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


  • Long-Term Military Relationship with Egypt (C)

At Tab A is the State-Defense decision memorandum on longer-term military assistance to Egypt, which you requested after the PRC met on this subject. I have held this memorandum awaiting Jim McIntyre’s comments,2 but they are still not available, and I think that a decision is needed now. (C)

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The State-Defense memorandum provides the technical information you need to make the crucial decisions required, so I would like to address myself to the larger picture. With these decisions, we have the opportunity, and in my view the obligation, to cement a relationship of vital importance to the United States. President Sadat has nowhere else to turn for military assistance. He is in this position by virtue of turning away from the Soviets and moving closer to the United States and Israel—steps of unprecedented benefit to our interests in the Middle East. Our failure to support Sadat militarily at this critical juncture could have disastrous effect on our overall peace effort. (S)

It is important to stress that we have taken responsible steps to keep the assistance package at a reasonable level. We received a larger and more expensive list from Sadat,3 but we pared that list by projecting smaller, yet more sophisticated, Egyptian armed forces. Further, we are working with the Egyptians to build up their indigenous arms production base, and, if the moderate Arabs move closer to the peace process, we hope to encourage their resuming contributions to Egypt’s defense. (S)

I strongly agree that we need to provide more assistance and preferred financing terms in FY 81, and that this funding should be in addition to the already strapped FY 81 security assistance budget. We do not want an arms delivery gap to occur during the next two critical years, nor do we want to affect adversely vital interests elsewhere as we move to protect the interests at stake here. (S)

Finally, I think that sufficient facts are presented here for you to make a decision at this time, rather than to wait until after the budget cycle runs its course next month. Sadat is expecting a reply shortly, and delaying the decision until December could affect the Strauss/Linowitz visit on November 17.4 (S)


That you approve each of the five recommendations in the State-Defense memorandum at Tab A.5 (U)

[Page 999]

Tab A

Memorandum From Secretary of State Vance and Secretary of Defense Brown to President Carter6


  • Long-Term Military Relationship with Egypt

Issue for Decision

You asked7 for a decision paper examining the implications of a long term military assistance program for Egypt along the lines proposed by the PRC, and alternatives. In this paper, we have taken into account the budget impacts of continuing security assistance for Egypt, as you requested.


Following Vice President Mubarak’s visit last June,8 you wrote to President Sadat9 suggesting that our two governments work closely to plan a longer-term military supply relationship, in order that Egypt could satisfy a greater proportion of its military equipment needs over the next several years. You also indicated at that time the hope that Egypt would assign highest priority to economic development rather than to military programs. DOD began the planning process with Egypt in August. Based on its report of the results of this first exchange,10 the PRC met on September 20 to consider the issues and make some recommendations.11

The DOD report validated Egypt’s priority military needs for the defense of its homeland. The analysis showed that whatever assistance we could provide within feasible financial assistance levels would not meet all their needs and would not create a significant threat to Israel; Egyptian force structure would in fact be less than that in the 1973–79 period. It is also clear that, with the cessation of Soviet assistance earlier and Arab assistance at the time of the Peace Treaty, the US is seen by Egypt as not only chief supplier of military equipment but practically [Page 1000] the only source of substantial credit assistance. In view of present political circumstances and Egypt’s economic situation, the US is likely to remain in this position for a while to come.

Our decisions on the scope of a longer term arms supply relationship thus have significant political content. This is true not only of the size of the program, but also its pace. The deliveries in the current “three-year” program are front-loaded. Therefore, if we simply phase in a five-year program after “the three-year program,” we will have a severe interim “delivery gap” of 2–3 years which will put a serious strain on our overall relationship.

The PRC recommended a multi-year security assistance program for Egypt, involving $350 million in FMS credits in FY 1981 and $800 million annually for the five years thereafter, FY 1982–86, borrowing from the unspent portion of the $1.5 billion peace package12 to assist earlier starts of selected new programs in order to minimize the gap in deliveries of equipment, and relying on future appropriations to ensure full funding of approved programs. The PRC also recommended that we agree to sell F–16 aircraft and M60A3 tanks to Egypt, as well as a few more F–4Es (i.e., about 15) if necessary.

There are several issues that require your decision:

—The multi-year nature of the US commitment;

—Annual funding levels;

—Whether to begin additional funding in FY 1981;

—Use of “cash-flow” financing;

—Sale of F–16 aircraft and M60 tanks.

The Nature of the US Commitment

With the Peace Treaty, the $1.5 billion FMS program, and your decision to enter into joint planning, we are already well on the road toward a long term security assistance relationship with Egypt. To move the planning process beyond this point, we need to indicate to Egypt what level of credits we might provide in future years.

Given extensive and pressing Egyptian modernization needs, and the high costs of the programs involved (e.g., 80 F–16s for $1.8 billion or 900 M60s for $1.2 billion), we would not be able to fully fund the most important programs with a single year’s credits, nor delay the start of programs till the requisite credits had been accumulated. This means we must start selected major programs with available credits, e.g., drawing upon the unspent portion of the $1.5 billion program, taking the risk that Congress will appropriate in subsequent years the credits necessary to continue those programs (this is called the “cash-flow” ap [Page 1001] proach). Nevertheless, we do not propose a formal multi-year budget commitment. Rather we recommend that we continue the planning process with Egypt, indicating the specific level of FMS financing we intend to seek from Congress in FY 1981 and FY 1982. We would make clear that financing is subject to annual Congressional authorization and appropriation. We would point out that we do not have a formal multi-year commitment with Israel. We would indicate that we intend to request substantial levels for the out-years, suggesting we use the FY 82 figure (and by implication its extension in future years) for planning purposes only. As programs are planned by the US and Egypt together under these sums, the US would carefully control the flow of letters of offer to them in order to avoid overcommitment.

FY 82 Funding Levels

We have studied Egypt’s military needs and priority equipment requests in great detail. We examined alternative annual funding levels to see what militarily justified types and quantities of equipment could be bought by Egypt with our credit assistance. Illustrative alternatives are as follows:

$500 million a year would permit purchase over five years of some 50 F–16s, 300 M60s, 4 patrol gunboats, but a severely cut-down list of vehicles and other equipment, and no additional air defense. This is well under the quantities Egypt has said have priority and which we believe are justified from a military point of view.

$650 million a year would allow us either to add somewhat to the numbers of aircraft or tanks Egypt could buy or to offer a more substantial amount of the smaller equipment items the Egyptian services would like so much to have and we believe they urgently need.

$800 million a year would permit purchase of the full quantity of priority F–16s (80), but still only 300 M60s, plus other equipment, but no more aircraft and no more air defense weapons. This amount would neatly replace Arab military aid, which was $800 million a year.

$1 billion a year—President Sadat’s request and the same as Israel now receives—would permit the purchase by Egypt of 80 F–16s, the full priority complement of 900 tanks, additional air defenses, but no additional aircraft or frigate-type ships.

The PRC recommended $800 million a year.

None of these alternatives meet all of Egypt’s needs or priority requests. They would, however, provide some of Egypt’s requirements for advanced weapons (which we support) over the next six years. Nonetheless, the lower alternatives shown above would result in considerable delays in the delivery of equipment, because of the slow pace of programs required. While we are also embarking on a program of [Page 1002] limited production assistance to Egypt, it will have minimal impact in satisfying Egyptian requirements for the foreseeable future.

The budgetary impact differential among these annual funding levels is not great, assuming no “forgiveness” (grant aid) is involved. For FMS credits extended by the Federal Financing Bank, the annual appropriation must cover only the guarantee fees, which equal 10% of the loans. Thus, the budget appropriation would range from $50 million to $100 million a year. OMB already assumes, in its budget projections for FY 1982, credit funding at the $500 million a year level. (The possibility of FY 1981 funding is discussed below).

We are sensitive to the “proportionality” of the annual funding level to that of Israel. As it approaches Israel’s $1 billion, Israel will undoubtedly feel the case for additional security assistance it has submitted is even more justified. They have asked for an additional $800 million a year, but we do not believe the accelerated pace of military equipment deliveries which this would imply is necessary, and we have not encouraged them to think they will get it or even a portion of it. An increase for Israel, assuming that it contained the usual 50% forgiveness, would add greatly to the budget impact; e.g., an additional $800 million a year for Israel would require an additional budget appropriation of $440 million. If this initiative with Egypt did result in our also increasing assistance for Israel, we would want to strongly resist extending any forgiveness in that increase.

We do not recommend forgiveness for Egypt. Egypt’s external financing deficit appears just about balanced by the external assistance they receive. Egypt should be able to manage the interest and subsequently the principal repayments if we offer the same terms provided for under Peace Treaty package—10 year grace period and 20-year repayment of principal thereafter. By the same token, however, we do not recommend that Egypt directly fund a major portion of approved purchases from their own resources. It would merely divert resources from priority economic development. In our judgment, these recommendations would not lead to a requirement for an increase in currently projected U.S. economic aid levels to Egypt.

FY 1981 Funding

The original $1.5 billion treaty package was supposed to cover a three-year period, but it is already committed and it satisfied only a small portion of Egypt’s priority needs. If we do not begin the new assistance program until FY 1982, we would face a politically difficult two-year gap before we can even announce a new sale to Egypt, and a three or four-year gap between completion of major deliveries from the $1.5 billion program and the start of new deliveries. In the meantime, Egypt’s Soviet equipment will be seriously deteriorating, with attendant decline in Egyptian military morale.

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There will be unspent credits remaining from the $1.5 billion package—either $520 million in FY 1980 or $320 million in FY 1981 and we could draw upon those to start new programs for Egypt (“cash flow”). However, we would have to pay them back out of subsequent years’ appropriations.

Therefore, the PRC has recommended some new funds be made available in FY 1981 to permit a transition to be made to the new longer-term program. The PRC specifically suggested $350 million for this purpose.

Additional credits for Egypt in FY 1981 could have serious implications for the overall FMS credit program. State and Defense have requested a global level of $2.304 billion for FY 1981 (the present OMB mark is $1.98 billion). $1 billion of this is for Israel, $175 million is for treaty commitments to Spain, Philippines, and Panama; $250 million is for Turkey, leaving only $879 million for Greece, Jordan, Thailand, and numerous smaller but crucial programs around the world. A program for Egypt cannot be undertaken with the security assistance financing levels cited above. A decision to begin a regular program of FMS financing for Egypt means the level will have to be raised by the amount earmarked for Egypt, for FY 1981 and beyond.

Alternatives for FY 1981 funding are as follows:

No new credits in FY 1981. We could make some minor new program starts by borrowing from the unspent portion of the $1.5 billion, but this alternative would probably be insufficient to start any major program, like F–16. Egypt would see cash flow financing alone as simply an accounting sleight of hand. Some new U.S. resources need to be committed to meet our foreign policy objectives.

$225 million in new credits in FY 1981. This would make available a total of $545 million in credits in FY 1981, permitting some new program starts. However, at the pace these amounts would permit, the delivery gap could be reduced in perhaps only one major program. The budget impact would be only $22.5 million (10%) additional.

$350 million in new credits in FY 1981. This would make available up to $670 million, and would allow substantial new starts and acceleration of deliveries to close the delivery gap. It would impose less of a “cash flow” payback burden in FY 1982 and thereafter. The budget impact would be only $35 million (10%) additional. The PRC recommended this alternative.

Use of Cash Flow Financing

The foregoing alternatives for FY 1981 funding have assumed the use of cash flow financing to minimize the deliveries gap. Objections to cash flow financing, which we utilize in the Israeli program, have been raised because of the financial risk to the US involved unless a long- [Page 1004] term FMS financing program at substantial levels were established. Because of this risk we do not recommend cash flow financing across the board; rather we propose this method of financial implementation only on a selected basis to begin important programs in FY 80 and 81 and only drawing on committed but not yet spent funds from the original $1.5 billion program. We believe that limiting the use of cash flow financing in this manner meets previous objections and limits our financial exposure to an acceptable level. Cash flow financing (up to $320 million available) in combination with new FY 81 funds (e.g. $225–350 million) would make available up to $545–670 million to begin new programs in FY 1981. This will help bridge the gap until a more substantial program can begin in FY 82.


Only F–16 aircraft and M60 tanks pose policy issues. Their release poses no serious arms control or arms transfer issues given the quantities under consideration and the quality of equipment in neighboring countries. We have sold identical or superior equipment to other friendly nations in the area. Tactically, Israel could object in hopes we will provide it more equipment and we will need to conduct extensive consultations with Congress before any formal proposal is made. Because of production line problems the tank sale may have to be notified to Congress relatively soon. F–16s might wait, although we need a decision in principle to permit us to continue our discussions with the Egyptians.

We have looked at less capable equipment such as F–4s and M48A5s from the U.S. inventory, but have concluded we cannot strip U.S. forces without adversely affecting U.S. combat capability. We might be able to provide up to 15 F–4s and some M48A5s if we can buy back M48s from Jordan. This may change over time and we will keep the situation under review.

Congressional and Israeli Implications

A substantial continuing FMS program for Egypt will come as no surprise to either Israel or to the Congress. Israel will probably not object as long as the program does not threaten its security—which any feasible programs do not—but it will certainly bring pressure to increase its own security assistance level. Congress has been supportive of our security assistance to Egypt. We will have to guard against Congressional attempts to wedge the Egyptian program in under the overall level or to cut crucial programs in other countries. Once we have your decisions, we plan to consult closely with key members and committees about the emerging program.

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1. That we continue our five-year planning discussions with Egypt, without seeking a multi-year appropriation from Congress, on the basis of anticipated annual FMS credit amounts of up to:

—$1 billion (equal to Israel)

—$800 million (recommended by PRC)

—$650 million

—$500 million

2. That we begin new FMS financing in FY 1981 at:

—$350 million (budget impact $35 million)(PRC recommendation)

—$225 million (budget impact $22.5 million)


3. That the amount of financing for Egypt in FY 1981 and in subsequent years be added to the projected FMS financing level.

4. That the “cash flow” approach be used in FY 1980 and FY 1981 to facilitate selected new program starts and sustain the momentum of programs.

5. That you approve in principle the sale of F–16 aircraft and M60 tanks.

  • Cyrus Vance14
    Secretary of State
  • W. Graham Claytor15
    Secretary of Defense
  1. Source: Carter Library, National Security Affairs, Staff Material, Middle East, Subject File, Box 12, Egypt: 11/79. Secret. Sent for action. In the upper right-hand corner of the memorandum, Carter wrote: “State/DOD must assess Egypt/Israel military needs as part of the ZBB approach to ’81 budget—compared to worldwide nation-by-nation priorities. J.C.” The memorandum was found attached to a November 8 memorandum from Brzezinski to Vance and Brown, forwarding to them the text of Carter’s handwritten comment. (Ibid.)
  2. See footnote 2, Document 322.
  3. See footnote 4, Document 274.
  4. See Document 310 and footnote 2 thereto.
  5. Brzezinski added a handwritten postscript to the memorandum, “P.S. I would recommend that you first look at p. 8 of the joint State/DOD memo—and then refer back only if you feel you want more detail.” Carter neither approved nor disapproved the recommendation.
  6. Secret.
  7. See Document 298.
  8. See Document 293.
  9. See Document 269.
  10. Not found. See footnote 4, Document 274.
  11. See Document 296.
  12. See Document 212.
  13. Carter neither approved nor disapproved any of the recommendations.
  14. A stamped notation indicates that Vance signed the memorandum on October 25.
  15. Claytor signed the memorandum on behalf of Brown. A stamped notation indicates he signed on October 17.