71. Telegram From the Department of State to the Embassy in Oman1

89463. For Bartholomew. Subject: Oman Access: Assistance Issues. Ref: Muscat 0890.2

1. (S-entire text).

2. In response to Omani desire for commitment for FY 82 and 83 FMS levels, you are authorized to inform Omanis that USG will seek an FMS financing program for Oman in FY 82 and 83. Because our budget planning for those years is still in process, we cannot commit to particular levels at this time. However, we would look forward to seeking in FY 82–83 levels similar to those in FY 80–81.

3. In regard to Omani request for IMET, funding problems are acute in both FY 80 and 81. However, we can offer small FY 80 program of $20 thousand—considering timing, and fact that no course reservations or other administrative requirements have been accomplished, we believe best use of funds would be tour of US military training facilities to assist in defining Omani training requirements. An FY 81 program for Oman in excess of this amount has been included in the current interagency effort to reprogram IMET funds to meet Indian Ocean access requirements. FYI, we are seeking $100 thousand for FY 81. End FYI.

4. Concur in your approach to economic issues (para 7 reftel), trying lesser fallback positions before resort to final position. Regarding Omani contention that EXIM bank credits are not attractive or are uncompetitive, following points might be made:

EXIM Bank direct project loans are currently at 8¾ percent interest over a long term (up to 14 years depending on project). In today’s inflationary environment this is highly concessional. Commercial interest rates are more than twice as high. US Treasury is borrowing currently at 12–16, depending on maturity. European and Japanese credit agencies are, like EXIM Bank bound to common-floor interest rates for various types of project credits to middle income countries such as Oman.

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—We believe it unlikely that another industrial nation could offer substantial amounts of project financing to Oman from concessional aid funds in the next year or so. Even if others wish to do so for their own exports, Oman would still need means to finance its imports from the United States. For this purpose, we believe EXIM Bank credits are highly attractive.

  1. Source: National Archives, RG 59, Bureau of Politico-Military Affairs, General Program Country Files 1980–1984, Lot 86D371, Box 2, Indian Ocean Base Access Negotiations. Secret; Niact Immediate; Exdis. Drafted by Douglas R. Keene ( PM/SAS); cleared by Countryman and Jane E. Taylor (S/S–O), in DOD/ISA, NSC, and OMB, and in substance by Nimetz; approved by O’Donohue.
  2. See Document 70.