Foreign Relations of the United States, 1977–1980, Volume IX, Arab-Israeli Dispute, August 1978–December 1980, Second, Revised Edition

228. Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to President Carter¹

Washington, March 21, 1979

SUBJECT

• Credits for Egypt (U)

Harold Brown is preparing to sign a letter² to General Ali today which promises Egypt that we will be prepared to recommend to Congress that the United States will provide military equipment and services to Egypt over the next three years of a value of at least $1.5 billion, $750 million of which is to be in the form of FMS credits comparable to those we provide to Israel, i.e. current interest rates, ten year grace, twenty additional years to repay. The remaining $750 million would have to be financed by Egypt. (S)

I am concerned about the lack of comparability between our assistance to Egypt and Israel. Israel is getting $3 billion, all of which is FMS credits and $800 million of which will be entirely forgiven. Even allowing for the additional military expenses Israel faces in its relocation of facilities from the Sinai, the proposal is extremely lopsided in Israel’s favor. (S)

FMS credits place very little burden on the American taxpayer and on the budget. (Congressional authorization of 10% of the credits as a guarantee is all that is required.) I believe we should offer credits for the full $1.5 billion of the Egyptian program. I am not concerned that this will remove incentives for continued Saudi military assistance to Egypt. Egypt will still be faced with the need to pay interest, and eventually to repay these loans. It would be easier, in my view, for Egypt to persuade Saudi Arabia to pick up these finance charges than it would to get them to fund large new military programs at this time. Similarly, it could provide the basis for persuading Saudi Arabia to increase its non-military assistance on the grounds that it would free up Egyptian funds to repay the FMS loans. (S)

RECOMMENDATION:

That you consider again the desirability of informing Egypt that the United States will provide FMS credits of up to $1.5 billion over three years following the signing of an Egyptian-Israeli peace treaty. (S)

_______ Approve $1.5 billion in credits. Notify Harold Brown to prepare the letter to General Ali accordingly.³

_______ Approve $1 billion in credits.

_______ Approve $750 million in credits.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 18, Egypt: 1–6/79. Secret. At the top of the memorandum, Carter initialed “C,” indicating that he saw the document.
2. Brown’s letter to Ali is printed in Document 230.
3. Carter approved this option and initialed “J.”