Chapter 1

Ways and Means

This chapter decodes the alphabet soup of US weapons sales and military aid programs, providing background on them and on other arms industry buzz words. Pointers for researching each of these programs are included, as well.

 

Weapons made in the USA are sold, leased and given to governments the world over. In 1996, more than 160 of the earth's 190 independent states took delivery of US military equipment or training. To help you effectively intervene against arms sales and the subsidy programs which underwrite them, the different mechanisms used to export American arms are explained here. While this chapter contains tips for gathering data on each of these programs, chapter 7 is wholly dedicated to helping you find information on these issues. Full citations and ordering information for all of the reports listed in this chapter-and throughout this book-can be found here.

Decoder Key

AECA Arms Export Control Act
BXA Bureau of Export Administration
CCL Commerce Control List
DCS Direct Commercial Sales
DELG Defense Export Loan Guarantee
DSAA Defense Security Assistance Agency
DTC Office of Defense Trade Control
EDA Excess Defense Articles
EAA Export Administration Act
EAR Export Administration Regulations
FAA Foreign Assistance Act
FMF Foreign Military Financing
FMS Foreign Military Sales
ITAR International Traffic in Arms Regulations
LOA Letter of Offer and Acceptance
PM Bureau of Political Military Affairs
SAO Security Assistance Organization
USML United States Munitions List

 

The Law

Three principal laws, and two sets of implementing regulations, govern American arms transfers. The Arms Export Control Act (AECA) of 1976 is the primary law establishing procedures on sales and transfers of military equipment and related services. Created by congressional reformers in the aftermath of the Vietnam war and Watergate, this law stipulates the purposes for which weapons may be transferred (self-defense, internal security and UN operations only) and establishes a process by which the executive branch must give Congress advance notice of major sales. The AECA also requires a series of quarterly and annual reports from the Defense and State Departments to Congress on overseas sales activity. These reports are a critical source of information for public interest researchers and activists.

The Office of Defense Trade Controls, located in the State Department's Bureau of Political Military Affairs, develops and updates the International Traffic in Arms Regulations (ITAR) which implement this law and guide the arms trade activities of government bureaucrats and weapons dealers. The ITAR include a listing of all categories of equipment considered "munitions," which are subject to export controls by the State Department. The arms industry continually seeks to move items off of this list, and on to the control list maintained by the Commerce Department (see below), which has a more lax licensing procedure. The ITAR also name those countries which are ineligible to receive American armaments.

The Foreign Assistance Act (FAA) of 1961 is the law of the land on the provision of economic and military assistance to foreign governments. This act establishes that the executive branch and Congress may give funds (either as a grant or as a loan) to foreign governments to purchase newly-manufactured US arms. Generally, the United States provides this type of financing only to close, long-standing military allies, or to governments fighting the production and trafficking of drugs intended for the US market. The authority for the Pentagon and the President to give away-or sell on the cheap-stocks of surplus arms is also found in this law. The FAA includes language barring military aid or arms sales to any country that shows a "gross and consistent" pattern of human rights abuse. Finally, the law bars arms transfers and aid to some specific countries, like Pakistan, for its pursuit of nuclear weapons. Congress has sought in the past few years to rewrite the FAA in light of the end of the cold war, but thus far it has failed to achieve consensus on any substantive revisions.

Barred From Business

The following 24 governments and one insurgent group are currently ineligible to import any American weapons. The State Department imposed these restrictions due to U.N. Security Council-mandated arms embargoes, chronic warfare, a determination that the government sponsors terrorist activity, or some other foreign policy reason.

Source: State Department Embargo Reference Chart (www.pmdtc.org/country.html)

 Afghanistan  Cuba  Nigeria  Vietnam
 UNITA (in Angola)  Cyprus  North Korea  Yemen
 Armenia  Haiti  Rwanda  Yugoslavia (Serbia and Montenegro)
 Azerbaijan  Iran  Somalia  Zaire
 Belarus  Iraq  Sudan  
Burma  Liberia  Syria  
 China  Libya  Tajikistan  

 

The Export Administration Act (EAA) of 1979 governs shipments of dual-use goods-technology and information with both military and civilian applications. Technically, the EAA lapsed in 1994, but it continues to be implemented under emergency powers of the President. The Bureau of Export Administration at the Commerce Department administers this law through the Export Administration Regulations (EAR). These regulations, which govern the sales activities of both Commerce Department personnel and US exporters, function similarly to the ITAR. The EAR contain the Commerce Control List (CCL), which includes technologies useful for the production of ballistic missiles, ingredients which could be used to make chemical weapons, certain computers, shotguns and police equipment. Companies wishing to export these items must obtain an export license from the Commerce Department. Since the end of the cold war, US industries and their allies in Congress and the executive branch have worked to loosen the controls found in the EAR, remove many items from the control list and speed the review process for export licenses. Congress will likely revamp the Export Administration Act soon, further easing restrictions and decreasing oversight on exports of dual-use goods.

Researching the law

While these three laws are permanently on the books, they are tinkered with yearly through legislation passed by Congress. The annual foreign aid and defense authorization and appropriation acts, which set the levels of assistance and weapons procurement for the upcoming fiscal year, often amend the sales programs and financing mechanisms contained in these laws. (Chapter 4 discusses the legislative process in more detail.) Both the Arms Export Control Act and the Foreign Assistance Act, as amended, are published annually by the congressional foreign relations committees. The most recent version of the joint committee print is entitled Legislation on Foreign Relations Through 1997, and it is available for purchase from the Government Printing Office (see p. 110).

Because the laws are always amended, the regulations implementing them are also updated continually. These specific changes are printed in the Federal Register, the daily bulletin of the executive branch, which is available at most libraries and over the Internet. The most up-to-date version of the ITAR and quick links to recent amendments printed in the Federal Register are available on-line at www.pmdtc.org. Information related to the EAR is published at bxa.fedworld.gov. Printed versions of both sets of regulations are also on sale at the GPO. While these volumes are not exactly page-turners, you do not need legal training to understand them-just perseverance.

 

The Process

The five principle (legal) means by which America exports weapons and military services abroad are foreign military sales (FMS), direct commercial sales (DCS), leases of equipment, transfers of excess defense articles (EDA) and emergency drawdowns of weaponry. To get the most accurate picture possible of US weapons exports in a given year-to the whole world or to a particular destination-you must compile transfers made through all of these channels.

Most arms deals begin with contact between a foreign government and a US security assistance organization (SAO)-US military personnel located in diplomatic posts and embassies abroad. SAOs help foreign militaries define their needs, provide them with data on American military equipment and function as the primary in-country point of contact for US weapons contractors. These offices produce annual military assistance assessments, which form the basis of the upcoming year's military aid and arms sales programs. SAO personnel determine which form of transfer best suits the recipient-sale, joint production of the weapon, lease or grant transfer.

 

Government-Negotiated Foreign Military Sales

Foreign governments may purchase new and used weapons and related services directly from the US government. These agreements, negotiated by the Pentagon and known as foreign military sales (FMS), are package deals. In addition to the weapons, the Pentagon usually contracts to deliver the goods, provide training in the operation and maintenance of the weapon, supply spare parts and give performance assurances. The military articles being sold through this program can come from either Pentagon stocks or new production. In the latter case, the Defense Department contracts with U.S. arms manufacturers to actually build the weapons and, in some cases, provide related services. But the Pentagon takes care of all of the paperwork.

An FMS deal is initiated with a request for equipment from the U.S. embassy in the customer country to the "implementing agency"-the Army, Navy, Air Force or the Defense Logistics Agency. Sales of fighter jets that were originally developed by US arms contractors for the USAF, for instance, would be implemented initially by the Air Force's sales agency; similarly, transfers of frigates would be handled by the Navy. Copies of the request are also sent to several relevant government agencies, including the State Department's Bureau of Political Military Affairs, the Defense Security Assistance Agency (DSAA) in the Office of the Secretary of Defense, the Arms Control and Disarmament Agency (ACDA) and the unified military command responsible for the region where the customer country is located.

The State Department, DSAA and ACDA have about one week after receiving copies of the letter of request to determine whether the deal should go forward, be rejected or be put on hold, or whether additional information is needed. If no objection is raised, the implementing agency, in conjunction with the DSAA, begins to prepare the contract for the arms package, known as a letter of offer and acceptance (LOA). But 15-30 days before the Pentagon can offer the LOA to the purchasing government, it must notify Congress of the proposed sale, if the sale is valued at $14 million or more. (For more on this process, see p. 49.)

When measured in dollar volume, the bulk of US weapons transfers occur through this channel. As a result, most official (US government) statistics on arms exports count only FMS, overlooking the other types of transfers listed below.

Researching FMS

Quite a lot is publicly knowable about FMS. The Pentagon publishes press advisories about proposed sales on its Internet site (www.defenselink.mil/news) at the same time that it notifies Congress of its intention to offer a contract to a foreign government. This press release usually discloses the weapon make and model, the principal manufacturer, the quantity to be delivered and the price. A more detailed version of the notice is published a few days later in the Federal Register (also available on-line). This four-page notice includes the official justification for the sale. Several specialty publications and their associated web pages-such as Arms Control Today, Arms Sales Monitor, Arms Trade News and Defense News-also report these sales notifications. Even the mainstream press sometimes reports on congressional notifications of major government-to-government sales. Keep in mind that the preceding sources report on potential sales-not on signed contracts.

To find out how much (in dollar terms) the US government actually contracted to sell and/or delivered to a particular government in each of the preceding ten years consult Foreign Military Sales Facts, published annually by the DSAA. This report also provides aggregated data on FMS from 1950 onward. So, from this source, you can find out that the US government has contracted to sell $284 billion of weapons to countries around the world since 1950. You can also discover (for example) that in fiscal year 1996 the US government sold Thailand more than $500 million of arms.

To find out which specific weapons were delivered to a particular foreign government through FMS in the previous fiscal year, look to a new annual report prepared by the Defense and State Departments known as the "Section 655" report. (Section 655 of the Foreign Assistance Act mandates preparation of the report.) From this document you can learn (for example) that Israel took delivery of 4,698 rifles from the United States in 1996.

If none of these sources fills your particular information need, you can always file a specific request with the Pentagon under the Freedom of Information Act (see p. 112). The Pentagon is usually responsive to requests on FMS, although specific data on quantities of weapons shipped abroad is sometimes withheld (on alleged national security grounds). Quarterly reports from the Pentagon to Congress which are required by the Arms Export Control Act (Sections 25(a) and 36(a)) are another rich source of information. We routinely file FOIA requests for these reports, which cover a variety of arms sales activities.

photo: Department of Defense

As of October1997 the Pentagon had sold 1,720 F-16 "Falcon" fighter jets to air forces around the world through the FMS program.

 

Industry Direct Arms Sales

Direct commercial sales (DCS) are negotiated by US companies and foreign buyers, without the involvement of the Pentagon. These sales must be approved by the State Department's Office of Defense Trade Controls, through the provision of an export license, and they are subject to the same congressional notification procedure as FMS. Most public and policy attention focuses on FMS, since this program is much more visible and has accounted for the majority of US arms exports over the years. But industry-direct shipments surpassed government-negotiated transfers in 1989 and have been valued at several billion dollars annually during the 1990s.

In general, the choice of whether to use the government-to-government channel or to deal directly with the arms manufacturer is up to the purchasing country. The Pentagon is technically neutral about which method foreign governments use to make their purchases, although there are some weapons systems that the Pentagon will not permit the industry to sell directly. The decision about which route to use depends on several variables, including the complexity of the equipment, the savvy and experience of the purchasing government in negotiating complicated procurement contracts, the customer's training and support needs, price, financing and delivery.

The commercial route is usually quicker, sometimes cheaper and always entails less government oversight than do FMS. In addition, the State Department is much less transparent about DCS than the Pentagon is about FMS. Minimal information about price and quantity is classified as "confidential business information" and kept from the public. This secrecy undermines the ability of Congress and the interested press and public to exercise proper oversight on industry-direct arms transfers.

The existence of these two separate programs also makes gaining an accurate count of arms exports in a given year exceedingly difficult. Delivery data for commercial arms exports is gathered from shippers' export documents collected at ports of departure by the US Customs Service and eventually passed along to the State Department. This process is cumbersome and slow, resulting in incomplete or inaccurate tallies of exports. Oftentimes governmental reports on the arms trade omit DCS exports entirely, resulting in a significant undercounting of the U.S. share of the market.

US Market Share, 1989-1996 (all figures in thousands)

Notes: All figures are in current-year dollars, representing the value of weapons delivered in that year. Industry export figures are for fiscal years, while government-negotiated FMS and worldwide totals are for calendar years. *These figures still under-count total US exports by omitting free transfers of surplus weaponry. **This figure will undoubtedly be revised upward in the coming year(s), as export data trickles in. Sources: DSAA, Foreign Military Sales, Foreign Military Construction Sales and Military Assistance Facts as of September 30, 1996, pp. 56-7; Congressional Research Service, Conventional Arms Transfers to Developing Nations, 1989-1996, p. 81.ion

 fiscal year

 US industry arms exports

 US government arms exports

 total US arms exports*

 total world arms exports

 US market share
1989  $8,446,535  $7,478,000  $15,924,535  $45,378,000  35.1%
 1990  $6,215,959  $9,034,000  $15,249,959  $42,734,000  35.7%
 1991  $5,165,782  $9,557,000  $14,722,782  $30,857,000  47.7%
 1992  $2,667,219  $10,669,000  $13,336,219  $27,169,000  49%
 1993  $3,808,085  $11,119,000  $14,927,085  $27,119,000  55%
 1994  $2,098,686  $9,943,000  $12,041,686  $25,043,000  48.1%
 1995  $3,620,117  $12,782,000  $16,402,117  $29,482,000  55.6%
 1996  $705,851**  $13,791,000  $14,496,851  $30,091,000  48.2%
 1989-96  $32,728,233  $84,373,000  $117,101,233  $257,873,000  45.4%

 

Researching DCS

It is much more difficult to obtain information about DCS licensed for export, or actually exported, than it is to track FMS. The State Department currently interprets a provision of the Export Administration Act (Section 12(c)) as prohibiting it from disclosing any information about items which it is licensing for export.

A 1996 act of Congress requires that the State Department publish the notices sent to Capitol Hill of proposed export licenses in the Federal Register, the same as for FMS. The level of detail in these notices, however, is very sparse comparatively. Moreover, the State Department usually delays publishing information on DCS until several weeks after it has notified Congress of the proposed export license. Some specialty publications, like the Arms Sales Monitor, record and publicize these proposed licenses in "real time" when possible.

To find out how many of which types of weapons at what value the State Department licensed for export to a particular country in the preceding year, consult the State Department's annual "Section 655" report. From this document it is possible to determine (for example) that the State Department approved $26.7 billion of munitions exports from US industry to countries around the world in 1996. Using this report, one can figure out how many assault rifles and grenade launchers (for example) were authorized for sale to a particular destination, or to the whole world. This document does not provide any information on actual weapons deliveries, only export approvals.

To determine the dollar value of commercially-negotiated weapons deals actually delivered to a particular country in each of the preceding ten years, see the DSAA's annual report Foreign Military Sales Facts.

Sporadic congressional hearings and internal State Department reports (usually by the office of the Inspector General) provide some additional information on DCS. But if these sources don't give you what you are looking for, you are probably out of luck. In most cases, requests under the Freedom of Information Act on industry-direct sales authorized by the State Department will be unsuccessful, unless you are prepared to file a law suit.

 

Lease to Own

The end of the cold war left the United States with-literally-a surplus army (and navy and air force) of weapons. While the Pentagon usually sells excess arms to foreign governments (through FMS) or gives them away (see below), in recent years it has loaned large quantities of equipment to foreign militaries.

The Arms Export Control Act authorizes the Pentagon to lend weapons out, as long as the Defense Department guarantees that the articles are not required for use by U.S. military or civilian agencies for the duration of the lease. Typical reasons for leasing are to provide a weapon for testing purposes; to allow the Pentagon to respond to an "urgent" foreign requirement while still retaining ownership of the equipment as a hedge against possible future needs; or to provide equipment on the cheap when the recipient cannot afford to purchase the weapons outright. The customer pays a rental charge which equals the depreciation of the equipment during the lease.

Government-negotiated leases are sealed with a contract (called an LOA), the same as government-negotiated sales. The LOA covers costs incurred in upgrading or conditioning the equipment, delivery, training and restoration or replacement if the weapon is damaged. Leases run for a fixed period, capped at five years, but they can be renewed. The US government maintains title for the leased weaponry, and the Defense Department may terminate a lease and require the immediate return of the equipment at any time. The Pentagon must notify Congress of any weapons lease that will run for more than a year, as well as any lease surpassing the $14 million threshold established for notification of FMS and DCS.

The widespread use of leasing also leads to undercounting U.S. arms exports, since dollar-based determinations of the arms trade count only the rent, as opposed to the value of the weapon being transferred. In recent years, the value of weaponry being leased to countries around the world has doubled-from $300 million in 1994 to nearly $700 million in 1996. Since most leases run for several years, it is reasonable to assume that the United States currently has well over one billion dollars worth of lethal equipment on loan to foreign militaries.

Researching leases

The only current source of public information about new lease agreements being proposed by the Pentagon is through the House International Relations Committee's weekly Survey of Activities (available on the Internet at www.house.gov/international_relations). In its regular "Deals in the Works" table, the Arms Sales Monitor publishes additional information about leases obtained from congressional staff, such as duration of the lease and specifics on the equipment being provided.

To find out the value of equipment leased and the rent being charged to individual countries during the preceding year, consult the annual Congressional Presentation for Foreign Operations. This document does not, however, indicate which actual weapons were leased. A Freedom of Information Act request to the Defense Department for documents on leases (to a particular country or to all countries for a particular time period) would probably be successful, but you might have to wait many months for the information.

 

Excess Defense Articles: Everything Must Go!

The Pentagon has been running a giant garage sale throughout the 1990s to unload its large overstock of dated, but still lethal, weapons and spare parts. Not wanting to pay the costs of storing or destroying the surplus, the Department of Defense dispenses most of it for free or at deep reduction through the excess defense articles (EDA) program. The Foreign Assistance Act defines EDA as surplus equipment owned by the US government, but not originally procured for anticipated sale or assistance programs.

Militaries interested in obtaining free EDA must go through a process similar to that for purchasing new weapons under the FMS program. Through the US embassy's security assistance office, the foreign government or organization submits a letter of request to the Pentagon. The application is referred to the Army, Navy, Air Force or Defense Logistics Agency, depending on the type of equipment desired, and the services' sales offices determine if EDA will satisfy the request. By law, the Department of Defense must avoid undercutting U.S. arms companies seeking to sell newly- manufactured equipment. If transfers of surplus weapons are deemed appropriate, the DSAA must give Congress 30 days to consider the export of major items before going forward. Gifts or sales of surplus ships are treated differently; for naval vessels less than 20 years old, Congress must pass a law (usually drafted by the Navy) approving the export sale or grant. These laws usually pass without controversy.

Since 1990, the Pentagon has offered approximately $8 billion of excess military equipment to foreign militaries, including nearly 4,000 heavy tanks, over 500 bombers and more than 300,000 pistols, rifles and machine guns. Free shipments of surplus arms are regularly omitted from official statistics on the overall value of U.S. arms exports. Even when surplus arms are included, the value ascribed to them is often heavily discounted, thereby further undercounting total levels of US arms transfers. One government investigation found that EDA sold through the FMS program are routinely priced at 5-50 percent of their original acquisition cost.

In 1996 the executive branch authorized over $525.8 million of grant EDA transfers. Due to a law passed by Congress during the same year, beginning in 1997 the government will be limited to giving away no more than $350 million of surplus arms annually. This cap is counted in terms of the current value ascribed to the equipment, which-as stated-is often unrealistically low.

Originally, only the poorer members of the NATO alliance were cleared to receive EDA, but following the 1991 Gulf war, many Middle Eastern and North African states were added; the "Partnership for Peace" program made most Central and Eastern European governments eligible for free surplus arms; and South American and Caribbean countries were authorized for free weaponry as part of counter-narcotics efforts.

Among the leading recipients of free weapons through this program in 1996 were Mexico, Colombia, Peru, Egypt, Israel, Jordan, Bahrain and Turkey-all countries where serious political repression and/or human rights violations were reported.

Researching EDA

Because of concern by the arms industry that these giveaways might cut into their business, the Pentagon has been more transparent about EDA than any other export program. In 1993, the Defense Department set up a computerized bulletin board on excess weapons sales and freebies, open to the public. Through this system, anyone with a computer and modem can find out exactly what the Defense Department has offered to give to a particular country during fiscal years 1992-98. The database includes information on deliveries of the equipment in some cases.

Unfortunately, the archaic EDA bulletin board technology was rendered obsolete by the Internet. As a result, the Pentagon has been lax about keeping it up-to-date and operational. Nevertheless, to access the bulletin board, go into your communications software and dial 703/604-6470 instead of your normal Internet provider. The bulletin board will ask you for the user's name. If you are a first time user, call 703/604-6615 to establish a new log-in name and password. In the near future (1999), the Pentagon's Internet site (www.defenselink.mil/news) will host an EDA homepage containing this same information.

Meanwhile, the House International Relations Committee's weekly Survey of Activities provides another source of timely information on EDA authorizations (www.house.gov/international_relations). Each week's bulletin includes a listing of EDA notifications Congress has received from the Defense Department in the preceding week.

To find out how much (in dollar terms) excess weaponry the United States actually shipped to a particular country in the preceding year, consult the Congressional Presentation Document. This report provides the value of surplus equipment offered and the value of that actually accepted by each country. To find out which specific equipment was offered to each country in the preceding year, look in the State Department's "Section 655" report.

 

Drawing on Pentagon Stocks for 'Emergencies'

In a pinch, the executive branch may also provide military equipment, services or training from Department of Defense, State, Treasury and Justice stocks on a grant basis to meet emergencies that it cannot meet through other aid channels. The FAA authorizes the President to "drawdown" up to $100 million of defense articles or services from the Pentagon for "unforseen emergencies." Another $150 million may be drawn from US weapons stocks to aid counter- narcotics efforts in Latin America, disaster relief in Asia and Africa and UN peacekeeping operations throughout the world. Much of the equipment transferred under this authority is non-lethal (like tents, blankets, radios, uniforms, food or medicine), and only half may come from Defense Department resources. In recent years, though, quite a bit of lethal combat equipment has been shipped for free under this authority.

A recent transfer included $100 million in tanks, personnel carriers, rifles, machine guns, ammunition and communications equipment to Bosnia-Herzegovina. Similar types and amounts of equipment have also been drawndown for Jordan. Israel, Mexico and Colombia each have received military helicopters through this back-door program.

Researching drawdowns

Each time the President taps into the drawdown account, the White House publishes a notice in the Federal Register. Typically this notification simply tells which country or countries are to receive equipment, why (the nature of the emergency) and the value of equipment authorized to be exported. On some occasions these blurbs also list out specific types of equipment being shipped. Sections 506 and 552 of the Foreign Assistance Act, which authorize drawdowns, compile in one place all of the Presidential notifications to Congress of emergency transfers during the previous year. Each volume of Legislation on Foreign Relations, published by the foreign relations committees of Congress, prints this information for the preceding year (that is, look in the 1991 volume to find out which countries were authorized to receive an emergency shipment of arms in 1990). To find out which specific items were approved for transfer to a particular country (or to all countries) during the preceding year, look in the "Section 655" report.

 

How Would You Like to Pay for That?

There are several ways to finance arms deals, including direct grants or loans through the foreign military financing (FMF) program, fungible cash transfers through the economic support fund (ESF), grant aid for international military education and training (IMET) and assistance related to the war on drugs. If these aid programs fall short, customers can use commercial loan guarantee programs and/or barter.

Foreign military financing refers to congressionally appropriated funds (in the form of grants and loans), given to foreign governments to finance the purchase of American-made weapons, services and training through either FMS or DCS. Since 1950, the US government has provided over $91 billion in FMF to militaries around the world. During the cold war, this aid was directed toward three principal goals: building up the militaries of the poorer members of the NATO alliance, countering Soviet military influence in the developing world and rewarding Israel and Egypt for making a cold peace in 1979.

The majority of FMF is in the form of outright grants, which in 1998 will total $3.2 billion. This military assistance primarily benefits Israel and Egypt, which receive $1.8 and $1.3 billion, respectively, in FMF annually as a reward for their peace effort at Camp David almost twenty years ago. Since 1980, successive American administrations have given Israel nearly $28 billion and Egypt over $19 billion in grant FMF to purchase US-made weaponry. (Israel is allowed to spend $475 million of its annual allotment to purchase weaponry made by its own industry.) Jordan has recently been added to the regular recipient list, also in return for making peace with Israel.

In addition to grant FMF, Congress appropriates money to the Pentagon to underwrite loans to foreign militaries for the purchase of American arms. Until the early 1980s, almost all FMF was provided in the form of loans, rather than grants. But many U.S. allies became mired in military debt, so the Reagan administration shifted to providing the bulk of FMF in grants. In addition, many of the previously made "loans" were effectively converted to grants, to reward key allies and ease their debt burden. In 1990, for example, the US government "forgave" more than $7 billion in weapons loans owed by Egypt (in the lead up to the Gulf war). Several years later, the Clinton administration zeroed out $400 million of Jordan's military debt. In other cases, the Pentagon has written off loans when the recipient country broke down into total warfare and chaos (as in Liberia and Somalia). As of October 1997, the Pentagon had $13.2 billion of loans outstanding, with several countries nearly $900 million in arrears.

Throughout the 1990s, Greece and Turkey have been the principal recipients of new FMF loans for arms. In 1998, though, the administration ended the FMF program for these two countries. In their place, with the development of NATO's "Partnership for Peace" and the planned expansion of the alliance, former Warsaw Pact and Soviet states are now receiving both security grants and loans for weapons purchases and military training.

Financing Foreign Militaries

In November 1997, Congress passed into law the foreign aid appropriations act for fiscal year 1998 (H.R.2159). The law appropriated $3.2 billion in grant military aid and $60 million to underwrite $657 million of military loans. Congress directed the money to be allocated as follows:

Source: H.R.2159

 Egypt  $1,300,000,000
 Israel  $1,800,000,000
 Jordan  $75,000,000
 Baltics  $18,300,000
 Poland, Hungary and Czech Republic  $50,000,000
 Greece  (loan) $105,000,000
 Turkey  (loan) $150,000,000
 administrative costs  $23,250,000

 

Researching FMF

The annual foreign aid appropriations act, passed by Congress, sets the overall level of FMF and "earmarks" certain amounts for certain countries (principally Egypt, Israel, Greece and Turkey). This legislation is easy to obtain, either in electronic form via the Internet (search for it at thomas.loc.gov or at www.house.gov/appropriations) or in published version from the House documents room.

To research past or cumulative FMF levels to a particular country, region or the whole world, consult Foreign Military Sales Facts. The most recently-published volume covers each of the ten preceding years. Prior volumes can be used to research earlier time spans. In addition, the Congressional Presentation for Foreign Operations (prepared annually by the State Department for Congress, with a limited quantity available to the public) includes a detailed description of, and justification for, the administration's FMF request for the coming fiscal year. This document provides the basis for Congress' foreign aid funding bills. It also shows dollar amounts of military aid actually allocated in the preceding couple of years.

Section 25(a) of the Arms Export Control Act requires the Pentagon to submit to Congress an annual report on outstanding weapons loans. You can request this report, as well as other specific information, from the Defense Department under the Freedom of Information Act.

 

Cash Transfers

Congress established the economic support fund (ESF) to promote economic and political stability in strategically important regions where the United States has special security interests. The funds are provided on a grant basis and are available for a variety of economic purposes, like infrastructure and development projects. Historically, these are untargeted cash transfers, not designated for any particular purpose. Although not intended for military expenditure, money is fungible, and these grants allow the recipient government to free up its own money for military programs. Moreover, ESF grants to Israel-at $1.2 billion annually-are explicitly provided to allow repayment of Israel's military debt to the United States. And Egypt's annual dole of $815 million is tied to Israel's aid, again because of the Camp David peace agreement. Other leading recipients of ESF-although paling in comparison to Egypt and Israel's haul-have been Cambodia, Haiti, Palestine and Turkey. Congress appropriated $2.4 billion in ESF for 1998, roughly the same amount as in the preceding couple of years.

Researching ESF

As with FMF, the administration's request and justification for ESF levels is submitted to Congress in the Congressional Presentation for Foreign Operations, which contains the most detailed information available. Using this request as a starting point, Congress determines the overall level of funding for this program in the annual foreign aid appropriations act. Again as with FMF, the House and Senate often "earmark" certain levels of funding for certain countries.

 

Military Training

For each of the last several years, the administration has requested, and Congress has approved, nearly $50 million in grant assistance to provide professional education in military management and technical training on US weapons systems to foreign military personnel. In fiscal year 1998, 123 governments are slated to receive international military education and training (IMET) grants.

Over 2,000 courses are offered, including some on human rights and civil-military relations. This program is said by its proponents to promote positive military- to-military contacts, thereby familiarizing foreign officers with "US values and democratic processes."

But IMET grants also serve a clear-cut marketing function. Testifying before Congress in 1994, then-Assistant Secretary of State for Inter-American Affairs Alexander Watson gave the usual rationales for the military training programs: they promote American values, build relationships, provide access to future leaders... But he candidly added, "they bring certain economic benefits for the United States as well; they give Latin and Caribbean officials experience using American hardware, and thus can influence their future procurement decisions."

There are several other military training programs which are funded out of the Department of Defense Operations and Maintenance budget. Some of these training programs are part of US counter-narcotics programs, and some are considered "peacekeeping" training.

Leading Recipients of US Military Training, 1998

Source: Cong. Presentation for Foreign Operations for FY 1998, pp. 123-6. All totals are estimates

 Colombia  $900,000
 Egypt  $1,050,000
 Hungary  $1,500,000
 Indonesia  $800,000
 Jordan  $1,700,000
 Mexico  $1,000,000
 Philippines  $1,350,000
 Poland  $1,500,000
 Russia  $850,000
 Senegal  $675,000
 Thailand  $1,600,000
 Tunisia  $900,000
 Turkey  $1,500,000

 

Researching training

The State Department's Congressional Presentation for Foreign Operations, which contains past, present and projected future levels of IMET funding as well as the number of students taught per country is the best source of information on that program. Foreign Military Sales Facts also contains information on the dollar amount of IMET provided and the number of foreign military students trained, by country, for each of the preceding ten years.

Through its annual appropriations acts, Congress often sets some programmatic limits on the grant military training program, including which countries may receive IMET funds. The General Accounting Office-Congress' investigative arm-has evaluated the IMET program several times in the 1990s, publishing many relevant reports.

It is much more difficult to obtain information on other Pentagon-funded military training programs, as the Department of Defense is not currently required to report to Congress on all of its training activities. You can request information from the Special Operations Forces under the Freedom of Information Act.

 

Counter-Drug Aid

Through International Narcotics Control programs, the US government provides funds for military equipment and training to overseas police and armed forces to combat the production and trafficking of illegal drugs. Resources-appropriated by Congress and administered by the Department of State's Bureau of International Narcotics and Law Enforcement Affairs-fund anti-narcotics programs worldwide, but primary emphasis is on Latin America and the Caribbean. In recent years, human rights abuses by military and police units receiving this aid have intensified criticism of the program. As a result, Congress has passed some substantive restrictions on its distribution.

These funds are generally dedicated to the export of firearms and the refurbishment of surveillance aircraft, transport planes and helicopters. In 1998, Congress approved $230 million of counter-drug military aid through this program. Additional counter-narcotics training and equipment is provided by the Department of Defense, the Drug Enforcement Agency and other agencies.

Researching drug aid

The Congressional Presentation for Foreign Operations is the place to start. This document will provide you with the amount of aid requested, program descriptions and policy explanations for each country. Also useful, the State Department's Bureau of International Narcotics and Law Enforcement Affairs provides financial, program and other details via the Internet (www.state.gov/www/global/narcotics_law/index.html). Available at that web site is the International Narcotics Control Strategy Report, released annually, with regional and country profiles.

Military Aid for Narcotics Control Requested Levels for 1998

Source: Congressional Presentation for Foreign Operations for FY 1998.

Latin America/Caribbean

$150,600,000

Interregional Aviation Support

$21,000,000

Law Enforcement, Other Training

$11,500,000

International Organizations

$11,500,000

Asia/Near East

$7,500,000

Program Development, Support

$6,500,000

Europe/Former Soviet

$4,400,000

 

Defense Export Loan Guarantees

In 1995-96, Congress created the Defense Export Loan Guarantee (DELG) program, through which the Pentagon can guarantee up to $15 billion of commercial bank loans for approved customers to purchase or lease US weapons or services. The loan guarantees may be used for either government-to-government (FMS) or industry direct arms sales (DCS). The guarantees mean that the US government (read taxpayers) are responsible for payment of the loan principal and interest in case of default. Countries eligible for the program include NATO members, major non-NATO allies (such as Israel, Egypt, South Korea and Argentina), most countries in Southeast Asia and the new democracies of Central Europe.

Meanwhile, as noted above, many Defense Department loans made for weapons purchases during the 1970s and 1980s have gone bad in recent years. Since 1990, the Pentagon and White House have written off-or "forgiven"-nearly $10 billion of military debt. Some safeguards were built into this program to protect taxpayers. For instance, the DELG program is not currently subsidized with appropriated funds; the borrowing country must pay a required "exposure" fee, as well as an administrative fee to fund the operation of the program. The arms lobby is trying to change this, however, by obtaining public funds to cover the risk insurance.

As of May 1998, only Romania had received a loan guarantee under the DELG program (for approximately $17 million), but applications for over $500 million of loans were filed in the first quarter of fiscal year 1998.

 "will there be any need to check my credit history?"

Researching the DELG

To find out which governments are using the program to finance weapons purchases, check out the quarterly reports on the DELG website at www.acq.osd.mil/icp/delg/defexploan.htm. Alternatively, you can write or phone the Acquisitions Office in the Office of the Secretary of Defense (703/697-2685) to request copies of the reports.

 

Export-Import Bank Financing

The DELG is meant to mirror the US Export-Import Bank, which provides loans and loan guarantees to foreign governments to underwrite major purchases of principally non-military, American-made goods. Generally speaking, sales of weapons are prohibited from receiving Ex-Im Bank financing, since previous Ex-Im Bank loans for arms resulted in a high number of defaults and arrearage in the 1960s and 1970s. In recent years, though, an exception has been made for sales of "dual use" products-those with both military and civilian utility-but which will be used primarily by the importing government for civilian purposes. The Ex-Im Bank may use up to ten percent of its resources to finance such sales, including military equipment used for drug interdiction, radar/air traffic control equipment and surveillance satellites used to monitor natural resources. In the past three years, the Ex-Im Bank has financed dual-use military purchases by Romania, Turkey, Chile, Indonesia and the Bahamas.

Researching Ex-Im Bank loans

To find out which governments are using the Ex-Im Bank to finance military purchases, check out the organization's website at www.exim.gov, where you can find minutes and decisions of weekly meetings of the loan and financing board. These briefs disclose the destination country, the product, cost and other pertinent information for loans and loan guarantees approved.

 

Offsetting Deals

Offsets are the side deals cut between the weapons manufacturer and the purchasing government as part of an arms sale (either FMS or DCS). They are both a marketing tool-a way of sweetening the deal to entice the customer to buy, and also a financing tool-a means of making the deal affordable to the customer. In today's market, where buyers have the leverage, arms customers are demanding higher and higher levels of offsets, and sellers are complying. (Other terms which are often synonymous with "offset" are coproduction, barter and countertrade.)

Offsets are sometimes directly related to the weapon being sold (for instance, production of components or final assembly of the weapon in the buying country), or they may take the form of investment in unrelated industries or marketing of unrelated goods and services in the United States or elsewhere (in direct competition with US providers of the same goods or services). For example, in order to make a sale of F-16 fighter jets to Turkey, Lockheed Martin helped create an arms industry in Turkey to produce the F-16 locally. This and similar deals obviously impact American workers, but they also have security implications: Turkey now produces and exports weapons to other countries, sometimes to governments the United States will not sell arms to.

There is rising concern among the knowledgeable public, government and media about the effect of these side deals on domestic industries and employment. Offsets are not a government sponsored program, per se, but the US government does not currently hinder corporations from using them liberally or require that information about offset deals be made public, so that their impact can be more fully monitored.

Researching offsets

Currently, the only sources of information on offsets are the military and business press, which frequently report on the terms of arms sales, and the Bureau of Export Administration at the Commerce Department, which publishes an annual survey called Offsets in Defense Trade. To order a coy of the report, phone BXA at 202/482-4060.