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

46. Action Memorandum From K. Wayne Smith of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)¹

Washington, January 4, 1971.

SUBJECT

• FY 1972 Military Assistance and Foreign Military Sales Credit

Dave Packard has sent the President a memo (Tab A) appealing some of the tentative budget decisions made by OMB regarding the FY 72 military assistance program.² Packard argues that the recommended changes “are necessary if we are to maintain military assistance and credit sales as the essential instruments with which we will continue to implement the Nixon Doctrine.” I understand he also called you to express his concerns.³

The Packard memo makes the following procedural points:

• —For the second year in a row OMB obtained decisions on budget requests for military assistance without a Department of Defense representative being present to express his views.
• —The levels jointly recommended by Defense and State were not used as the basis for decision.

The memo specifically appeals to the President to raise the MAP amounts budgeted for:

• —Taiwan (from $15 to $25 million)
• —Greece (from $15 to $25 million)
• —Turkey (from $90 to $130 million)
• —Jordan (from $30 to $50 million)

The memo makes the observation that:

• —the amount budgeted for Foreign Military Sales (FMS) credit is based on an assumption that such credit in the amount of $250 million will be available in FY 71 and, if necessary to obtain it, a supplemental request will be made in January to the new Congress.

Finally, the memo recommends that:

• —FMS credit for Israel in FY 72 be budgeted at $100 million and that any additional requirement be met through the Jackson Amendment,
• —a dedicated MAP Contingency Fund of $25 million be established.

This is the kind of memo that will eventually drive me to drink. But let me try to sort out the issues and non-issues.

Procedures

Packard is right in saying that the levels jointly recommended by Defense and State were not used as the basis for a decision. The reason is simply that the joint Defense/State recommendations were not available at the time the decisions were made. As I understand it, State’s and Defense’s recommendations regarding MAP and FMS were due in early December. After daily appeals by OMB, they were made available (separately from State and Defense) at the staff level, around the middle of December. When State and Defense learned of OMB’s tentative decisions, they apparently logrolled a new joint position which was forwarded in a memo to OMB, dated December 23, 1970.⁴

The original agency requests that I saw (shown in the table at Tab B),⁵ discussed at Shultz’s request with OMB, used in my memo to you dated December 18, 1970 (Tab C),⁵ and later discussed at length with you, differ from the December 23 requests in several ways. (You will recall that in our discussion you agreed to the NSC/OMB figures except you asked for another $100 million in import financing for Vietnam and another $50 million in the President’s contingency fund.) These differences are summarized below together with the initial OMB recommendations and the agreed OMB/NSC figures based on the earlier agency requests.

	Agency Request December 18	Agency Request December 23	OMB Recommendation Based on Earlier Request	OMB/NSC Agreed Based on Earlier Request
Cambodia	$220.0	$205.2	$170.0	$200.0
Greece	20.0	30.0	15.0	15.0
Jordan	30.0	50.0	15.0	30.0
Latin America	16.0	11.0	16.0	16.0
MAP Contingency Fund	0.0	25.0	0.0	0.0
President’s Contingency Fund	0.0	0.0	25.0	50.0

I think it is apparent from the above table that I drove a relatively hard bargain with OMB based on the earlier agency requests—though it looks less hard in light of the later higher requests.

As to Packard’s point regarding representation, representatives from the agencies are never allowed at OMB’s “Director’s Review” sessions. These are internal OMB staff sessions with the Director to prepare him for later discussions with the President and with representatives of the agencies. On occasion, White House personnel are invited to attend these sessions as Ed David and I were this year. Packard’s assertion that a new procedure has been adopted over the past two years is simply untrue. The agencies have ample opportunities to make their views known as his memo attests.

Taiwan

Packard states that the proposed MAP level of $15 million “is not consistent with our objectives of upgrading the air defense and reorganizing the Chinese Armed Forces” and should be raised to $25 million.

It should be pointed out that the total MAP and FMS funds budgeted by OMB for Taiwan is $65 million. This is the same as the total amount requested by Defense/State. The OMB figure contains $10 million more for FMS because they believe countries with large cash reserves such as Taiwan should rely somewhat more on FMS and thus free up more MAP funds for countries without large reserves.

Greece and Turkey

The Packard memo notes that “these two countries occupy key strategic positions with respect to the critical Middle East situation,” that Secretary Laird’s recent trip to the area “convinced us that they are doing a fine military job with limited resources, but both are badly in need of new and relatively expensive equipment,” and that “now is certainly not the time to reduce military assistance to these countries.”

To begin with, military assistance to Greece and Turkey is not being reduced. MAP assistance to Greece in FY 71 is $17.7 million and to Turkey $92.1 million. OMB’s FY 72 recommendations are $15 million in MAP and $45 million in FMS for Greece and $90 million in MAP and $8 million in FMS for Turkey. In both cases, the totals are larger than for FY 71.

Moreover, in the case of Greece, the issue again is more one of composition of MAP and FMS than the total. Greece has more than ample cash reserves, some of which could be used for FMS purchases. In regard to Turkey, OMB has serious doubts about Turkey’s ability to absorb more than $100 million in MAP.

Jordan

According to Packard, “the Senior Review Group is considering a three-year program estimated at $140 million and it appears to be generally agreed that at least the FY 1972 increment will have to be grant aid. If so, $50 million will be required and I recommend this amount.” All of this is news to OMB (and to me).⁷ The earlier request for Jordan was $30 million which I convinced OMB was necessary. I believe OMB is prepared to raise the MAP amount for Jordan if you so desire. (Purely as an aside, has anyone looked into what impact such an expenditure would have on the Jordanian economy?)

Israel

State requested and the OMB mark provides $300 million in FMS credit. Defense requested $100 million in FMS for Israel and the Packard memo appears to be appealing the OMB mark downward. The rationale is not clear, particularly since, if the Defense recommendation were followed, the budget would understate the need. Presumably Defense would propose seeking an additional $200 million later under the Jackson Amendment. The OMB mark would reserve the Jackson Amendment as a fallback if the funds are not provided by Congress under the Foreign Military Credit Sales Act. This would seem to be the more sensible strategy.

Contingency Fund

The OMB mark is $100 million for foreign aid contingencies, whether military or economic assistance or disaster relief. This is several times larger than the fund has been in recent years ($12-15 million). It was increased by OMB from $25 to $50 million specifically at my request and from $50 to $100 million at your request.

Defense wants a separate earmarked military assistance contingency fund of $25 million instead of the amount being part of the President’s contingency fund. In my judgment this would reduce Presidential flexibility. Moreover, if the $25 million MAP contingency fund sought by Defense should prove to be inadequate, it is questionable whether the President’s fund could then be used for that purpose.

Foreign Military Sales

Defense is not appealing the OMB mark, which is higher than Defense requested. Defense seems merely to be going on the record to the effect that if the Congress does not appropriate funds for an FMS program in 1971, a later upward amendment to the 1972 budget amount may be needed. There is no disagreement on this point.

My Views

Except for Vietnam and Cambodia, there is no analysis to support any of these numbers. We are all groping in the dark, relying on precedent and intuition, and guessing at levels and composition. I have no analytical basis for knowing whether the MAP and FMS amounts for the countries concerned should be increased or decreased or should remain the same; neither does State/Defense or OMB. My inclination is to ask for more based on the principles of having cut insurance with the Congress and having too much rather than too little.

We badly need some analysis in this important area. The only thing that is clear is the overall trend of our assistance programs. The trend is clearly up—and up substantially. Even without any more increases, the total MAP program in FY 72 will be $688 million. This compares to a total program of $391 million in FY 70 and $436 million in FY 71 ($776 million if the $340 million in the supplemental is included). In addition, we are planning on a $100 million contingency fund in FY 72 (compared to $15 million in FY 71) and Foreign Military Credit Sales of $602 million compared to $70 million in FY 70 and $250 million in FY 71. Finally, the supporting assistance program for FY 72 will be $818 million, up $205 million from FY 71 and $304 million from FY 70.

Next Steps

As a result of discussion between the two of you in San Clemente last summer regarding memos to the President dealing with budgetary items,⁸ Shultz believes that OMB should have the action on this memo. He has already asked Schlesinger to discuss the issues with Defense/State. From my conversations with Schlesinger, I know that he is willing to raise Taiwan from $15 to $20 million, Turkey from $90 to $100 million, and Jordan from $30 to $40 million simply on the basis of the new requests alone. He will probably go even higher if you support the Defense/State requests.

Recommendations⁹

I recommend:

—(1) That you make your views known to Shultz regarding the MAP requests for Taiwan, Greece, Turkey, and Jordan.

—(2) Alternatively, that you make your views known to me and I will relay them to Schlesinger.

	State/Defense MAP Request	OMB Recommendation	HAK Recommendation
Taiwan	$25	$20
Greece	25	15
Turkey	130	100
Jordan	50	40

—(3) That you forget about the issues of procedures, a separate MAP Contingency Fund, budget strategies for obtaining FMS credit for Israel, and the assumptions underlying the FY 71 Foreign Military Credit Sales Act.

—(4) That action on answering the Packard memo be formally given to OMB.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71. Top Secret; Sensitive; Urgent.
2. Dated December 30, 1970; not printed.
3. See also Document 47.
4. Identified in Packard’s December 30 memorandum as a letter from Irwin to Shultz; not found. Secretary Rogers on December 31 sent a memorandum to President Nixon with an appeal, similar to Packard’s, of the OMB-recommended funding levels. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 226, Department of Defense 12/1/70-2/23/71)
5. Not printed.
5. Not printed.
7. Senior Review Group meetings on October 9 and December 17, 1970, dealt with Jordan but no record of subsequent meetings was found, although Jordan may have been discussed in broader meetings on the Middle East. (National Security Council, Secretariat, Record of NSC and Related Meetings 1/20/69-12/31/72)
8. Not further identified.
9. No record of Kissinger’s action on these recommendations was found, and the column for his recommendations in the table below is blank, but see Documents 47 and 48.