Foreign Relations of the United States, 1981–1988, Volume XXIV, North Africa

246. Memorandum From James Stark of the National Security Council Staff to the President’s Assistant for National Security Affairs (McFarlane)¹

Washington, August 5, 1985

SUBJECT

• FMS Reapportionment for Morocco

State and Defense have proposed reallocating to Morocco $5 million in FMS originally approved for Lebanon (Tab I). These are FY85 funds which Lebanon cannot use and does not need, since it already has a backlog of $20 million in old FMS credits. This reallocation is unrelated to the $18 million in Lebanese ESF which was the target of an earlier raid.

Normally, such a reallocation would be handled between State and Defense with no NSC involvement. However, because of the sensitivity of our relations with Morocco, they are requesting your approval.

Without going back for Congressional approval, FMS can only be reallocated to countries which did not receive full funding for that year’s FMS request. The table at Tab II² lists these countries and shows the size of the underfunding for FY85. Note that the Lebanese FMS can be reallocated at either Treasury (commercial) rates or concessional rates (about 5 percent), depending upon the nature of the underfunding.

Of the thirteen eligible countries, three—Guatemala, the Philippines, and Turkey—are ineligible due to legislative restrictions. Congress has specifically forbidden any additional FMS funds for Guatemala and the Philippines. Any reallocation to Turkey would automatically entail additional funds for Greece to conform to the 7:10 ratio. Since Greek FMS was fully funded, this move would require Congressional approval.

There are several reasons why each of the remaining countries are not good candidates for the $5 million reallocation. Some—Dominican Republic, Peru, and Panama—have serious debt problems and would have trouble repaying a loan even at concessional rates. Others—Indonesia and Malaysia—would be unlikely to process the necessary paperwork prior to the end of the fiscal year. Oman and Malaysia already have unused FMS credits they can draw on, while Thailand could only receive $2 million of the available funds. Tab II reviews the specific rationale for each country.

Moroccan FMS was underfunded by $7 million in FY85. Unlike most countries, the U.S. has identified for Morocco a specific FMS/MAP funding level needed just to maintain its existing equipment. That level was requested, but not fully funded, in the FY85 CPD. Thus, shifting funds to Morocco would only slow the deterioration of their material readiness, but would not support purchase of new end items. The Moroccan Ambassador has authority to locally sign a credit agreement which would assure action prior to the end of the fiscal year.

The argument against reallocation to Morocco centers on Hassan’s ties to Libya. Withholding these funds could be used to reinforce our other negative signals to King Hassan over Oujda. But such a move would also hurt the military—one of the primary supporters of stability in the country. While a shift of funds to Morocco is not unambiguously positive, I believe that in this case the pros outweigh the cons.

OMB and Treasury also support reallocating these funds to Morocco.

Don Fortier and Howard Teicher concur.

RECOMMENDATION

That you authorize me to inform DoD and State that NSC interposes no objection to the proposed reallocation to Morocco.³

Tab I

Paper Prepared in the National Security Council⁴

Washington, undated

PROPOSED REAPPORTIONMENT OF $5 MILLION IN FMS FROM LEBANON TO MOROCCO

The Departments of State and Defense, with the concurrence of OMB and Treasury, wish to reapportion $5.0 million in FMS credits from Lebanon to Morocco. Other alternatives—countries with allocations below the FY 1985 CPD level—have been studied. (Please see attached.)⁵ However, it is believed that reallocation of the funds to Morocco would be the most effective course.

OMB has informed State that it will not apportion $5 million in FY 1985 FMS credits programmed for Lebanon. The reallocation would have no negative programmatic impact on Lebanon. The Lebanese would still have over $20 million in old FMS credits that are available to them after this $5 million is moved to Morocco.

The reallocation of the $5 million in FMS credits will have no effect on the remaining $20 million plus in unused FMS credits available to Lebanon, or on Lebanon’s remaining ESF. (These credits have no relationship whatsoever with the no year ESF funds provided to Lebanon by the U.S. Congress in the FY 1983 Lebanon supplemental.) We anticipate no adverse Congressional reaction to this routine reallocation of funds.

There are sound programmatic reasons for such a reallocation to Morocco. DSAA estimates a Moroccan program sustainment level of $58 million for FY 85. The present MAP/FMS allocation is $48 million. This reallocation would have a beneficial effect on U.S.-Moroccan relations, particularly in light of the recently concluded JMC meeting.⁶

Since Morocco’s funding level of $3 million in FMS credits is currently below its FY 85 FMSCR request level of $10 million, no reprogramming or reallocation notification to the Congress would be necessary. In addition, we do not believe that this extra $5 million at concessional rates would have a significant adverse impact on Morocco’s debt situation.

We would like to proceed with this reallocation as soon as possible. Our past experience indicates that it usually takes Morocco about two months to sign up for a new loan.

1. Source: Reagan Library, Near East and South Asia Affairs Directorate, Morocco 1985 (08/05/1985–09/30/1985). Confidential. Sent for action. A stamp at the top of the memorandum reads: “RCM HAS SEEN.” An unknown hand wrote “TEICHER” underneath the stamp.
2. Tab II, a table listing countries eligible for reapportionment, is attached but not printed.
3. McFarlane approved the recommendation.
4. Confidential.
5. See footnote 2 above.
6. The JMC was held in Washington July 27–31.