Odds and Ends of 1989

By Dennis J. Wamsted

The lackluster first session of the 101st Congress ended in late November with a flurry of legislative activity, a surprising amount of which will have an impact on US Middle East policy.

Perhaps of greatest importance, for the second year in a row and only the second time since 1981, Congress enacted freestanding foreign aid appropriations legislation just prior to its adjournment. The $14.65 billion bill is a slight increase from last year's $14.29 billion, but significantly less than the $15.15 billion originally requested by President Bush. In addition, virtually all of the increase can be traced to a $532.8 million aid package for Poland and Hungary included in this year's foreign aid legislation.

As in years past, the two single largest accounts in the US program are the economic support fund (ESF) and the foreign military financing program, which, together, gobble up $7.9 billion, or just under 54 percent, of the entire foreign aid budget. And in keeping with longstanding tradition, Congress earmarked the lion's share of these two accounts for Israel and Egypt, with just under 66 percent of the total, or $5.15 billion, slated for these two countries.

Phrased differently, Israel and Egypt will receive more than 35 percent of all the foreign aid the US will spend worldwide in 1990. Even more revealing, Israel, with a scant .0008 percent of the world's population, is slated to get more than 20 percent, $3 billion, of 1990 US foreign aid funds.

Within the confines of the ESF program, Israel is slated to receive 37.4 percent of the total, or some $1.2 billion. Similarly, Israel will get 38.2 percent of all the funds appropriated for US military aid programs throughout the world in 1990. Equally important, as in years past, the entire $3 billion earmarked for Israel is in the form of cash and so-called forgiven loans. Another provision in the appropriations bill gives Israel the right to spend $400 million of its military aid in Israel. By comparison, all other US aid recipients must spend their military aid purchasing American-manufactured goods. This offset, which was intended as a temporary support for the Israeli aerospace industry following the cancellation of the Lavi jet fighter in 1988, has now been in the aid legislation for three straight years and has apparently become a permanent " temporary " component of Israel's foreign aid package.

While unable to boost funding for Israel outright, the pro-Israel lobby, led by the American Israel Public Affairs Committee (AIPAC) and its congressional supporters, was able to bury two additional measures in the foreign aid bill, effectively boosting the dollars doled out by the US to Israel in 1990.

One measure, which was approved initially by the Senate Appropriations Foreign Operations Subcommittee chaired by Sen. Patrick Leahy (D-VT), would allow Israel and other qualifying countries to refinance outstanding loans used to purchase military equipment from the US that have interest rates of between 8 and 110 percent. Such refinancing, which can save the borrowing countries millions of dollars in interest, was previously limited to loans carrying interest rates of greater than 10 percent. While undoubtedly a boon to the borrowing countries, this provision will deprive the US Treasury of huge sums of foregone interest at a time when budgetary constraints are forcing large cuts in many domestic programs.

A second provision pushed by AIPAC and its supporters involves the pricing of military hardware sold by the US to foreign governments. The measure, termed "fair pricing", by its proponents, will lower the cost of military purchases by foreign governments by excluding overhead costs, including administration and research and development charges, from the sales price. This provision, which was limited to Israel and Egypt a year ago, will now be expanded to include the entire foreign military sales program. The net effect of this provision will be to raise the cost of arms purchases to the US armed forces while reducing the flow of revenue into the US Treasury. Indeed, the Pentagon estimated in 1988 that such a provision would cost the US $280 million a year if applied to the entire military sales program.

Foreign Aid Leftovers

While there was nary a ripple of controversy concerning the billions earmarked for Israel, Congress scrutinized closely the leftover millions slated for America's Arab allies. Tunisia, which had been slated to receive $42.5 million in combined military and economic aid in 1990, was particularly hard hit. During the conference committee negotiations on the foreign aid bill, the funds earmarked for Tunisia were returned to the general aid fund, which means that Tunisia will likely receive significantly less than the $42.5 million originally approved. In addition, total aid to Morocco was cut $9 million to $63 million.

Congress also renewed a prohibition on the sale of hand-held Stinger antiaircraft missiles to Arab countries in the Gulf region. A related measure was approved that will enable the island state of Bahrain to keep the Stingers it has purchased from the US at least until September, 1991. At that time, the missiles will have to be returned to the US unless the president certifies to Congress that the country needs them for its defense and that no other appropriate weapons system exists. A move by Rep. Charles Wilson (D-TX), one of the House conferees, to exempt Oman from the Stinger ban was defeated.

Israel, with a scant .0008 percent of the world's population, is slated to get more than 20 percent, $3 billion, of 1990 US foreign aid funds.

Another major provision included in the foreign aid bill, largely at the urging of Sen. Daniel Inouye (D-HI), a vocal proponent of Israel, bars the Export-Import Bank from financing US exports to Iraq and a number of other countries. In years past, Congress has prohibited US aid to Iraq, but both the Reagan and Bush administrations argued that this prohibition did not apply to the Ex-Im Bank, which has issued loans worth millions of dollars to war-torn Iraq. Now, as a result of Inouye's action, these loans will be prohibited as well. Other countries affected by the ban include Libya, Cuba, and Vietnam, among others. Rep. Wilson argued unsuccessfully against the Ex-Im financing ban during the House-Senate conference, although the conferees did accept an amendment proposed by Sen. John Heinz (R-PA) that would allow the president to waive the prohibition if he certified to Congress that such a waiver would be in the national interest.

Other major components of the foreign aid legislation include:

$1.88 billion in multilateral aid;
$615 million in direct loans to the Export-Import Bank;
$565 million in development aid for Sub-Saharan Africa;
$483 million for the "food for peace" program; and
$437 million for the Agency for International Development's operating expenses.

Dennis J. Wamsted is a free-lance writer specializing in Middle East affairs and Congress.