260. Memorandum From Secretary of State Vance to President Carter 1

SUBJECT

  • Conventional Arms Transfers

You have directed a PRM on arms transfers due March 15.2 Even as this is being done and without prejudice to the decisions you will make at that time, the State Department will have to deal with immediate problems. These include presentation on the FY–78 budget, the backlog of pending decisions, and questions from Congress and press. This memorandum describes:

—Steps we have initiated in the State Department to deal with arms transfer issues that are currently on our agenda, and

—Planning in progress to bring greater coherence and increased control to the world arms trade in the longer run.

BACKGROUND

The term arms transfers is a rubric for three forms of military exports: (1) those paid for by the US as grant aid under the Military Assistance Program (MAP); (2) those paid for by the recipient under the Foreign Military Sales Program (FMS) using US Government credits or [Page 633]loan guarantees and/or the US military logistics system; and (3) those conducted as straight commercial sales. Each type of arms transfer requires a different form of government involvement.

(1) MAP

The Military Assistance Program is included each year in the annual budget as a foreign assistance item. The questions to whom and how much are decided by a State-Defense-ACDA-OMB review process, which is coordinated through the Security Assistance Program Review Committee, chaired by the Under Secretary of State for Security Assistance. Congress makes the final determination when the budget is submitted.

(2) FMS

Foreign Military Sales are the largest portion of total US arms exports. FMS requiring US Government direct loans or credit guarantees are included in the annual budget by country and dollar amount. FMS cash sales, however, do not appear in the budget and Congress has no formal opportunity to make its views known until it is notified of individual proposed sales. The attachment is a description of how the decision-making process operates in a typical FMS case.

The International Security Assistance and Arms Export Control Act of 1976 requires that the Executive Branch must give the Congress thirty days prior notification of any FMS transaction in excess of $25 million and any FMS sale of major defense equipment in excess of $7 million. Within this thirty days Congress may vote to veto the transaction. The thirty calendar day formula was reached on the basis of assurances from the Executive Branch that the concerned committees would receive twenty days’ informal prenotification of the formal notification. In effect, therefore, Congress has fifty calendar days in which to consider a pending Letter of Offer for a proposed significant FMS transaction.

(3) Commercial Sales

All commercial sales of military services and equipment must be licensed by the US Government. This function is performed by the Munitions Control Office of the State Department. Legislation requires that licenses for commercial military deliveries be notified to Congress according to the formula used for FMS cases.

Additional facts that help clarify discussions about the complicated subject of arms transfers are:

—Most dollar figures cited for government-to-government (FMS) sales represent orders taken in a given year, not deliveries. Some years, total orders have topped $10 billion, but annual deliveries have never reached $5 billion.

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—On the average, about 40% of US Government orders or deliveries are weapons systems. The balance is vehicles, transport aircraft, construction, training and miscellaneous services.

STEPS NOW BEING TAKEN

1. The Pipeline. Over $32 billion in defense goods and services, ordered by foreign governments (mainly in the Middle East), are under contract and scheduled for delivery over the next eight years. We are putting together a list and timetable of what is to be delivered to whom. We will assess the immediate impact and use this information in evaluating future requests for sales.

2. Pending Sales. We are now reviewing 17 proposed Foreign Military Sales (FMS) cases worth $2.3 billion which we inherited from the last Administration. We are screening these very carefully and will send to you separately a list of those items which we believe should be considered by you prior to being sent forward for Congressional review. At that time, we will also propose procedures for obtaining your views on future cases. Among the most pressing issues are a number of large proposed sales to the Persian Gulf area. Those requiring notification to the Congress cannot be processed until we have satisfied the SFRC’s resolution requiring an Executive Branch statement of Persian Gulf policy.3

3. Fiscal 1978 Security Assistance Programs. Together with OMB and DOD we have reviewed the past Administration’s proposed request to Congress for FY 1978 funds for grant aid, FMS financing and military training. These are for the most part reasonable and defensible, although we would have formulated it somewhat differently. Given the short time available, we have been able to make only limited changes, and these have centered principally on our human rights concerns. To show that we intend to follow a different policy on this issue, we have proposed to OMB that the grant aid program in Ethiopia be eliminated, that the FMS financing program in Uruguay be eliminated and that the FMS financial program in Argentina be cut.

4. Congress. Members of my staff and I have begun an active campaign to build confidence with members and key staff on the Hill. We will institute a new procedure with respect to Congressional notifications of proposed arms transfers—namely, including a policy justification with each new FMS case. Current practice on these notifications is to report formally only the name of the buyer, the content and price of [Page 635]the proposed sale and the military department handling the contract. Policy explanations are not among the items required by the law and usually are given only selectively and informally.

5. Controlling Promotion of Arms Sales. We are planning to publish shortly in the Federal Register a notice of a proposed regulation which would require State Department approval before an arms manufacturer may undertake efforts to promote the sale of major military hardware overseas. Such a regulation should inhibit efforts by private firms to create appetites for arms in foreign governments.

PLANNING IN PROGRESS

In the context of the PRM which you have ordered we are examining ways of bringing tighter control over US arms exports and encouraging multilateral restraints on the arms trade. Here are some of the ideas under consideration in both areas:

A. Control Over US Arms Exports

(1) We need to increase the flow of early information about proposed sales to all interested agencies and to regularize the criteria for evaluating all major FMS cases. We want to assure that arms control and human rights considerations receive proper early attention on each proposed transaction.

(2) We need to develop better control at the critical points leading to formal arms transfer decisions. Too often decisions are “created” by the activities of arms salesmen, the excesses of some zealous military advisory personnel, and the appetites of foreign leaders, combined with inertia on the part of the Executive in bringing policy considerations to bear at an early stage.

(3) Sales of high technology, sensitive weapons, co-production projects and equipment requiring large numbers of supporting American technicians should receive a more rigorous screening than has been the case in the past.

(4) It is essential to develop good working relations with Congress on these issues, over the longer term, to avoid arbitrary efforts at control, such as moratoria and dollar ceilings. Such approaches tend to appear punitive and could severely harm other US foreign policy interests in some countries or regions.4

(5) We need to take action promptly to establish an interagency mechanism to coordinate security assistance and arms export control activities and to bring the expertise of all concerned agencies to bear on the basic policy decisions.

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B. Efforts to Encourage Multilateral Restraint

(1) Unilateral Restraints. We believe our objective must be to reduce the international traffic in arms, not simply to reduce the US role in that traffic. As we gain credibility through improved policy and procedural control over our own arms exports, we can begin to elicit the cooperation of other nations. This could be a long-term process, because arms exports have great commercial and political importance to our friends.

(2) Informal Multilateral Restraint. When we disapprove a proposed sale because we wish to avoid introducing a new capability or level of technology into a particular region, we can let other suppliers know the reason for our decision and encourage comparable restraint on their part (e.g., intermediate range missiles in the Middle East). In addition, we can use available international fora (CCD, NATO, UN, OAS, etc.) to urge restraint by other suppliers and by recipients. We can also try to identify particular regions where opportunities exist for mutual restraint among arms importing countries and seek to encourage such restraint through diplomatic efforts with those countries. NATO standardization and offsetting procurements by the US from our European allies may be useful incentives in discouraging sales efforts in other regions.

(3) A Conference of Arms Suppliers. With the benefit of experience gained from the Nuclear Suppliers’ Conference,5 we may be able to initiate a similar dialogue among suppliers of conventional arms. Although arms suppliers are a more diverse group with more widely divergent interests, we should make an effort to see what can be achieved by a suppliers’ conference. As first steps, we are identifying the sales practices of various suppliers and considering what issues could usefully be discussed by those participants whose attendance would be required. We shall also have to take into account the predictable resistance from recipients and consider means of involving them in the process.

(4) A Dialogue with the USSR . Requests by foreign countries for sales from the US are often a response to military supply relations between the requesting country’s neighbor and the Soviet Union. The Soviets have experienced difficulties in their arms sales activities which are similar to some of our own problems and it would seem that bilateral discussions could produce worthwhile results on a number of issues (e.g., sales to African countries which might fuel an arms race or [Page 637]produce instability not desired by either side). Yet, we have not previously engaged the Soviets in a dialogue on this subject. We are beginning to plan how bilateral talks could be proposed, the subjects we would like to discuss, and how a US/USSR dialogue could relate to an arms suppliers’ conference. Moving towards discussions with the Soviets will, of course, require careful preparation not only in Washington, but in the capitals of our friends.6

Attachment

Paper Prepared in the Department of State

CASE STUDY OF A FOREIGN MILITARY SALE7

This paper describes the procedures involved in a hypothetical foreign military sales (FMS) case from its inception to its being reported to Congress. There is no typical FMS case; actual cases arise in a variety of ways. For purposes of illustration, therefore, we will follow a hypothetical sale to Iran of the Maverick missile under FMS cash procedures.

Iran possesses a Maverick capable aircraft and is interested in Maverick. This interest is derived from its perceptions of the threat. Interest, however, is stimulated by a representative of a commercial firm and a description of the system in one of the aerospace publications. Initial discussions are carried out with the MAAG and a DOD survey group is sent with State concurrence to review the threat and to determine the feasibility of introducing the new system in the country. During this period the defense manufacturer will seek to maintain interest in the system.

The request for Maverick planning data is received in Washington simultaneously by Defense and State. The US Air Force takes the survey team results, reviews the military justification, and determines whether the sale will impact on US military requirements. Air Force will then consult with the US supplier to determine when the items can [Page 638]be scheduled for production and the cost. It will also review related costs of training and support of the system.

In State, the Maverick request is reviewed by the Politico-Military Affairs and the Near Eastern and South Asian Affairs Bureaus (PM and NEA) to determine whether sale is consistent with our foreign policy, particularly in the country and region. PM will also obtain the views of the Arms Control and Disarmament Agency (ACDA) regarding the arms control implications of the sale. If existing guidance is inadequate, policy level approval is sought. If there are no policy objections, Iran would receive the information requested.

Assuming Iran is satisfied with the information received, the next step is to request a Letter of Offer, which is a contract outlining the precise terms and conditions of sale including prices and delivery times. It normally takes Defense 60–90 days to prepare an LOA. As soon as reasonable estimates are available, Defense requests State approval to issue an advance notification to Congress. This request is reviewed in State by PM, NEA, ACDA and the Congressional Relations Bureau as well as by the NSC staff. If approved, Defense sends a classified letter to the staff of the House International Relations Committee and Senate Foreign Relations Committee, which has 20 days to review the case. The purpose of this step is to give Congress sufficient time to review major transactions.

If there are no objections to the proposed Maverick sale, State will authorize Defense to proceed with the formal 30 day notification pursuant to Section 36(b) of the Arms Export Control Act and to give an unsigned copy of the LOA to Iran. The LOA cannot be issued by the USG if Congress within 30 days adopts a concurrent resolution stating that it objects to the proposed sale, unless the President states in his certification that an emergency exists which requires such a sale in the national security interests of the US. Congress has never adopted such a resolution. An objection to the Maverick sale would most likely be the subject of negotiations between the Executive and Legislative branches and a compromise reached (as in the case of the actual sale of Mavericks to Saudi Arabia).

After the 30 day review period, the LOA is signed by representatives of Iran and the USG. The case is implemented by the Air Force.

The foregoing process is described in schematic form in the attached chart.8

  1. Source: Carter Library, National Security Affairs, Staff Material, Global Issues, Mathews Subject File, Box 4, Arms Transfers: Policy (General): 2–5/77. Confidential.
  2. See Document 259.
  3. On September 24, 1976, the Senate Foreign Relations Committee passed a resolution “opposing further arms sales to Persian Gulf states pending completion of an overall National Security Council study.” (“Arms Sales to Saudis Set Back,” Washington Post, September 25, 1976, p. A1)
  4. In the left-hand margin next to this paragraph, Carter wrote “We might meet w/ key Congress leaders before final decision.”
  5. The Nuclear Supplier Group, founded in 1974 after India’s successful nuclear test, included the United States, the Soviet Union, the United Kingdom, Canada, the Federal Republic of Germany, France, and Japan. It met several times from 1974–1977 to set guidelines for the export of nuclear material to states which did not possess nuclear weapons.
  6. In the left-hand margin next to this paragraph, Carter wrote “Explore in Cy’s visit to Moscow. Earlier w/ Dobrynin.” In an earlier interview, Vance said that “I do believe that the area of disarmament or arms reduction in the conventional arms area is of critical importance. It is the area where the largest amount of money is spent, and is a very serious and substantial problem. I would expect the discussion of reduction of conventional arms to be on the agenda of items that we might discuss when I go to Moscow at the end of March.” (Documents on Disarmament, 1977, pp. 27–29)
  7. No classification marking. At the bottom of the first page, Carter wrote “Be sure that I’m consulted early in this process.”
  8. Attached but not printed.