65. Action Memorandum From the President’s Special Assistant (Rostow) to President Johnson1

SUBJECT

  • PL-480 Program for Israel

Attached is a Freeman-Poats-Fowler-Schultze recommendation on Israel’s PL-480 request.2 There are two separate issues to decide:

1.
Quantity. Israel requested a $33 million program. The Departments recommend $27 million (same as last year) because Israeli and US experts differ over Israeli requirements, even after we sent a specialist to Tel Aviv. Our problem is not selling so much that we hurt our markets. This is a technical disagreement with some Israeli bargaining thrown in. If you go ahead, three courses are open:
a.
Approve the Departments’ $27.1 million program
b.
Approve the Departments’ program but tell Israel we’d consider adding later if they need more3
c.
Give the Israelis what they ask for and write into the agreement safeguards to protect our program
2.
Terms. Last year you approved a 50-50 split between dollar credit and local currency. Israel requests the same terms this year. But everyone agrees that 100% dollar credit for 20 years are the softest terms justifiable on economic grounds, since Israel is doing well. These are the terms we give Jordan, which is in much worse shape. If you wish to make a concession, your advisors recommend at least 75% dollar credit to continue progress toward 100% dollar sale as the Congress has asked. Your choices are:
a.
100% total credit (20 years at 2-1/2%)4
b.
Compromise at 75% dollar credit
c.
Approve Israeli request for 50% dollar credit

I agree that Israel can afford hard terms and is just trying to get aid wherever it can. But I also recognize your needs and personally [Page 135] would suggest the middle course-75% dollar credit this year (2b) for the $27 million program with the promise of a little more later if the Israelis need it (1b). If you wish to tighten up just a bit more, we could more easily justify a move to 100% dollar sale than being tight on quantities.

Walt
  1. Source: Johnson Library, National Security File, Country File, Israel, Vol. VIII, Cables and Memos 12/67-2/68. Secret. A handwritten notation indicates the memorandum was received in the President’s office on February 1 at 9 a.m.
  2. Not printed. Secretary of Agriculture Freeman and Acting AID Administrator Poats put their joint recommendation to President Johnson in a January 24 memorandum. (Ibid.) On January 27 Director of the Bureau of the Budget Schultze sent a supporting memorandum to the President, noting that the Agriculture-AID recommendation was also supported by Secretary of the Treasury Fowler. (Ibid.)
  3. President Johnson checked this option.
  4. President Johnson checked this option.