Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

41. Memorandum From the Director of the Office of Management and Budget (Shultz) to President Nixon¹

Washington, undated.

SUBJECT

• Supplemental Requests for Foreign Aid

As you know, Secretaries Rogers and Laird, in their October 14 memorandum to you, proposed supplemental appropriations for 1971 for foreign aid totaling $1,065 million, as follows:²

		($ millions)
Israel Military Credits		500
Military Assistance (MAP)		380
Korea	150
Cambodia	125
Jordan	30
Lebanon	5
Other countries	70
Supporting Assistance		185
Cambodia	120
Vietnam	65
Total		1,065

Decisions on these amounts depend on an assessment of various factors:

• —the receptivity of the lameduck session of the Congress to the proposals;
• —the relative urgency of the items proposed;
• —the relative firmness of the estimated requirements; and
• —the possible effect of the total amount proposed on congressional action on other pending appropriations, particularly in those cases where you vetoed an appropriation bill containing excessive amounts.

Three basic alternative approaches are available:

1. A supplemental package which would represent the minimum needs for only the most urgent items. Such a theme would be the clearest and least difficult to present to the Congress. However, because of the inherent uncertainty in the estimates of some of the requirements—e.g., Cambodia—and the fact that the Congress is likely to cut any request, this approach has major risks.

2. A somewhat larger and more balanced package which could be accurately characterized as urgent and would not be regarded by the Congress as excessive, but which would be large enough to accommodate the uncertainties and to provide “cut insurance” against the risk of congressional reductions.

3. A large supplemental package incorporating the maximum estimates of needs not only for the most urgent items but also for others where the need and urgency are less readily apparent. This would be the most difficult to justify and to sell and runs the greatest risk of severe and indiscriminate congressional cuts. The risks of generating this response appears greatest in the case of military assistance. The proposed MAP supplemental of $380 million will be perceived by the Congress as more than doubling the $350 million included in the 1971 budget, even though that figure was a ceiling imposed by the Congress and was lower than the Administration wanted. In addition, since the countries involved are recipients of substantial amounts of excess stocks, a large supplemental could stimulate renewed congressional attempts to impose tight restrictions on the amounts of such stocks that can be used for military aid.

I believe the second alternative is preferable.

You have already approved $500 million for military credits for Israel,³ urgently needed to enable Israel to pay for military equipment already delivered or on order. Similarly, there is general agreement on inclusion of the proposed amounts for military assistance to Jordan and Lebanon.

With respect to the other items, there are a range of possibilities.

Cambodia MAP and Supporting Assistance. These items are of great urgency. The proposed amounts totaling $245 million—$125 million for MAP and $120 million for Supporting Assistance—exceed the estimated supplemental requirements of $205 million set forth in the recently completed NSSM 99 study on Cambodia—$115 million for MAP supplemental (plus $10 million in excess DOD stocks) and $90 million for Supporting Assistance (plus P.L. 480 sales of $30 million). Some of these funds would be used to replace diversions to Cambodia from other country programs.

The higher State-Defense figures reflect the uncertainty of both the requirement and congressional reaction. State is now considering reducing the proposed $245 million by $30 million. I would concur.

Supplementals totaling $245 million with a possible reduction of $30 million

Supplementals totaling $205 million

Other MAP. The State-Defense proposal of $70 million would restore all MAP country programs—principally Greece, Turkey, and Taiwan—to 1971 budget levels. Those levels have had to be reduced because of diversions to Cambodia and Indonesia and because of shortfalls in recoveries of prior-year obligations.

Failure to restore those programs would cause irritation in our relationships, particularly with Taiwan. Greece, however, will benefit from the release of the $56 million in major items of MAP equipment withheld since the 1968 military coup, will receive excess stocks of about $30 million, and is reported to be purchasing an estimated $20-40 million in tanks and patrol boats from France. Similarly, Turkey and Taiwan will receive substantial amounts of excess stocks.

There are two options lower than the proposed $70 million supplemental: (a) $45 million, which would be sufficient to restore the Taiwan and Turkey programs to their 1971 budget levels and provide $10 million for other high priority country programs; and (b) $40 million, the amount diverted to Cambodia, which might be the easiest to justify to the Congress.

Supplemental of $70 million

Supplemental of $45 million

Supplemental of $40 million

Vietnam Supporting Assistance. The NSDM 80⁴ directive on Vietnam outlines a program which would finance commercial imports of $750 million to Vietnam in 1971. Current estimates suggest that sufficient funds will become available to meet this target without a supplemental. Since the $50 million additional funding recommended by State and Defense for the commercial import program is not likely to be used in 1971, it would be difficult to justify the request to the Congress as part of a package of urgent requirements.

The remaining $15 million of the proposed $65 million supplemental would be for the Vietnam land reform program. These funds are not likely to be needed to carry out U.S. plans for support of that program. The basic rationale for the proposed amount is that it might gain congressional support for other parts of the supplemental package among those who are interested in the land reform program (e.g., Senators Muskie and Magnuson and Representative Moss).

Supplemental of $65 million

No supplemental

Korea Military Assistance. You have decided on a 5-year modernization program for the Korean forces totaling $1.5 billion in U.S. aid, of which not more than $1.25 billion should be funded by MAP grants or military credit sales.⁵ The proposed $150 million supplemental would mean a total 1971 military aid program for Korea, approximately as follows:

	($ millions)
Currently programmed MAP	140
Proposed supplemental	150
Subtotal, MAP funding	290
Equipment of withdrawing U.S. forces	117
Excess stocks (valued at 50% of acquisition cost)	75
Total	482

Korea may also receive $15-30 million in additional grant materiel if the ROKG agrees to pick up the costs of certain consumable items available on the local economy but now provided by MAP.

Thus, both the total program for 1971 as well as the funded portion substantially exceed one-fifth of the maximum amount approved for the 5-year program. This might help reassure the Koreans of our commitments to them as we carry out planned U.S. force reductions. However, it might also unrealistically raise Korean expectations for the future. In addition, since the costs of Korean Air Force modernization are likely to rise in subsequent years, a large first-year program might make it difficult to stay within the overall limits on the 5-year program.

There are two alternative levels which you might consider: (a) a $110 million supplemental, and (b) a $60 million supplemental.

Supplemental of $150 million (total 1971 program of $482 million)

Supplemental of $110 million (total 1971 program of $442 million)

Supplemental of $60 million (total 1971 program of $392 million)

Summary and Recommendations.

My recommendations are below, as compared to the State-Defense proposal and to estimated minimum requirements. I do not recommend the latter because it does not provide adequate margin against congressional cuts; nor does it take care of the uncertainties. I believe my recommendation does provide such a margin.⁶

	State-DOD	OMB	Minimum requirements
		($ millions)
Israel Military Credits	500	500	500
Military Assistance	380	315	250
Korea	150	110	60
Cambodia	125*	125*	115
Jordan and Lebanon	35	35	35
Other countries	70	45	40
Supporting Assistance	185	120	90
Cambodia	120*	120*	90
Vietnam	65	-0-	-0-
Total	1,065*	935*	840

* Subject to reductions totaling $30 million

Director⁷

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 10/7/70-12/31/70. Secret. Drafted by J.M. Frey on November 5. Attached to a November 6 memorandum from K. Wayne Smith to Kissinger, which indicated the memorandum was from Shultz. None of the options in the memorandum is checked.
2. Document 39.
3. This decision has not been identified.
4. See footnote 4, Document 35.
5. This decision has not been identified.
6. The request that eventually went to Congress on November 18 was for $1,035 million, less than the $1,065 million proposed by Rogers and Laird and more than the $935 million proposed by Shultz. For text of the message to Congress, see Public Papers of the Presidents of the United States: Richard Nixon, 1970, pp. 1074-1079. In his November 6 memorandum (see footnote 1 above), Smith agreed with Shultz that the chances of passage would rise if the request were for less than $1 billion, but he noted that endorsing Shultz’ view would anger Rogers and Laird. He recommended that Kissinger privately support Shultz’ recommendations with the President but take no formal, open action. According to an October 12 memorandum from Smith to Kissinger entitled “Improving Relations with OMB,” there were interpersonal and procedural issues as well. Smith referred to “fundamental elements” in the relationship among the President, Kissinger, Shultz, and Laird “that only the individuals involved and time can resolve.” He recommended OMB representation on the Senior Review Group and improved distribution of Presidential and NSC documents of interest to OMB. Kissinger wrote on Smith’s memorandum: “No, let’s decide from case to case. Kennedy to raise with me.” (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 206, BOB, Volume I)
7. Printed from an unsigned copy.