Mideast Arms Aid in '85

The Reagan Administration has made a significant change in its security assistance aid program for fiscal 1985 which will greatly benefit both Egypt and Israel—countries already receiving just under half of total U.S. military aid.

In an effort to ease repayment burdens, the Administration has proposed to Congress that a handful of countries be allowed to purchase U.S. weapons with loans—or what are called FMS (foreign military sales) credits—which would then be "forgiven" in their entirety. Portions of the military aid packages to Egypt and Israel have in previous years been forgiven (i.e., given as a grant), but if the present aid program is approved by Congress this will be the first time that all of the money is provided completely as a grant. The Administration submitted the proposal earlier this month, along with its recommendations for next year's foreign aid levels worldwide. On page 5 is a chart listing the Administration's suggested levels for countries in the Middle East and North Africa.

Under the President's new policy, Egypt would be granted $1.2 billion in FMS credits. By contrast, it received $1.3 billion in each of the previous two years, of which roughly two-thirds had to be repaid. Israel is slated to receive a grant of $1.4 billion. Currently, it is getting a total of $1.7 billion, split evenly between the forgiven amount and that which had to be repaid. For the previous year, in fiscal 1983, Israel also received $1.7 billion, just over half of which was loaned.

Other countries getting FMS loans will be charged interest in one of three ways: at a concessional rate of five percent, at prevailing market rates, or at a rate which is a mix between the two. For example, the Administration has proposed that Jordan repay half of its $95 million loan at five percent interest and the remaining half at the prevailing rate. Lebanon, on the other hand, would have to pay back all of its $15 million loan at the higher market rate.

The new all-grant policy will not be applied to the economic support fund (EFS), the other major security assistance program. However, for Egypt and Israel this will not make any difference since both have already been receiving their ESF aid in grant form. For fiscal 1985, the Administration has proposed that Egypt receive $750 million, the same as in each of the two preceding years, and that Israel receive $850 million—a figure $60 million less than the $910 million it is getting now.

The remaining two security assistance programs involve much less money and, in effect, supplement the larger aid mechanisms of FMS and ESF. They are the international military education and training program (IMET) and the military assistance program (MAP). Both types of assistance are provided as grants. In a break from past years, the Administration has recommended that Algeria—which has received no security assistance of any kind from the U.S. for several years—should receive $50,000 in IMET assistance.

Congress has already begun hearings on the foreign aid bill, but it is very doubtful one will be approved in this election year. Congress, as it has in the recent past, will probably include foreign aid legislation in a "continuing resolution," which defies close scrutiny and which in past years has allowed sympathetic Congressmen to push through more favorable aid packages for Israel. This was the case last November when Congress increased aid to Israel above what had been requested by the President, while at the same time approving unprecedented measures allowing Israel more advantageous terms on how the money could be spent.