GDS r11ENORMIDUN FOR THE PRESIDENT FROf l JAriES SUBJECT Budget LYNN and HENRY A ppea 1 KISSINGER on Fcr-e·i gn Aid The State Departrr Bnt is aopealing your decisions on 1 the f 1iddle East 2 H· S credits to Latin J l rr erica and 3 military assistance to the Phi 1i ppi nes mm recommends that you r·cconfi rm your earlier decisions 1 t ii ddl e Ens t Program in $ millions 1977 w I' Nu Israel HIS Economic Jordan Economic Decision --- State Aoweui ' 1 000 600 253 100 75 78 180 50 80 50 -75 70 I 65 750 400 550 650 90 90 60 70 75 3 333 3 333 1 340 2 430 975 750 • EqvDt f ecoui 400 300 253 FNS ' q L s - - 2 240 2 240 i 500 ' 1 £500 740 740 -iOO 75 78 tMAP Oi'iB - ' Presidential or·igina1 ' 700 2 000 1 350 650 l Q_O 210' 250 75 100 75 tEconomic § tria r Econom1c Total y Excludes - p L 480 The basic issue concerns the level of assistance to Is·rael He unde stand that yom primary concern is to· avoid cteating the expectation of continued aid at the very high l976 hvels 'thile at the same time avoid ing the appearance of a punitive eduction in aid levels to Israel The assistance levels to the other countries arlo largely based on the perceived balance IJHh Israeli aid DECLASSIFIED E O 12953 S c 3 8 - tj S M q J Id1 4lj NS C Jlkt 3 tJ c f 2 · Arq rr ents for the State l ppea 1 The $700 r lillion reduction in total aid to Israel from the 1976 leve1 of $2 3 bi11ion would be interpreted by the Israelis as punitive -- It would also be v12wed by Is racl as further evidence of lack of U S support at a t hr e whBn t· e are not supporting them on other issues e g r PLO participation in UN debates The State appeal progrc m of $2 0 bi· n ion a $400 mi 11 ion increase over your ear'Hel decision ' is judg d to be the minimum necessary to substantially ease these Israeli concerns and continue the flow of military equ·ipment perceived as essential by the Israelis The State oronosed increase in aid to the Arab countries is primarily required to balance the increase for Israel The $1 35 billion in military financing is needed to assure financing fat military imports at the full HATf 10N level in both 1976 and 1977 Initial D cision The $1 6 bi11icn level should provide adequate psychological assurance of U S support in view of the high level of military imports without encouraging Israeli intransigence # The $1 6 billion aid level for Israel meets essential economic import ne·eds and pro vi des for lli gh Teve 1s of mi 1ita ry imports full t•1ATNON in 1976 and 1 3 rt Tf'lON in 1977 Viher·eas the $2 0 billion level ¥vould mote than cover full NATNON in both years Nilitary imports even approaching the f 1ATiv10N B levels for 1976-'1980 will be highly destah1izing and are likely to force an esca1 at ion of the Arab m·il itary buildup The draft NSSM 231 study indicates that th f ATFON B level of Israeli lililitary purchases should be rejected and the level held to the minimum needed for essentially political purposes since Israel's defense capabi 1i ties are fu11y adequate tht ough 1930 Ji thout any new orders from the U S Increases in aid to the other countries are programmatically unjustified and would merely increase excessive Syrian foreign exchange reserves and add to the large pipeline in the Egyptian aid· program and further encourage the Egyptian ref usa 1 to fo 11 O · Ii F 'and U S Government tecommendations for essential economic reform S - GDS 3 Finally th State appeal would raise the ilbasen from wh lch future aid levels will be calculated and would increase 1977 outlays by about $200 million 2 ' Latin America FMS Cred ii Levels Program in $millions l9i6 H1S Credi ts 180 1977 Original or·fB R quest Re com Decision 238· 180 185 Pres 1 denti al State Appeal 238 State recorrmends reconsideration of your decision to request $135 million in 1977 Principal increases vdthin tha $238 mi1lion reg ional program would be in Brazil up from $GO million in 1976 to $90 nrtllion rgentina up from $34 million in 1976 to $50 million and Chile up from nothing in 1976 to $20 million These alid some smaller increases for Bolivia and Colombia ·muld be parti o 11y offset by dropping Venezuela Nexico and the Bahamas · Arqun ents for the State Aooeal for Brazn is necessnry to Preserve our oosition a th pr-·i f ar·y luurce of mi l·i tary qui prf ent fOi Btat 1' s fJrc s Th incre-B e The Argentine program most be ·Increased to accorr modate Argent1na 1 s force modernization plans and maintain our ovet·all relations vrith a country 'I Jher'e the rniiitary is taking · increasing responsibility far government · The $6 million increase for Bo1ivia is needed to offset the phaseout of grant MAP rguments for Your Earlier Decision The $185 mi11i on a1ready pro vi des a sma 11 increase over the 1976 request and is substantially above the $134 million the region was able to utilize in 1975 The $185 million level is adequate to cover d sired incr-eases for Bolivia and Colombia allm up to $20 m·illion for Chile and pel'·mit ftJnding Brazil and Arg ntina at the 1975-76 levels Secretary S'imon opposes increases for rgentina as a poor credit risk · is likely to delete funds for Chile for human riohts reasons and may question a 507 increase for Brazil on similar Congr ss grounds -GDS -GDS 4 3 Ph11ipoines Program in$ millions 1977 Original Grant N l P · H1S Cr-cdi ts m iB Presidential State Aooeal 976 Request Racom Decision 19 6 15 17 4 20 1 Q_ 25 15 25 20 37 0 40 40 40 40 20 Argur ents for the State Appeal vle are about to enter negotiations tvith the Philippines on the status of our militarY bases and on the entire rang of our bilateral economic relations reduction in ourt'LL P level Nou1d probably toughen Philipphie positions on both these issues It is Ambassador Sullivan's judgment that if our t·1AP level falls much bel m•t $20 mi 11 ion the Prli 1ippi nes vii H demand rent for 1·t in u d us 2 rf ·th Q b· s ez • · You already approved a h'l P level of $19 6 million for Indonesia in FY 1977 He should not have a lower 1AP figure for the Philippines which permits us to have bases on its ·soil than for Indonesia The Philipp ines is highly sensitive to such comparisons · Arquments for Your Earlier Decision The W P phasedown for the Ph-ilippines is part of a gradual wor1 dt ide substitution of FNS credits for gran·t NAP The Philippine may request large increases in aid as part of ths base negotiations and the going-in position should not be ·Jnc ·eascd above the· m·inimum necessary Decisions 1 Israel Accept State appeal $2 billion ·' Reconfirm original decision $1 6 billion Oii B recommendation -GDS -GDS 5 2 Jordan - Accept State appeal $250 million - Reconfirm original decision $210 million Oi·lB recommendat i ort 3 £ 9-XPt - Accept State appeal $650 udllton - Reconfirm original decision $550 million mm recorr mendation 4 Syria - Accept State appeal $75 million · ·· Reconfirm orig·Jna1 decision $70 million Ol B recommendation • Accept State appeal $238 rr 111on - Reconfirm original decision $185 million · Or1B recommendation 6 Philipni nes - Accept State appeal $20 million HAP $20 million FNS - Reconfirm original decision $15 million r'1AP $25 million H·iS 01 ll3 recorrmendation CC Official File - DO Records Director Oi rector •s chron Deputy Director'' Mr Ogilvie Mr Sanders Mr Sha ·• Mr Sisco - State Department R turn - Room 8201 NEOB Return - Room 8236 NEOB IAD EGSanders HJShaw neh 12 11 75