weapons exports.

The Budget Office suggests a policy of recovering the full costs of government-negotiated Foreign Military Sales (FMS) by reversing recent changes in U.S. laws and regulations that have created several arms sales subsidies. It would reinstate a "recoupment" fee on all FMS to recover taxpayer-funded weapons research and development costs (see ASM No. 33, p. 3) and require that a surcharge be included in the price of the sales contract to cover the full cost of civilian and military personnel working on FMS. CBO points out that AU.S. defense industries have significant advantages over their foreign competitors and thus should not need additional subsidies to attract sales." CBO estimates that such a plan would return $95 million to the U.S. Treasury in 1998 and $850 million over five years.

A second recommendation calls for a reduction in security assistance (Foreign Military Financing and Economic Support Fund), particularly that provided to Israel and Egypt (see p. 1). Under the CBO’s proposal, $475 million of Israel’s annual $1.8 billion in military aid would be phased out over a four-year period. (Israel is currently permitted to use $475 million of its annual aid allotment to procure arms directly from its own arms industry.) Egyptian aid would be cut proportionally. In support of these cuts, CBO cites the long-term build-up of arsenals by each country during the past generation, declining defense budgets in each country, Israel’s high-income economy (as measured by World Bank standards), and the apparent inability of Egypt to wisely spend the funds received. This proposal would reduce outlays by $3.3 billion over five years.

Source: Reducing the Deficit: Spending and Revenue Options, A report to the Senate and House Committees on Budget (Washington: U.S. Government Printing Office, March 1997), 426 pp.

$154 Million ‘Drawndown’ from DOD Stocks

 Since last September the administration has given away (or stated its intention to give away) $154 million of military equipment through emergency "drawdowns" of Pentagon stocks. This assistance is in addition to appropriated military aid and to giveaways of Pentagon surplus through the "Excess Defense Article" program (see ASM No. 33 p. 2). For each of the countries or organizations listed below, the President made a determination that "an unforseen emergency exists that requires immediate military assistance." Military equipment was drawn down principally to support multinational peacekeeping or counter-narcotics efforts.

Haiti $3 million
Ethiopia, Eritrea, and Uganda $10 million
Economic Community of West African States’ Peacekeeping Force $15 million
Colombia, Venezuela, Peru, and Eastern Caribbean countries $75 million
Mexico $37 million
North Iraq Peace Monitoring Force $4 million
A Victims of conflict and other persons at risk in North Iraq $10 million

Source: Federal Register, various dates

Pentagon Showcases Arms for Contractors

According to the Department of Defense, helping U.S. arms manufacturers ply their wares is a matter of national security, though An enhancing defense equipment sales opportunities is a clear Aside benefit. The DOD has recently certified that marketing U.S. weapons at arms bazaars in Singapore, Australia, the United Arab Emirates, and France is as in the national security interest. Since 1992 this justification is required whenever the Pentagon seeks to use public money to display weapons at overseas arms bazaars. The Pentagon estimates that the cost of participating in these shows is $1.4 million.

The DOD’s first show of the year was the Defense Asia >97 International Trade Exhibition, held in Singapore during 15-17 January. The USS Blue Ridge and its personnel were on display in order to A demonstrate our commitment to the security of the region and contribute to U.S. foreign policy and defense cooperation objectives," like promoting U.S. access to regional military and port facilities and furthering military-to-military contacts.

Participation in February at an arms bazaar in Melbourne, Australia was also necessary, according to the Department of Defense, in order to show the United States’ unflagging military commitment to the region. The U.S. Air Force provided two B-1B bombers, three F-16 Falcon fighter jets, and a Super Cobra attack helicopter.

The most recent chance for the Defense Department to help out came in March at the International Defense Exhibition (IDEX >97) in the United Arab Emirates. The Pentagon threw its full support behind Lockheed Martin in its effort to sell 80 new "enhanced" F-16 fighter jets to the UAE, but assured Congress that its participation at IDEX "will not result in sales of U.S. equipment which are qualitatively or quantitatively destabilizing to the region." Hughes, Raytheon, McDonnell Douglas, General Dynamics, and Sikorsky also benefited from the Pentagon’s assistance. The next stop on the Pentagon’s arms sales tour is the city of love, for the Paris Air Show, 15-22 June.

Source: Letters from the Under Sec. of Defense to Congress

Friends and Foes Owe U.S. $14 Billions for Weapons

The Department of Defense recently notified Congress that, as of the October 1996, thirty-four countries owed the United States $14 billion in military loans. The outstanding loans, some of which date back to the 1970s, had been provided to finance weapons purchases. The largest debtor nations are close allies Greece ($2.8 billion), Turkey ($3.2 billion), and Israel ($6 billion). Several states (principally Liberia, Somalia, Sudan, and Zaire) are $245 million in arrears, and the U.S. government will likely write this debt off at some point. Many others had rescheduled their debt, meaning that default on repayment was imminent.

These loans are separate from the Defense Export Loan Guarantee (DELG) program established last year (see ASM No. 33 p. 2). Under that program, the Pentagon can guarantee up to $15 billion in new private sector loans to underwrite the sale or lease of U.S. weapons or services to eligible nations. Government guarantees mean that U.S. taxpayers will be liable for 100 percent repayment of the principal and interest should a nation default.

Source: Report to Congress on status of DOD guaranteed and DOD direct loans as of 30 September 1996

Deals in the Works

In the first three months of 1997 the Clinton Administration notified Congress of the following proposed government-negotiated Foreign Military Sales (FMS) agreements, export licenses for industry-negotiated Direct Commercial Sales (DCS), leases of equipment, and reduced price or free excess defense article (EDA) transfers to developing countries. The Arms Export Control Act requires only that the administration notify Congress of FMS and DCS valued at $14 million or more. Sales below that threshold are not recorded here. Congress has 30 days to stop proposed FMS agreements or DCS licenses from going forward (15 days for NATO members and major non-NATO allies). To block a sale, a two-thirds majority in both houses of Congress must pass a resolution of disapproval. None of the following sales were challenged.

To See Table Click Here

Recent Government Documents

Arms Sales: Congressional Review Process, Congressional Research Service, December 1996.

Bosnia Peace Process (hearings before the Subcommittee on European Affairs of the Senate Foreign Relations Committee, 10 Sept. and 1 Oct. 1996), Washington: U.S. Government Printing Office, 1997.

Challenges to Naval Expeditionary Warfare 1997, Office of Naval Intelligence, Department of Defense, March 1997.

Confidence and Security Building Measures in the Americas: A Reference Book of Hemispheric Documents, 2nd ed., English/Spanish, U.S. Arms Control and Disarmament Agency, December 1996.

Congressional Presentation for Foreign Operations, Fiscal Year 1998, U.S. Department of State, February 1997.

The DISAM Journal of International Security Assistance Management, Vol. 19, No. 2 (Winter 1996-7), Washington: U.S. Government Printing Office.

Export Administration Act of 1996 [H.R. 361] (hearing before the Subcommittee on International Finance of the Senate Banking, Housing, and Urban Affairs Committee, 31 July 1996), Washington: U.S. Government Printing Office, 1997.

Export Administration Annual Report 1996 and 1997 Report on Foreign Policy Export Controls, U.S. Department of Commerce, Bureau of Export Administration, March 1997.

Export Controls: Change in Export Licensing Jurisdiction for Two Sensitive Dual-Use Items, U.S. General Accounting Office (report NSIAD-97-24), January 1997.

Foreign Military Financing of Direct Commercial Contracts for Israel and Israeli Use of Offshore Procurement Funds, Department of Defense, Office of the Inspector General, reports no. 97-028 and 97-029, 22 November 1996.

Fourth Annual Report of the Trade Promotion Coordinating Committee 1996 (hearing before the Subcommittee on International Finance of the Senate Banking Committee, 25 Sept. 1996), Washington: U.S. Government Printing Office, 1997 (contains sections on military offsets and bribery).

Legislation on Foreign Relations through 1996 (joint committee print of Committees on International Relations and Foreign Relations of the House and Senate), Vol. I-A, November 1996 (contains up to date amended copies of Arms Export Control Act and Foreign Assist. Act, the two principle laws governing arms exports/military assistance) Vol. I-B, January 1997. Vol. II, March 1997.

Reducing the Deficit: Spending and Revenue Options (A Report to the Senate and House Committees on the Budget), Congressional Budget Office, Washington: U.S. Government Printing Office, March 1997.

Security in Northeast Asia: From Okinawa to the DMZ (hearing before the Subcommittee on Asia and the Pacific of the House International Relations Committee, 17 April 1996), Washington: U.S. Government Printing Office, 1996.

Terrorist Attack against United States Military Forces in Dhahran, Saudi Arabia (hearing before the House National Security Committee, 18 Sept. 1996), Washington: U.S. Government Printing Office, 1997.

U.S.-Japan Fighter Aircraft: Agreement on F-2 Production, U.S. General Accounting Office (report NSIAD-97-76), February 1997.

United States Policy toward Iraq (hearing before the House National Security Committee, 26 Sept.1996), Washington: U.S. Government Printing Office, 1997.

U.S. Role in Iranian Arms Transfers to Bosnia and Croatia (business meeting and hearing before the House International Relations Committee, 8 & 30 May 1996), Washington: U.S. Government Printing Office, 1996.

Worldwide Challenges to Naval Strike Warfare 1997, Office of Naval Intelligence, Department of Defense, February 1997.

Worldwide Submarine Challenges 1997, Office of Naval Intelligence, Department of Defense, February 1997.