Office of the Historian

322. Memorandum From David Wigg of the National Security Council Staff to the President’s Assistant for National Security Affairs (McFarlane)1

Washington, September 25, 1984

SUBJECT

  • Can We Develop More Effective Ways to Fund U.S. “Policy-Sensitive” Exports, to Better Focus Financial Assistance to Friends and to Better Administer Aggregate Financial Assistance Abroad?

The frustrations of dealing with Eximbank, AID, State, OMB, Treasury, etc., in attempting to gain various types of financial assistance for key allies—particularly in cases involving support to broader, critical foreign policy objectives—are known to all of us. Indeed, even the President expressed his frustration with the process when, after approving the recent $50 million aid package for Honduras, he wrote: “there must be a less painful way to help our friends.”2 The President’s comment could serve as an imprimatur for us to attempt to streamline and sensitize our aid and export-financing operations, to provide better, more timely support as an often critical element of U.S. foreign policy.

Our time-consuming efforts to broker such matters in the SIG–IEP, the endless parrying with Treasury, and the recent formation of the Ad [Page 790] Hoc Group chaired by Bill Schneider,3 are all merely ‘‘band-aid’’ palliatives serving to help us limp along from crisis to crisis.

Make no mistake, poor economic conditions in a great many LDC’s—including a number of our allied “front-line” states—will continue to serve as a focus of socioeconomic/political crisis for the remainder of this decade and perhaps much longer. We can ill-afford the often misdirected, wrenching, time-consuming process of “breaking loose” funding if we are to keep friendly democracies from foundering, compete head-to-head with Soviet/Cuban assistance and compete with other OECD export credit programs. As indicated in Walt Raymond’s recent memo to you, Grenada serves as an example of AID incompetence and delay in a country that is virtually under a global microscope.4 Unfortunately, many other LDC governments are forming impressions of U.S. actions and follow-through on financial and economic assistance to Grenada.

Recent examples of Eximbank actions inimical to U.S. policy interests are numerous, including the Bank’s general lack of interest in Central America, resistance to finance Iraqi oil pipeline projects, Exim’s decision to fund Gulf-Angola over the objections of the NSC, and “stone-walling” the foreign policy community on Egypt’s planned El Dabaa nuclear plant. These problems extend to CCC and PL–480 programs, Treasury’s ESF bridging loans and occasionally even FMS.

I suggest we undertake, over the next few months, an internal NSC analysis of existing aid/credit programs, the related budgetary approval process and consideration of possible alternatives, as a first step toward developing more flexible, responsive programs consistent with the President’s foreign policy goals (e.g. reestablishing overall lending priorities as determined by the President to dovetail with foreign policy considerations, smoothing the process of resource allocation, reform/restructuring of Eximbank, streamlining AID, etc.). This preliminary effort might then serve as a basis for an NSSD launching a full-scale intergovernmental study to be completed by mid-1985.

Considering the importance of aid/credit decisions in U.S. foreign policy, one key goal should be to implement an NSC-controlled computerized system to track all pending international financial considerations within the U.S. government on a daily basis, and to influence deliberations to the extent necessary to ensure maximal timely support to U.S. foreign policy goals as determined by the President.

Messrs. Don Fortier, Constantine Menges, Bill Martin, Walt Raymond, Oliver North, Roger Robinson, Jackie Tillman and Raymond Burghardt concur.

[Page 791]

RECOMMENDATION

That you agree with our assessment that more effective ways must be found to administer U.S. international financial assistance/credit programs and approve of the informal study to be undertaken by the International Economic Affairs Directorate of existing aid/credit programs, the related budgetary approval process and consideration of possible alternatives.5

  1. Source: Reagan Library, Roger Robinson Files, Subject File, SIG–IEP Meetings 03/01/1985–03/08/1985; NLR–487–6–21–6–6. Confidential. Sent for action.↩
  2. Reference not found.↩
  3. See Document 173.↩
  4. Memorandum not found.↩
  5. McFarlane initialed his approval of the recommendation.↩