Foreign Relations of the United States, 1969–1976, Volume XXIII, Arab-Israeli Dispute, 1969–1972

93. Paper Prepared by the National Security Council Staff¹

Washington, February 23, 1970.

ANALYTICAL SUMMARY

ASSISTANCE TO ISRAEL: OPTIONS AND ISSUES

I. The Decisions To Be Made

A. The context. Israel’s requests fall into two groups: First, Israel seeks answer within U.S. FY 1970 on four major requests. Second, Israel has put these requests in the context of a projected $1.2 billion balance of payments deficit, 1970–1974. Israel has not made specific requests for the longer period but has implied that U.S. support will be expected. The point relevant to the present decision is that the objectives underlying the five-year projections partly determine the size of this year’s financial requests.

B. The specific requests requiring decision this year are for:

1. Agreement to sell 25 F–4 Phantom and 100 A–4 Skyhawk aircraft for delivery in 1971–1972. Cost would be about $270 million, and the Israelis wish to discuss credit.

2. $119 million in additional military sales credit to finance that remaining portion of the 1968 Phantom sale for which Israel originally contracted to pay cash.

3. $54 million in P.L. 480 purchases.

4. $50 million in AID loans.

5. Lesser requests for specific items are in normal channels: 250 M–60 tanks; 20,000 bombs; 500 armored personnel carriers; patrol boats; ground and air launched tactical missiles; special status for access to excess U.S. military equipment from vehicles to jet engines.

C. The implied longer range requests do not require specific decision now. They do, however, require a decision to enter consultation with the Israelis on their longer range projections. These projections include imports of a magnitude much greater than U.S. analysts have been able to explain, even taking into account high military imports, construction of a domestic arms industry and enough civilian imports to maintain an 8% economic growth rate. They also suggest a possible option of supporting Israel’s own arms production as an alternative to direct U.S. supply. But before decisions can be made, more data will be needed from Israel.

D. The following, therefore, are the operational decisions to be made:

1. What decision are we going to make on this year’s Israeli requests? And shall we enter consultations on the longer-range requests?

2. What are we going to tell the Israelis?

3. What position are we going to take publicly?

E. What follows is an effort to lay out:

1. the major military, economic and political considerations that bear on this decision;

2. the major issues in making a decision on the aircraft requests;

3. the principal options for response to Israel; and

4. the main options in presenting our decision to Israel and publicly.

II. The Setting for Decision

The setting in which the Israeli requests are being considered has become much more complicated in recent weeks. Intensive analysis of the Arab-Israeli military balance and of Israel’s economic situation within the U.S. Government since last September as well as recent intelligence and diplomatic reporting indicate that these are the main elements of that setting:

A. Military.

1. Our technical studies of the military balance show that, although Israel is outnumbered 2–5:1 in the principal categories of equipment, Israel can maintain clear military superiority during 1971–1972—the period covered by its specific requests—with little equipment beyond that now scheduled for delivery. This is true because the effective military balance is not just determined by amounts of equipment but by ability to use it. This point is best illustrated by the fact that, while the Arabs outnumber Israel 681–224 in jet aircraft, Israel outnumbers the Arabs 450–375 in numbers of combat-qualified pilots to fly those aircraft. Since human training is involved, that ratio will change only slowly.

2. These projections have not assumed direct Soviet involvement—the only development that could have significant effect on the present balance relatively soon. Deliberations of the Washington Special Actions Group have concluded that the most likely Soviet move would be direct involvement to improve the UAR’s air defense. This could in time result in higher Israeli aircraft losses if Israel continues its present raids into the Nile Valley.

3. The conclusion from these studies has been that there is no military need for committing ourselves at this time to a higher level of Israeli air strength than it will enjoy upon completion of deliveries under the present A–4 and F–4 contracts. If Israel continues its present pattern of raids and if the Soviets improve UAR air defenses, Israel might need replacement of some aircraft in 1970–1971 to maintain its strength roughly at the level foreseen when the current contracts were concluded.

4. This analysis suggests that, other than providing for possible replacement of losses and unforeseen contingencies, our decision can be made primarily in the political context.

B. Political.

1. Israel’s deep penetration raids on the Nile Valley have not only dramatized Israel’s clear military superiority but have generated heavy pressure on Nasser and then on the Soviets to end those raids. The recent mistaken Israeli bombing of a civilian factory with F–4 aircraft has charged the political atmosphere and focussed attention on the U.S. decision.

2. The Kosygin letter² tends to cast the U.S. decision as a response to a Soviet challenge. This is the case not only because the USSR has threatened to supply the Arabs with additional arms but also because Moscow has failed to respond to U.S. proposals for return to observance of the cease-fire, arms limitation or a more positive response to U.S. peace proposals.

3. A number of Arab friends in Tunisia, Morocco, Lebanon, Saudi Arabia, Kuwait and Jordan have told us that a decision to supply additional aircraft will virtually put an end to any diplomatic effort to achieve a political settlement on the basis of the U.S. peace proposals. If the U.S. in Arab eyes backs Israel’s current strategy, the Arabs say they will not be able to regard U.S. peace proposals as sincere.

4. Israel has also encouraged casting our decision in the context of a response to a Soviet challenge. More than that, Israel has made the U.S. decision on arms a test of U.S.-Israeli relations.

5. In summary, two different sets of considerations will affect our decision: The first relates to Mid-Eastern issues—efforts to promote a peace settlement and U.S. relations with Israel and the Arabs. The second relates to the political implications of our decision to the U.S.-Soviet balance in the Mid-East.

C. Economic

1. U.S. analysis of Israel’s balance of payments projections reveals a very ambitious Israeli program of expenditures, 1970–1974. In attempting to understand Israel’s planned expenditures, U.S. analysts have determined that Israeli projections include import of substantial amounts of military equipment; imports of enough equipment and matériel to develop an Israeli arms industry so as to produce before 1974 its own Mirage-type combat jet aircraft, tanks, armored personnel carriers, artillery and naval patrol boats; increase of foreign exchange reserves by $300 million; and civilian imports sufficient to maintain an optimum economic growth rate of at least 8%. After identifying all of these elements, U.S. analysts still find an unexplained requirement of some $900 million, which together with the $300 million increase in reserves is about equivalent to the $1.1 billion in aid Israel is seeking 1970–1974.

2. Israel’s foreign exchange reserves now are falling at the rate of $1 million a day and, at this rate, would be almost totally exhausted by the end of 1970. Israel’s recently proposed budget for its 1970–1971 fiscal year which begins April 1 indicates that its leaders do not intend to slow losses in foreign exchange through an austerity program. Instead they are pushing ahead with their programs of civilian and military expansion. Following a 12% increase in real GNP in 1969, the new budget projects a 9–9.5% GNP increase in 1970. This budget indicates that Israel still is depending on record contributions from World Jewry and substantial credit assistance from other governments, particularly the U.S., to halt further deterioration in its foreign exchange reserves. Israel’s projections assume some $200 million in U.S. aid in 1970. If assistance from either the U.S. Government or from World Jewry—and projections in this category seem highly optimistic—fall short, Israel will have to slow the growth of its economy below 9.5% and therefore reduce civilian imports or substantially reduce military imports.

3. The conclusion from U.S. analysis has been that Israel could meet most of its financial requirements from its own resources without added U.S. aid if it were prepared to accept a lower growth rate of, say, 6%. This would still permit Israel to achieve all the other objectives described above, including developing its own arms industry.

4. U.S. analysts are quick to point out that more complete data are required from Israel on its plans for 1971–1974 before the U.S. analysis can be treated as a basis for definitive U.S. decisions. They have, therefore, recommended detailed consultations with Israel on its economic projections before the U.S. commits itself beyond U.S. FY 1970. These consultations would also surface more information on Israel’s plans for further developing its own arms industry to determine whether supporting Israeli production would constitute an alternative to direct supply by the U.S.

III. The Economic Options

Since the U.S. response to Israel’s economic requests in FY 1970 has proved relatively uncontroversial in the course of this review, it seems appropriate to get this part of the problem out of the way before dealing with the much more difficult decision on supply of aircraft.

A. The broad options can be judged against the Israeli estimates that $200 million in additional capital imports will be needed in 1970 and that this need will rise toward $300 million after 1971. The main options fall into these general ranges:

1. Provide no further economic aid. The rationale for this approach would be either to apply political pressure or to press Israel to make its own decisions on economic priorities before asking the U.S. taxpayer to support both “guns and butter” in Israel.

2. Continue in the range of recent aid levels, $50–150 million yearly. This would meet the political requirement of doing something and provide assistance that could support close to an 8% growth rate in Israel and military imports if the Israeli Government took reasonable austerity measures.

3. Meet the full Israeli requests of about $200 million in 1970. According to Israeli budget estimates just published, this would support all planned military imports, an active program for building its own arms industry and a 9.5% growth rate in 1970. This budget includes no austerity measures.

B. Possible Elements of an Economic Package in U.S. FY 1970. It is generally agreed up through the level of the Special Review Group that one part of the U.S. response to Israel’s requests should be these two points: (1) the U.S. will need more data on Israel’s long-range plans before talking about longer term assistance; therefore, (2) the U.S. would like to send a small group of economic experts to Israel to consult. Short of that, however, a package for this year can be put together from the following elements:

1. $119 million additional military sales credit to cover Israel’s remaining payments under the current F–4 Phantom contract. This request could be met totally or in part as follows:

a. Promise the entire $119 million now. In practice we would have to fund this from the appropriations of two fiscal years—FY 1970 and FY 1971—and could not formally complete the transaction until Congress passes the Foreign Military Sales Act (probably mid-April). But enough money has been included in the requested appropriation and could be promised now to meet Israel’s 1970 needs.

b. Allocate $52 million now, withholding the balance of $67 million. This balance is the amount Israel has on deposit in France, and Defense questions whether the U.S. should pay the price for the impasse created by France’s embargo.³

2. The $54 million P.L. 480 request could also be met at one of three levels.

a. Approve the entire $54 million. The main complication in this is that $22 million would involve feasible but somewhat out-of-the-ordinary procedures for Agriculture (extending P.L. 480 terms to what would normally be Israeli commercial purchases here required by law) when Agriculture has not established the need. Including the extra $22 million would force the overall P.L. 480 program above our budget ceiling.

b. Approve the $32 million Israel originally requested before seeking the special arrangement for the added $22 million noted above. This would keep the program within the budget ceiling.

c. Approve an intermediate level of say $40 million. This could probably be worked out by adjustments within the present budget ceiling.

C. In summary: Adding to the above $30 million in this year’s military sales credit already committed under the 1968 Phantom contract, these options would give us a range of $114–203 million in economic assistance for U.S. FY 1970. This would be measured against projected Israeli need of $200 million from the U.S. The question of AID assistance—not possible under present AID criteria though legally possible—would be deferred this year on grounds that conventional programs and possible Israeli austerity measures should be exhausted before the U.S. considers reversing AID criteria with an extensive legislative history.

IV. Arms Supply—The Issues for Decision

A. U.S. interests. The central question to be answered is: What decision will best serve the long-term national interest of the U.S.? The main U.S. interests in the Middle East are:

1. That this area not become the arena or the trigger for a U.S.-Soviet confrontation. The most obvious course in pursuit of this interest is to promote a solution of the Arab-Israeli conflict, which threatens to draw in the U.S. and USSR. Failing a settlement, the next course for the U.S. is to avoid steps which would force deeper U.S. or Soviet involvement.

2. That this area not fall under Soviet predominance. It seems unlikely that the USSR intends to move quickly to establish the kind of influence it achieved in Eastern Europe after 1945. But there is no question that the Soviet objective is to undercut U.S. influence in the Middle East and to become the major outside influence. While the Middle East itself is not literally vital to the U.S., it is more nearly so to Western Europe, and the extension of Soviet predominance into a new area would have global implications.

3. That Israel survive. The U.S. has rightly or wrongly undertaken a non-legal national commitment to assure Israel’s survival. In the military context, this commitment has taken the form of assuring Israel’s capacity to defeat any possible Arab threat to its existence. Israel’s ability to defend itself is also important in avoiding direct U.S. involvement in a Mid-Eastern war.

4. That the Arab nations continue to welcome an American presence. This is relevant to the U.S. effort to prevent Soviet predominance. But it is also related to protecting the investments of private Americans as well as some $1.5 billion in national income credited yearly to the U.S. balance of payments. Finally, it is related to the obligation of the U.S. Government to protect American citizens (well over 10,000) working and living in this area.

B. The important question, therefore, is what effect a decision to supply Israel with additional arms now would have on each of these interests.

1. Given the analysis of the present military balance above (para. II. A, page 3), it seems fair to conclude that the U.S. obligation to contribute to Israel’s chances of survival could be fulfilled without any commitment right now to increase further Israel’s aircraft inventory. Therefore, the governing judgments in this decision will be those related to the remaining U.S. interests in the area. These are discussed in the following paragraphs.

2. Would a publicly declared decision within the next few weeks to supply additional aircraft to Israel lessen the likelihood of U.S.-Soviet confrontation in the Mid-East?

Pro.

—Since a major Arab-Israeli clash is most likely when Israel feels threatened, one could argue that a strong Israel is more likely to calibrate its military pressure on the UAR so as to fall short of a level that would force the USSR into open defense of the UAR and pose to the U.S. the question of direct response.

—While the Israeli leadership at present seems uninclined to reduce its military pressure on the UAR (and USSR), a positive decision would make it possible for the U.S. to urge Israel to ease off its attacks at least on populated areas in the Nile Valley. A negative decision or delay would decrease Israeli receptivity to such an approach.

—The likelihood of U.S.-Soviet confrontation is increased when the USSR believes the U.S. lacks resolution. The only way to encourage the USSR to turn toward serious efforts to achieve a political settlement is to make clear that Moscow can get what it wants—Nasser’s survival without undue Soviet involvement—only by promoting a negotiated settlement.

—It is in the U.S. interest to be sure before the USSR involves itself further that Israel is promised the means to defend itself. It is potentially less inflammatory for the U.S. to move now than for the U.S. to move in direct response to an open Soviet move, even though the Soviets might use the U.S. move as an excuse for its own.

Con.

—A U.S. decision now, in the wake of Kosygin’s warning⁴ and Nasser’s pressure on Moscow, could force a major change in the quality of the Soviet presence in the Mid-East. It would force the USSR to assume greater responsibility for the defense of the UAR.

—Open assumption by the USSR for UAR defense would face the U.S. with the difficult question of whether to make a direct response of its own. Such a response would change the Arab-Israeli conflict into a direct US–USSR contest. To date, the U.S. and USSR have been content to keep their contest for influence in the Mid-East on the political level.

—Backing Israeli strategy whether we agree with it or not would represent diminution of great power control over their role in the situation. The Israeli strategy of bombing the Nile Valley, a strategy in which the U.S. has little interest, has generated present pressure on the USSR to move more directly to the UAR’s defense. If the U.S. moved to back that Israeli strategy, it would in effect be joining a confrontation with the USSR on Israel’s terms. If each great power begins moving in support of its client the likelihood is increased that either Arab or Israeli acts could force them into moves vis-à-vis each other that neither has an interest in taking.

—In short, the U.S. has no interest in seeing the USSR pressed so hard that it feels compelled to escalate its own direct involvement. The most dangerous situation that could be created is one in which the USSR feels it is faced with humiliation and has no way out.

Summary of the Issue

Recent Israeli bombing has forced Moscow closer to assuming responsibility for UAR defense—a step which could elevate the Arab-Israeli conflict to a U.S.-Soviet contest. A U.S. decision which seems to back the Israeli strategy that achieves this result would appear to enhance Israel’s voice in setting the terms of the U.S.-Soviet contest. Yet U.S. firmness in the face of Soviet pressure is important in deterring a confrontation.

3. Would a publicly declared decision in the next few weeks to supply additional aircraft to Israel impede Soviet efforts to achieve predominance in the Mid-East?

Pro.

—Israeli power is a threat to Soviet prestige because it alone can periodically defeat and weaken pro-Soviet governments. This is all the U.S. has to depend on. Given the political forces at work in the Mid-East, it is unlikely that the U.S. can win the more prominent Arab regimes from the radical camp. If the U.S. cannot win them politically, the only alternative is to keep them weak.

—Soviet prestige will gradually be eroded by Soviet inability to regain the Arabs’ lost territories from Israel.

—As Soviet impotence is demonstrated, the Arabs will realize that the U.S. is the power they have to deal with.

Con.

—An open U.S. move would increase Soviet influence in the UAR. It would almost certainly compel increased Soviet involvement in the UAR’s air defense. To do anything effective, the USSR would have to involve its own technicians and maybe even pilots in considerable numbers, perhaps 10–15,000. With an increase of this magnitude would come greater Soviet influence, at least in the UAR military and perhaps even over political policy.

—If the USSR openly assumed responsibility for UAR air defense, this would be the first major extension of that kind of Soviet political relationship in the Middle East and, except for Cuba, the first such Soviet venture globally beyond the lines of 1948.

—If the USSR extended its protective mantle over the UAR, this would increase pressure on the U.S. to stand even more openly behind Israel. The USSR would then have maneuvered itself formally into the position of the sole champion of the Arab cause, leaving even the moderate regimes little choice of maintaining a close countering relationship with the U.S.

Summary of the Issue.

The basic fact of Israel’s military superiority strengthens the U.S. bargaining position. However, excessive use of Israeli power could drive the USSR into open assumption of responsibility for UAR defense—a step which would enhance the Soviet position in the Mid-East.

4. Will a publicly declared decision within the next few weeks enhance or at least not worsen the U.S. position in the Arab nations?

Pro.

—The moderate Arab regimes have an interest in continuing their relationship with the U.S. because a relationship with the USSR is incompatible.

—The Arabs respect power. Even though they may react emotionally to a U.S. decision in the short term, they will in the long run recognize that the U.S. (with Israel) is the only effective power in the area.

Con.

—An open U.S. move would weaken U.S. relationships even with moderate regimes. It would be conclusive proof even to Arab friends of the U.S. that the U.S. will give Israel unlimited backing regardless of its policy. This even closer U.S. identification with Israel would make it more difficult for moderate regimes to sustain politically a close relationship with the U.S. It would increase the pressure on them from their own radicals.

—Senior U.S. diplomatic representatives in four Eastern Arab capitals have reported their concern over the likelihood of Arab attacks on American citizens (more than 10,000) and property if a decision to supply more aircraft to Israel is announced.

Summary of the Issue

The Arabs have talked themselves into a state of mind where they would regard a U.S. announcement of further aircraft shipments to Israel now as a sign of complete U.S. backing for present Israeli strategy. Yet the U.S. cannot allow its decisions to be governed by Arab emotions.

V. Arms Supply—the Range of Options

A. The broader context. U.S. technical analysis of the Arab-Israeli military balance as it may evolve 1970–1974 has identified the following general ranges of possible U.S. supply of aircraft to Israel over the next five years:

1. 20 more Phantoms and up to 20 more Skyhawks delivered by 1974 would be necessary to meet Israel’s minimum security needs. This would enable Israel to win another war like that in 1967 when it concentrated on defeating one enemy at a time.

2. 20 more Phantoms and up to 45 more Skyhawks delivered by 1974 would enable Israel to defeat a coordinated attack by the UAR, Jordan, Syria and Iraq (which U.S. intelligence now estimates as unlikely in any militarily effective form).

3. 25 more Phantoms and 100 more Skyhawks delivered by 1974 (Israel has requested them in 1971–1972) would enable Israel to defeat an effectively coordinated attack by 14 Arab states.

B. Options for the FY 1970 decision. The Israeli request was for delivery in 1971–1972. Israeli Ambassador Rabin has said Israel would regard anything meeting from 60–100% of Israel’s requests as a positive U.S. response. The Israelis have also been pressing Defense for a U.S. agreement to make up losses from its present inventory of Phantoms and Skyhawks. Against that background, the U.S. has the following choices in making its present decision:

Option 1: Negative decision. A decision could be made not to provide Israel with additional aircraft, at least this year.

Option 2: Postponement of a decision. It could be announced that, given Israel’s present clear superiority and the high state of tension in the area, a decision is being postponed for the time being. To meet possible contingencies, the USAF would prepare on a standby basis to provide aircraft out of its inventory.

Option 3: A small number of aircraft for replacement. If it is judged that Israel will have the power it needs provided it maintains the aircraft level now envisioned when the present Skyhawk and Phantom deliveries are completed later this year, the U.S. could commit itself to maintain that level by replacing losses. There are two possible variants for handling this option:

a. Three-year replacement contract. Present Skyhawk and Phantom contracts would be amended to include replacement up to a specified number of Israeli losses (with Skyhawks replacing Mirages). Based on 1969 losses, we would agree to reserve 8 Phantoms and 18 Skyhawks for replacement of losses in 1969, 1970, 1971. We would agree to joint review of this level if actual losses ran higher. We would make public only the principle of controlled replacement.

b. Standby reserve for replacement. Without making a contract now, we could make arrangements to earmark and have available on an immediate standby basis for formal sale to Israel on short notice.

Option 4: A three-year replacement contract as above with added agreement in principle now to provide, subject to review in early 1971, an additional squadron of 16 Phantoms. The combination of these agreements would make a potential total of 24 Phantoms and 18 Skyhawks with Israel’s total inventory being increased by 16 Phantoms. [A variation of this would be to raise the number of Skyhawks slightly.]

Option 5: A one-time sale of 16 Phantoms and 24 Skyhawks now. This would provide for anticipated losses as now estimated and provide a modest increase in Israel’s inventory but would not commit the U.S. for the future.

Option 6: Meet all of Israel’s requests for a short-term period. Israel has requested 25 Phantoms and 100 Skyhawks by the end of 1972. Therefore, a decision now for delivery of about half that amount in 1971 should be regarded as positive. This would mean another 15 Phantoms and 50–60 Skyhawks.

C. The Argument. Rather than restate the arguments made on the principal issues under IV above or risk redundancy by arguing each of the options, it seems sensible to repeat here only the main elements that bear on choice among these options:

1. The Israelis regard this decision as a test of this Administration’s support for Israel. This makes it difficult to do nothing.

2. The USSR has warned against a positive decision. It would be difficult to do nothing if that would make the U.S. appear to have been intimidated.

3. The military balance right now does not require us to increase Israel’s aircraft inventory, though it may make replacement of losses desirable.

4. An open U.S. decision could force the USSR into assumption of responsibility for UAR air defense.

5. The Arabs will read a positive decision as U.S. support for Israel’s raids in the Nile Valley.

D. What do we tell Israel? Any response to Israel if it is to preserve a close U.S.-Israeli relationship must assure Israel of U.S. intent to see that Israel retains its position of military superiority as well as the economic base to support that position. The key to making any response short of total acquiescence in all of Israel’s requests politically acceptable to Israel will be that assurance plus the promise of continuing consultation on Israel’s needs. Within that framework, we will have to tell Israel exactly what we intend to do. It has been possible in the past to maintain the secrecy of exact numbers of aircraft.

E. What is said publicly will depend on the decision. Two general options are available:

1. State that a decision has been made but there will be no detailed comment.

2. Describe the general nature of the decision and emphasize continued interest in arms limitation.

3. State vaguely what we intend to do with restatement of basic objectives: meet military needs of friends, arms limitation, peace.

4. Let the thirty-day deadline pass without comment to allow pressure to die down before dealing with the problem publicly.

F. Formula for public announcement. What is said will depend on the decision. But for the sake of illustration, if the decision were a relatively inconspicuous replacement of Israeli losses plus a slight addition to inventory, the question would arise what formula might be found that would make us appear firm and yet sensitive to the situation. Such a formula might include points like the following:

1. The U.S. will maintain the strength of its friends by whatever means it considers appropriate [e.g., replacement of losses].

2. The U.S. does not believe that force alone can resolve the Arab-Israeli conflict. Therefore, the U.S. will not fuel an arms race. The U.S. will continue to act with restraint and to press other suppliers to discuss arms limitation.

3. At the same time, the U.S. will renew its efforts to restore the cease-fire and to help start negotiation of the terms of a peace settlement.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–043, Senior Review Group Meetings, Review Group Israel 2/25/70. Top Secret; Nodis. All brackets are in the original. For the titles of the papers on which this paper is based, see footnote 10, Document 86.
2. See Document 88.
3. France imposed an arms embargo on Israel after the 1967 war.
4. In his January 31 letter; see Document 88.