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

296. Summary of Conclusions of a Policy Review Committee Meeting¹

Washington, September 20, 1979, 4:30–6 p.m.

SUBJECT

• Egyptian Military Supply Relationship (U)

PARTICIPANTS

• State

  • David Newsom (chairman) Under Secretary for Political Affairs
  • Lucy Benson, Under Secretary for Security Assistance, Science and Technology
  • Harold Saunders, Assistant Secretary, Bureau of Near Eastern and South Asian Affairs

• OSD

  • Secretary Harold Brown
  • Graham Claytor, Deputy Secretary
  • David McGiffert, Assistant Secretary, International Security Affs.
  • Robert Murray, Deputy Assistant Secretary, Near Eastern African, and South Asian Affairs

• JCS

  • Lt. General John Pustay, Assistant to the Chairman

• DCI

  • Admiral Stansfield Turner
  • Robert Ames, NIO for Near East and South Asia

• OMB

  • John White, Deputy Director
  • Bowman Cutter, Executive Associate Director for the Budget

• ACDA

  • Spurgeon Keeny, Deputy Director
  • Barry Blechman, Assistant Director, Weapons Evaluation and Control Bureau

• White House

  • David Aaron

• NSC

  • Robert Hunter
  • Gary Sick
  • Robert Kimmitt

The PRC recommended (with OMB to comment separately²) that a U.S. delegation resume talks with the Egyptians in early November. This delegation should be authorized to discuss a five-year U.S.-Egyptian military supply relationship based on a proposed level of U.S. support as follows:

1. $350 million of additional credits in FY 81.

2. Cash flow financing of the Egyptian program.

3. $800 million in credits per year for five years (FY 82–FY 86).

4. Approval in principle to sell F–16 aircraft and M60A3 tanks. (S)

Discussion

Secretary Brown reported to the PRC on the results of the high-level delegation³ which visited Egypt in mid-August for discussions with the Egyptian military leadership, and on subsequent discussions he had conducted with Vice President Mubarak in Washington.⁴ It was his judgment that Egypt has very substantial legitimate security needs. Given the withdrawal of Arab financial support from Egypt, the fact that Sadat has in effect burned his bridges by turning to us, and our own political commitment to Egypt as part of the on-going peace process, he saw no alternative to the United States accepting a major program of support for Egypt for some time to come. This analysis was endorsed fully by the Department of State, the JCS, and the NSC. Admiral Turner added that, without substantial U.S. support, Sadat might be in trouble domestically. (S)

Secretary Brown noted that Egypt was previously reported to be receiving $800 million per year from Arab sources. That funding was assumed to be available when we proposed the $1.5 billion, three-year “Peace Package” for Egypt.⁵ Although Egypt has requested at least $8 billion of military equipment, our own analysis of Egypt’s security needs indicates that it requires a military program of about $4 billion through FY 86. He proposed that the United States consider a program of FMS credits over a five-year period (FY 82 through FY 86) of $800 million per year. He also noted that some additional assistance would be required before FY 82 in order to permit Egypt to begin working out its military priorities and to begin placing orders. Otherwise, there would be no tangible progress on the Egyptian program during the next two critical years. He proposed that this be accomplished in two ways:

—That we agree to finance the Egyptian program on a “cash flow” basis. This procedure, which is now used with Israel and Jordan, permits available credits to be used to cover actual expenses in a year, with the implicit understanding that additional credits will be available in future years. (The Egyptian program is now handled on a “full funding” basis in which credits are set aside from the start to cover the entire cost of a program.) By shifting to the cash flow basis, some of Egypt’s credits under the $1.5 billion “Peace Package” would be freed to cover start-up costs on additional programs.

—That an additional $350 million in credits be added to the FY 81 budget. This additional increment, plus cash flow funding, would smooth out the two-year gap until additional funds became available in FY 82. If this course of action were adopted, we would have to explain to Congress that the withdrawal of Arab support from Egypt required us to request additional funds before the end of the three-year period previously anticipated for the “Peace Package.” It would also provide leverage for Israel to request an increase in its own funding level. (S)

All agencies except OMB agreed that this level of funding was consistent with Egypt’s needs. OMB representatives stated that they would want to take a much closer look at the concept of cash flow funding. OMB indicated that they would submit their comments on this and the budgetary implications of this very large proposal to the President separately since they had not had time to study it sufficiently. (S)

OMB questioned the need to seek a decision on this issue now, rather than during the regular budget review process in December. Secretary Brown noted that we had promised General Ali to resume talks in early November. At that time we would have to be able to provide some indication of the size of the program we were prepared to offer. It was also noted that the proposed sums—although very large—required an appropriation of only ten percent of the total amount as a credit guarantee. (S)

The PRC reviewed the list of items which Egypt has requested. All agreed that we could not support its request to purchase F–15 aircraft at this time. However, all agencies, including ACDA, supported the OSD/JCS proposal that we indicate our willingness in principle to sell F–16 aircraft and M60A3 tanks to Egypt. Other items on the list, e.g. APCs, air defense, ships, etc., did not pose a significant problem in terms of arms transfer policy. The exact number, mix, and timing of any purchases would have to be worked out with Egypt. This program would not permit Egypt to purchase as much as they had requested, and further negotiations would be required to permit them to work out their own priorities. (S)

All agreed that consultations should be undertaken with the Congress as soon as possible after the President had had the opportunity to review the PRC recommendation and take a decision. We would probably wish to inform President Sadat personally of the President’s decision at approximately the time we begin consultations on the Hill, but we should avoid leaks coming from Egypt before the Hill had been informed. (S)

1. Source: Carter Library, Brzezinski Donated Material, Subject File, Box 25, (Meetings—PRC 123; 9/20/79). Secret. The meeting took place in the White House Situation Room.
2. See footnote 4, Document 298.
3. See footnote 4, Document 274.
4. See footnote 5, Document 293.
5. See Document 212.