151. Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) and the President’s Special Representative for Economic Summits (Owen) to President Carter1
SUBJECT
- Financial Support of Israeli and Egyptian Security Measures Implementing the Peace Treaty
This memorandum describes one Middle East aid issue, not treated in the OMB papers, that may need to be resolved by the time of [Page 535] the treaty signing. We have worked with OMB on this matter, but in line with your instruction no copy of this memorandum is being made.
Discussion
On November 2, Begin presented to Vance2 an estimate of $3.37 billion as being needed to pay for the costs of Israeli military redeployment and establishment of new bases, and asked us to pay the entire amount with a $700 million grant and the balance as concessional loans. On November 16, Finance Minister Ehrlich and associates provided some particulars: $750 million for replication of the Etam and Etzion air bases on a three-year schedule, $140 million for related air control facilities, $715 million for army redeployment, $655 million for infrastructure to support redeployed air and ground forces, $70 million for replication in Israeli territory of their Sinai naval base, $740 million for additional defense equipment and $300 million for resettlement of 1,550 families from Sinai. The Israelis are pressing for detailed bilateral discussions of this request.
As you know, we have never undertaken to do more than “consult” with Israel on the costs of the two replacement air bases. A Defense Department survey team’s on-site estimates of air base replication costs is to be completed by December 8 and submitted after DOD review about December 15.3
Egypt will incur much smaller costs, probably limited to establishing an early-warning system in the Suez area. We have not yet received an Egyptian request for help in meeting these costs.
The scale of any US contribution turns on three variables:
—Inclusion or exclusion of redeployment costs, apart from the air bases.
—Inclusion or exclusion of local costs of projects.
—Inclusion or exclusion of marginally related Egyptian items in the interests of political balance in the US support package.
Options
These considerations are summarized in two cost options. Each is additional to annual US aid currently totalling $1,785 million for Israel and $950 million for Egypt. We favor the lower, Option A. We suggest deferring a decision, if the treaty negotiating process permits, until refined cost estimates are known in mid-December.
We do not see how a US guarantee of private foreign lending to Israel would help meet these airfield costs, since Israel’s debt servicing [Page 536] capacity is already fully mortgaged and movement of these airfields would not enhance that capacity.
Option A is to make incremental grants to Israel and Egypt in FY 1979, FY 1980 and FY 1981 equalling the agreed foreign exchange costs of replicating the two Israeli air bases, including essential associated air control and communications systems and other directly required logistical support facilities, and of establishing the Egyptian early warning system, both on a construction schedule within three years. In both countries, “foreign exchange costs” would be defined to permit substitution of imported goods and services for domestic ones when necessary in our judgment to avoid extreme dislocations of their domestic economies. We would refer the Israeli request for military equipment not essential to the air base relocation to the regular process of US-Israeli consultation on annual FMS credit assistance, without indication of predisposition to increase regular aid levels. As to the economic impact of other military redeployments or civilian resettlement, we would point out that our regular economic assistance provides generous relief of these burdens, to the extent that dollars can help. Our present rough estimate is that this approach would cost the US about $220–$250 million a year (additional to current aid levels) for three years; at least 85% of this would be for Israel.
Option B would offer full-cost financing of the same facilities as in Option A, thus releasing more Israeli budget funds for the other purposes. We would insist on US control of the construction schedule and take this program into account in responding to Israel’s annual aid requests. Our rough estimate is that this approach would cost the US about $1.3–$1.4 billion, spread over three years, that is, $425 to $475 million per year (additional to current aid levels), 90% for Israel.
Legislation
We recommend that any US contribution toward costs of implementing the treaty be sought from the Congress in special legislation, which would authorize appropriations in annual installments. Keeping this aid out of our regular foreign aid program would help to avoid building in radically heightened annual aid levels to either country. Offsetting Congressional cuts in your other aid programs could probably still be expected, however.
- Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 55, Middle East: Peace Talks Between Egypt and Israel, 11–12/78. Secret; Sensitive. Sent for information. At the top of the memorandum, Carter wrote: “We will take the most conservative, least costly option—when it becomes absolutely necessary. J.” Brzezinski wrote on the memorandum: “WQ, HO hold tight.”↩
- See Document 123.↩
- See footnote 3, Document 159.↩