FOREIGN ASSISTANCE ACT OF 1973

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP75B00380R000600170005-7
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 92
• Document Creation Date: December 9, 2016
• Document Release Date: August 24, 2001
• Sequence Number: 5
• Publication Date: February 22, 1973
• Content Type: OPEN

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FOREIGN ASSISTANCE ACT OF 1973
HEARING
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
NINETY-THIRD CONGRESS
S. 837
TO AMEND THE FOREIGN ASSISTANCE ACT OF 1961,
AND FOR OTHER PURPOSES
U.S. GOVERNMENT PRINTING OFFICE
90-989 WASHINGTON : 1973
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t',OMMITTE +; ON FOREIGN RELATIONS
J. W. FULBRIGHT, Arkansas, Chairman
JOHN SPARKMAN, Alabama GEORGE D. AIKEN, Vermont
MIKE MANt.F(ELD, Montana
FRANK CHURCH, Idaho
STUART SYAII:NGTON, Missouri
CLAIBORNE FELL, Rhode Island
GALE W. McGEE, Wyoming
EDMUND S, MUSKIE, Maine
GEORGE S. McGOVERN, South Di.kota
HUBERT If HUMPHREY, Minnesota
CLIFFORD P. CASE, New Jersey
TACOB K. JAVITS, New York
HUGH SCOTT, Pennsylvania
JAMES B. PEARSON, Kansas
CHARLES H. PERCY, Illinois
ROBERT P. GRIFFIN, Michigan
CAI L MARCY, Chief of Staff
ARTHUR M. KUIIL, Chief Clerk
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CONTENTS
Statements by :
Kahin, George, Professor, Cornell University, Friends Committee on Page
National Legislation ---------------------------------------- --- 74
Luce, Don, Director, Indochina Mobile Education Project, Washing-
ton, D.C------------------------------------------------------- 82
Tarr, Hon. Curtis W., Under Secretary of State for Security Assist-
ance, accompanied by Robert N. Nooter, Assistant Administrator,
Agency for International Development, and Vice Admiral Ray Peet,
Director, Defense Security Assistance Agency, Department of
Defense ------------------------------------------------------- 3
Insertions for the record:
Text of S. 837, 93d Cong., first session ----------------------------- 1
Prepared statement of IIon. Robert II. Nooter, Assistant Administra-
tor, Bureau for Supporting Assistance, AID--------------------- tr
Prepared statement of Vice Adm. Ray Peet, USN, Deputy Assistant
Secretary of Defense (International Security Affairs) for Security
Assistance, and Director, Defense Assistance Agency_____________ &
Legal Interpretation Regarding Use of MASP Funds--------------- 24
Classification of Country-by-Country List of Foreign Military
Installations -------------------------------------------------- 25
"Arms to Cambodia and Laos Debated-Pentagon Said to Feel Pacts
Bar Help With the State Department Differing," article by John
W. Finney, the New York Time,, February 3, 1973--------------- 26
"Indochina Arms Loophole?" article by Oswald Johnston, the Wash-
ington Star-News, February 5, 1973_____________________________ 27
"United States Can Give Arms to Laos, Cambodia, State Depart-
ment Insists," article from the Washington Post, February 6, 1973- 28
"Future Military Aid to Laos," letter to the Editor of the New York
Times from Charles W. Maynes, the New York Times, February 15,
1973 ---------------------------------------------------------- 29
"Cambodia's Elite Grows Rich With U.S. Aid," article by Tanury
Arbuckle, the Washington Sunday Star and Daily News, Novem-
ber 26,1972---------------------------------------------------- 30
"Cambodian War Enriches the Corrupt, Debases the Poor," article
by Sydney II. Schanberg, the New York Times, November 30, 1972__ 31
"Aid and Vietnam Future--As the Factions Contend in the South,
Foreign Help Will Be Political Weapons," article by Flora Lewis,
the New York Times, February 15, 1973________________________ 34
Indochina imports from Japan and total, table--- ------------- 36
Estimated additional refugee resettlement, medical and emergency
repair costs in South Vietnam not able to be accommodated at the
present continuing resolution level ------------------------------- 42
Letter and enclosure to Senator James B. Pearson from Curtis W.
Tarr, Under Secretary of State for Security Assistance, dated
February 23, 1973----------------------- ---------------------- 46
Rationale for requested increase in excess defense articles---------- 58
Public safety programs funded from security supporting assistance,
fiscal year 1973 congressional presentation_______________________ 59
Additional Committee questions and responses of Mr. Tarr, Depart-
ment of State-------------------------------------------------- 65
Additional questions submitted by Senator McGovern and responses
of Mr. Tarr, Department of State------------------------------- 73
Prepared statement of Professor George McTurnan Kahin, Cornell
University, on behalf of Friends Committee on National Legislation- 79
Prepared statement of Don Luce_________________________________ 85
Head count of Cambodian troops_________________________________ 87
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FOREIGN ASSISTANCE ACT OF 1973
THURSDAY, FEBRUARY 22, 1973
UNITED STATES SENATE,
COMDIITTEE ON FOREIGN RELATIONS,
Washington, D.C.
The committee met, pursuant to notice, at 10 a.m., in room 4221,
Dirksen Senate Office Building, Senator J. W. Fulbright (chairman)
presiding.
Present : Senators Fulbright, Symington, McGovern, Aiken, Case,
davits, Scott, Pearson, Percy, and Griffin.
The CHAIRMAN. The committee will come to order.
The purpose of this hearing is to consider S. 837, the President's re-
quest for authorization of appropriations for foreign assistance and
military sales for the 1973 fiscal year.
(The text of S. 837 follows:)
[S. 837, 93d Cong., First Sess.]
A BILL To amend the Foreign Assistance Act of 1961, and for other purposes
Be it enacted by the Senate and House of Representatives of the United States
of America in Congress assembled, That section 491 of chapter 9 of part I of the
Foreign Assistance Act of 1961, relating to refugee relief assistance, is amended
by striking out "1972" and inserting in lieu thereof "1973"; by striking out the
figure "$250,000,000" and inserting in lieu thereof "$100,000,000"; and by striking
out the words "East Pakistan" wherever they appear and inserting in lieu there-
of "Bangladesh".
SEC. 2. Part I of the Foreign Assistance Act of 1961 is amended by adding at
the end thereof the following new chapter :
"Chapter 10-PHILIPPINE DISASTER RELIEF
"SEC. 497. PHILIPPINE DISASTER RELIEF.-Notwithstanding the provisions of
this or any other Act, the President is authorized to provide, on such terms and
Conditions as he may determine, relief, rehabilitation, and reconstruction assist-
ance in connection with damage caused by floods in the Philippines during 1972.
Of the funds provided to carry out part I, $50,000,000 shall be available only to
carry out this chapter. Such assistance shall be distributed, to the extent prac-
ticable, under the auspices of or by international institutions and relief agencies
or United States voluntary agencies.".
SEc. 3. Chapter 2 of part II of the Foreign Assistance Act of 1961, relating to
military assistance, is amended as follows :
(a) In section 504(a), relating to authorization, strike out "$500,000,000 for
the fiscal year 1972" and insert in lieu thereof "$780,000,000 for the fiscal year
1973".
(b) In section 506(a), relating to special authority, strike out "1972" each
place it appears and insert in lieu thereof "1973".
(c) Section 514 is hereby repealed.
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SE.c. 4. Section 532 of chapter 4 cif part II of the Foreign Assistance Act of
1961. relating to authorization for security supporting assistance, is amended by
striMng out "for the fiscal year 1972 not to exceed $618,000,000, of which not
less than $:10.060.00() shall be akaflvble sotely for Israel" and inserting in lieu
thereof "for the fiscal year 1973 not to exceed $844,000,000".
Sec. 5.:17he Yereign Military Sa es Act is amended as follows :
(a) In section 23 of chapter :;, relating to credit sales, strike out "ten" and
insert in lieu thereof "twenty".
(b) In section 31(a) of chapter 3, relating to authorization, strike out "$,100,-
000,000 for the fiscal year 1972" and insert in lieu thereof "$527,000,000 for the
fiscal year 1973".
(c) In section 31(b) of chapter 3, relating to aggregate ceiling on foreign
military sales credits, strike out "$550,000,000 for the fiscal year 1972, of which
amount not less than $300,000,01)0 shall be made available to Israel only" and
insert in lieu thereof "$629.000,000 foa the fiscal year 1973".
(d) In section 33(a.) of chapter 3, relating to aggregate regional ceilings,
strike out "$100,00.000" and insert in lieu thereof "$150,000,000".
(e) Section 33(e) of chapter 3, relating to aggregate regional ceilings, is
amended to read as follows :
"(c) The President may waive the limitations of this section if he finds that
overriding requirements of. the national security of the United States justify
such a waiver ;and promptly reports such finding to the Congress in writing, to-
gether with his reasons for sucL findings. In any case in which the limitations
of this section are waived under the preceding sentence, the report required
under such sentence shall set forth, in detail, the amounts of assistance, sales,
credits, guarantees, and ship loans proposed to be made in excess of the geo-
graphical lirnitatiou applicable under this section.".
14:e. 0. Section 8(b) of the Act of January 12, 1971, entitled "An Act to amend
the Foreign Military Sales Act, and for other purposes" (84 Stat. 2053; , is
amended by striking out "$18:1,000,000" and inserting in lieu thereof
245,000.0Ii0".
The f"rr, iji. rtix. Last yeah, that is in calendar 1972, the Senate de-
feated one foreign aid authorization bill and a second died in confer-
once because the Senate and House conferees were unable to reach
agreement on' a provision sponsored by Senator Case which required
t bat, foreign military base agreements be submitted as treaties. The en-
tire foreign assistance program is now being funded through a con-
t-innirrg resolution which expires on February 28, although no addi-
tiona]'authorizations of appropriations are needed for the economic
aid programs, other than for Bangladesh.
The bill before the committee is basically the same as that proposed
by the executive branch last year. It requests a total of $2.1 billion for
military gaunt aid, military credit sales and supporting assistance,
and $I(. el
million for Ba.ngladesll. Much of the money requested in this
bill is for Southeast Asia. The committee will be interested in obtain-
ing an explanation of how the aid programs for Indochina relate to
the cease-fire agreement and the planning for postwar relief and re-
construction i.n that area.
Thw committee is pleased to have as witnesses this morning Curtis
11'. Tai-r. Under Secretary of State for Security Assistance; the Iion-
otuble Robert If. Nooter, Assistant Administrator, Agency for In
te.rnational Development; arid Vice A-dm. Ray Peet, Director, Defense
Security Assistance Agency, Department of Defense.
I wonder, gentlemen, if perhaps to make it easier, we could have the
three of you appear at once and give. your statements? I assume, Mr.
Tarr, y ou wish to lead off. Is !;hat correct?
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STATEMENT OF HON. CURTIS W. TARR, UNDER SECRETARY OF
STATE FOR SECURITY ASSISTANCE; ACCOMPANIED BY ROBERT
N. NOOTER, ASSISTANT ADMINISTRATOR, AGENCY FOR INTER-
NATIONAL DEVELOPMENT, AND VICE ADM. RAY FEET, DIREC-
TOR, DEFENSE SECURITY ASSISTANCE AGENCY, DEPARTMENT
OF DEFENSE
Mr. TAim. Thank you, Mr. Chairman.
Senator Aiken, Senator Pearson, I appreciate the opportunity to
appear to support the President's request for authorization of fiscal
year 1973 security assistance funds. We meet at a time of relief that
the agreement for ending the war in Vietnam has been signed. But it
is also a time of anxiety that we will be able to preserve the peace in
Southeast Asia. The security assistance legislation before us contains
some of the elements to encourage that peace, and thus our discussion
could hardly be more timely.
Under the continuing resolution authority (CRA), which ends Feb-
ruary 28, we have of necessity operated wit i considerable restraint.
The members of this committee will want to know the consequence of
that restraint, and thus I wish to make brief remarks that might pro-
vide the basis for some of your questions. Mr. Nooter and Vice Ad-
miral Peet have prepared statements that we wish to submit for the
record.
The CHAIRMAN. They will be accepted.
MILITARY ASSISTANCE PROGRAMS
Ir. TARR. Military assistance programs : The President requested
I
$780 million to support the military as program (MAP) in
fiscal year 1973. Under the CRA, we have operated thus far with new
obligational. authority of $553 million. While this amount is greater
than the $500 million authorized last year for the military assistance
program, Thailand has been shifted during the same time from mili
tary assistance service funded (MASF) to MAP. Furthermore, the
level of expenditure in fiscal year 1972 was considerably lower than
many people believed to be prudent.
The main casualties under continuing resolution authority funding
having been the Korean 5-year modernization program and the a'ssist-
a.nce to Turkey as it seeks to replace outmoded World War II equip-
ment for its NATO forces. Neither is a U.S. commitment, but
we have worked closely with the leadership of each government on
their improvement plans. These leaders, in turn, have made their
budget plans on the assumption that our support would be fortlicom-.
in? at the levels we have shown in our presentation last year. Without
the authorization in fiscal year 1973 that we have requested for Korea,
it will not be possible to complete their 5-year plan on the date we had
set.
Foreign military sales : Under the President's fiscal year 1972) pro-
gram, we requested $527 million in new funds for foreign military
sales credits. The CRA has provided us with $400 million. In a busi-
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ness sense, we can easily reduce credit sales by telling our friends that
we do not have funds available. This usually encourages the leaders
of those nations to purchase military equipment provided by another
nation, even though American equipment and the continuing relation-
ship that comes with it. would have been preferable.
Nevertheless, this restriction comes at a time when we would prefer
to increase sales while at the same time reducing our military assist-
ance grants. Our planning for the future assumes this transition. But
we cannot follow these plans without the credit authorizations in the
amounts requested.
Supporting assistance: As you gentlemen know, we provide sup-
porting assistance to a small number of nations, with the largest
amounts going to Southeast Asia, Israel. and Jordan. Since the pro-
gram requirements in other countries are relatively fixed, the South
Vietnamese effort is the one that must absorb the major reductions in
funding.
The President asked for $841 million in new supporting assistance
authority for the current year. Under the continuing resolution an-
thority we have been operating at the :level of $600 million, including
$50 million earmarked for Philippine disaster relief that was no-' in-
cluded in the original request. In order to tailor our efforts to the lower
level of expenditure, we eliminated several sound programs in Viet-
nam, including the development projects that now have even an in-
creased importance following the cease-fire, and U.S. support for the
land reform program that ha, encouraged a welcome fundamental
economic restructuring.
Perhaps the greatest diffculty with the low level of funding for
South Vietnam is that now we. should take advantage of the op:por-
tunitie s that the cease-fire makes available to us. The need to resettle
refugees in permanent circumstances is upon us. We should encourage
reconstruction, particularly those projects that will help to insure
economic. growth. Our pipeline of commodity imports has contracted
substantially. taking from us even that flexibility.
EXTENDED REPAYMENT PFraOD ON FOREIGN MILITARY SALTS
Other advantages in authorizing bill: The President's legisla`ion
also contains three importar t procedural changes. The legislation be-
fore the committee would extend the repayment period on foreign mili-
tary sales to a maximum of ".03 ears, as compared with the present 10-
year period. We have no intention of extending payments longer than
the life of the equipment, for which credit has been granted. At the
present. time we do not feel compelled to apply even the 10-year maxi-
mum on all foreign military sales contracts. But for some loans, the
20-year maximum has justification, both in terms of the economic re-
quireuients placed upon the. ''ecipient nation and the life of the equip-
ment involved in the transaction. In these circumstances, we would
prefer to have the added flexibility.
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Next, the bill before you would eliminate the 10-percent deposit
requirement for the military assistance program charges. This feature
reduces the benefit of the program to the recipient government. To
meet the cost, a government must allocate tax revenue for the deposit
requirement and divert it from other essential programs. Some have
suggested that the requirement causes the nation to scrutinize more
closely the assistance it will accept from the United States ; perhaps
this is so in a few cases. But if it encourages a kind of frugality among
a few, the major effect has been resentment among others. We believe
our program would attain its ends more constructively if the deposit
requirement were eliminated.
Finally, we ask the members of this committee to agree to the
elimination of restrictions on sales to Latin America. This paternalism
no longer has a place in our relations with Latin American nations if in
fact it ever had justification. Brazil has become the seventh most popu-
lated nation of the world, with a rapidly growing economy that some-
day will make it a foremost power. Many other nations in the region
are moving ahead rapidly. Most Latin American leaders seek normal
trade relations with the United States, and we should be in a position
to reciprocate. This restriction makes it impossible for us fully to do so.
COMMITTEE SUPPORT REQUESTED)
The security assistance program for fiscal year 1973 encourages
progress and helps to maintain the delicate balance between security
and development. The program reflects our attempt to lay the -founda-
tions for a negotiated settlement of the Arab-Israeli dispute. Not only
Israel, but a number of Arab states as well, are dependent upon security
assistance. In East Asia, our program provides the underpinning for
South Korea's current dialog with the North for the purpose of nor-
malizing future relations. In Indochina it facilitates the transition to
peace.
Thus security assistance is a constructive, vital. element of our for-
eign policy, transcending the simple question of transferring weapons.
It can and must continue to lay the foundation for cooperation. It pro-
vides the link that we need to facilitate the transition between the past
and the future. For these reasons, I request that the committee support
the Administration in its request for authorization of fiscal year 1973
security assistance funds.
(The prepared statements referred to follow:)
STATEMENT OF HON. ROBERT H. NOOTER, ASSISTANT ADMINISTRATOR, BUREAU FOR
SUPPORTING ASSISTANCE, AGENCY FOR INTERNATIONAL DEVELOPMENT
Mr. Chairman and Members of the Committee, I am here today in support of
S. 837, a Bill to amend the Foreign Assistance Act of 1961. This Bill would
authorize $844 million for Security Supporting Assistance, $100 million for
South Asia Relief and Rehabilitation Assistance, and authority to use up to
$50 million from any of the Part I economic assistance categories for Philippines
Relief Assistance. Except for the requested authority for Philippines Relief
Assistance, the other requests are the same as those presented to this Com-
mittee by Dr. Hannah on April 17, 1972. All other programs administered by
A.T.D. were authorized for both FY 1972 and 1973 and are therefore not
included in this Bill.
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I am here to answer ally que,tioiis which you may have on Security Sup-
porting Assistance, and other appropriate witnesses are available to respcnd
to your questions on other portions of the request.
The Security Supporting Assistance request made at this time is essentially
for the same purposes as requested last April. A break-down of this request
hiy country is attached, and a more detailed program description for each
country is contained in the Security Assistance Program Presentation boot:
for FY 1973.
tlver three-f.niirtlis of the Security Supporting Assistance request of $844
million is for Indochina. These funds are intended to provide the economic
assistance which South Vietnam Cambodia, and Laos need to sustain their
economies, to provide refugee assistance to the large number of displaced and
needy people there, and to contirtie sufficient economic assistance to start the
transition toward economic self-sufficiency.
The present Continuing Resolution level of $000 million for Security Sup-
porting Assistance does not provide sufficient funds to carry out these objec-
tives. At this low level, we have had to cut back funding for the Vietnam
program very sharply. We have not been able to proceed with U.S. support sor
a number of economic development projects which hold the hope of getting
the South Vietnamese economy back on its feet so that: it will not require
outside assistance in the future. We have not been able to make the final l1a
million U.S. contribution in support of the sweeping land reform program
begun by South Vietnam three years ago. We have had to make cutbacks
across the board in ongoing technical assistance programs in agriculture, edu-
cation, public health and public v?orl:s, as well as in programs aimed at main-
taining the eount.ry's economic sta!iiliti- such as the Commodity Import Program.
We have had to suspend entirely oil 1, funding for an Economic Support Fund
which was intended to offiset th? sharp decline in U.S. military spending in
Vietnam.
We should proceed with our contribution to land reform, which is the most
significant: social. reform carried out by the Government of South Vicuna tit.
Since its inception in March 1970 this program has moved forward well despite
the ,great difficulties posed by the war. By the third anniversary next month,
we expect that all titles covering the planned area of 2.5 million acres will be
processed, and that at least 90 percent will be in the hands of the new owners.
We indicated to the Government of South Vietnam, when it planned to laurich
this program, that, pending approval by the Congress, we would provide $40
toillion to help offset the economic costs of the program. We have provided
$25 million to date and should go forward with the final $15 million now.
We have also faced major new refugee requirements during this fiscal year
in excess of original estimates. Prior to the North Vietnamese offensive of let
year, many more refugees were being resettled than were being generated by
the war. The caseload. of those receiving refugee and resettlement benefits was
down from a high of over 3 million in 1965 to less than 500,000 in March, 1972.
The North Vietnamese offensive, which began after our request was made to the
Congress ]ast spring generated well over one million South Vietnamese refu-
gees who were forced to flee their homes. Despite these added burdens, the
South Vietnamese Government did an excellent job of caring for the additional
refugees- Stocks of food and other relief supplies were available and in position,
temporary camps were organized rapidly, and medical supplies were made avail-
able. There were some problems, hut: on the whole the South Vietnamese Gov-
ernment did art outstanding job or providing emergency relief for these people.
As of now we have provided ar additional $30 million out of Supporting As-
sistance for refugee relief. We have accommodated these additional refugee costs
within the Continuing Resolution level in view of the high priority which we
give to this portion of our program, but it is not possible to continue to do an
adequate job, Particularly for refugee resettlement, without additional funds.
I would like to point out that the Government of South Vietnam has moved
with some vigor on financial and economic reforms. A greater stress has been
placed on domestic tax collection and more taxes have been collected. In the mid-
1960's much reliance was placecon administrative controls to manage the
economy. In recent years, the Government has come to rely more heavily on
market forces, which work much better. Interest rates have. been increased and
the. exchange rate changed from one artificially pegged at a low level to one
adjusted periodically to reflect realities of the market. These changes provide
Vietnam with sound fiscal and mcnettary policies for the future, and will facili-
tate the transition to economic self-sufficiency.
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We have not found it operationally possible to make significant reductions in
programs outside of Vietnam. Our request for Cambodia, $75 million, is needed
to provide the most urgent import requirements for food, fertilizer, petroleum
products, spare parts and other necessities. We cannot reduce the $50 million
level for Laos much if we are to meet refugee needs and help support the coun-
try's economy. We attach considerable importance to providing adequate levels
of economic support to Israel and Jordan, which offer the best prospects for
assuring stability and peace in the Middle East.
EFFECT OF THE CEASE-FIRE ON SUPPORTING ASSISTANCE REQUIREMENTS FOR FY 1973
It has long been our objective to encourage economic stability in Vietnam
in 'a way which will permit an orderly reduction in U.S. assistance to that
country. The cease-lire agreement signed on January 27, 1973 should accelerate
that process considerably over the coming years. In the short run, however, the
cease-fire will, if anything, increase the requirements for economic assistance.
This, will be particularly true because of the additional requirements for refugee
resettlement programs, and the need to undertake the reconstruction of damaged
bridges, hospitals, schools, and health clinics. We, believe that these costs can
he accommodated within the $844 million request during the remainder of this
fiscal year, but not at the $000 million Continuing Resolution level.
There are some who advocate that U.S. economic assistance to Vietnam be
channeled almost exclusively to refugee aid. We agree that refugee assistance
should be given priority over other programs, but it is not realistic to think that
generous assistance to refugees alone can be'effective at the same time that the
general economy is collapsing for lack of support. Our assistance to Indochina
must be a balanced program if it is to be effective, and for this reason we strongly
urge that this Committee oppose the earmarking of funds for particular portions
of the program, even for something as worthwhile as refugee support.
At some later date we will present to you a request specifically aimed at the
problems of rehabilitation and reconstruction in Indochina, probably within the
context of the FY 1974 budget. This will be done on the basis of consultation.
both with the Congress and with other donor countries and institutions. In the
meantime, however, the substantial progress toward peace which has been made
in Indochina depends upon being able to sustain the economies of Vietnam, Cam-
bodia, and Laos until such time as peace is fully restored and reconstruction
can become a reality.
The cost of economic assistance to Indochina is a substantial amount, but
it is only a fraction of the cost of war. Our military forces are withdrawing ; it
is essential that we continue the economic support which these countries need
in order to survive.
BANGLADESH
The authorization request for Bangladesh is $100 million, compared to
$250 million authorized for FY 1972. This $100 million is contained in the Con-
tinuing Resolution as a separate line item.
We have provided the Committee this week with a detailed statement of our
relief and rehabilitation program for Bangladesh. In summary, we are assisting
the relief activities of U.S. voluntary agencies, providing the U.S. contribution
to the U.N. Relief Operation in Dacca, and providing bilateral grants for
relief supplies and to assist in rehabilitation projects. The U.N. agency, the
largest relief organization in Bangladesh, supports the relief and rehabilitation
effort of the Bangladesh Government, marshals worldwide contributions and
coordinates the many activities of voluntary agencies.
At the level of $100 million which we have requested in FY 1973, the U.S.
contribution to relief and rehabilitation in Bangladesh is about one-third of
the total from all sources. Other donors have been forthcoming in their con-
tributions, and we believe that the essential tasks. of relief and rehabilitation
can be completed with FY 1973 funding.
The Phillipines was struck by massive floods late last summer. The devasta-
tion and disruption have been great throughout the countryside and in the
cities as well. The United States has responded quickly, first with emergency
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relief assistance, then with funds to help in reconstruction. By the end of this
month about $45 million of the $50 million provided under the Continuing ]Reso-
lution will have been put to use.
The lJnited States is assisting the Philippine Government in rebuilding rural
roads and irrigation works, and in providing fertilizer and insecticides :much
needed for greater rice yields in.thce affected areas. Schools destroyed are being
rebuilt to hi,rher standards wh`eh will resist such disasters in the future. We
also are assisting in flood control vv)rks necessary to help prevent further catas-
trophies of this sort In the future. We have recently provided the Committee
with a more detailed statement on this program.
The Philippine disaster strut'{ after the FY 1973 authorization request was
submitted to the Congress. Diaast?rs of this kind deserve our support, and
should take priority over other programs which may be equally important but
less urgent. The Congress, in th? Continuing Resolution, earmarked $50 million
for Philippines Relief Assistance to be drawn exclusively from Security Sup-
porting Assistance, which is alread'T greatly reduced and must meet the needs
of large numbers of refugees in Indochina. As an alternative, we are requesting
authority to fund the Philippines Relief Assistance from any of the categories
of Part I of the Foreign Assistance Act so that it can be drawn from whatever
programs can most easily he delayed.
Supporting a.Isistancc-Summar,j: Request for fiscal year 1974 as contained in
the security assis'ancc program presentation book
Vietnam _ Millions
------------- ------ $55.5.0
Cambodia --------------------------------------------------------- --------------
Laos
---------
------ 49.8
Thailand --------------------------------------- ---------------
--------- 35.
Israel ----------------------- 50. 0
- -- ------------------
0
Jordan --------------- lo.0
East Asia regional----------------------------------------------------- 8.4
Malta ----------- ----------------------- 9.5
Spain -------- - -------------- 3.0
Interregional _-______________
CYP ------------------------- 3. 4
IJNFI
-- -------------------- --------------------------------- 4. 8
't'otal program--------------------------------------------------- 8i'4.5
Less anticipated deohligations from prior years ------------------------- 30. 5
Now obli!gational authorit, --- ----------------- ---- 894. 0
ti'I':1TF:Aa P;'IT OF tier Amu. RAY ?EF,-. USN, DEPUTY ASSISTANT SECRETARY OF
DEFENSE (INTERNATIONAL SECURITS' AFFAIRS) FOR SECURITY ASSISTANCE, AND
DIRECTOR, DEJ:'ENSE SECURITY ASSISTANCE AGENCY
Mr. Chalrman and Members cf the Committee, I take this opportunity to
present to you a brief report on management of the Military Assistance Program
and Foreign Military Sales under the Continuing Resolution Authority (CRA).
We have been working under some miusual constraints and have had to employ
some innovative measures to deal with them. As you will see, however, we have
not been able to find acceptable volutions to all of the problems.
The major constraint has been a reduction in the size of the grant aid pro-
gram from the Administration's request for $780 million new obligational
authority (NOA) to the continuing resolution authority (CRA) level of $553.1
million. This thirty percent reduction has necessarily altered the scope of the
Security Assistance Program.
In the Military Assistance Prograri there are some expenses that cannot he
deferred if the program is to continue. Annual contracts must be funded fully
at the beginning of the year. We must pay current bills for moving the pipeline
generated by prior year programs and these bills do not occur at a level rate.
Funds must be obligated early it, the year if students are to be selected and
moved to training, facilities in the TJn'ted States. In some cases equipment must
be ordered at a fixed time to meet delivery commitments or to preclude produc-
tion breaks that would result in suelstantial price increases. In other cases,
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ongoing projects in the field must be funded for the same reasons. By using
available CRA funds to meet these priority needs we had to defer funding of
operations and maintenance - requirements.
At this point in time we have managed to avoid significant disruption in the
program. In.many cases, however, foreign countries have exhausted stocks on
hand and their abilities to find other resources. Simply to keep the program
moving we foresee valid requirements of about $68 million now. Some of these
require immediate attention and, short of obtaining additional funding, we see
no way at this time of alleviating the situation. For example, we have not yet
been able to fund some resupply requirements for Cambodia, M-00 tanks and
UII-1 helicopters for Jordan, and several other significant needs such as con-
struction equipment for Nicaragua, ship overhaul for Indonesia, and mainte-
nance needs for several countries. In the next few weeks we should fund T-37,
F-100 and F-5E aircraft and, of course, additional operation and maintenance
needs. I would like at this point to submit for the record a detailed accounting
of our planned programs and the status of their funding to date. (Attachment A).
Funding of FMS credit has not caused serious problems. We have not been
able, however, in some cases to proceed with planned transactions at the time
that would have been advantageous to both the United States and the foreign
country. I would like at this point to insert for the record a statement of credit
transactions concluded to date. (Attachment B).
FY 1972 Foreign Military Sales totaled $3.4 billion. During the first six months
in FY 1973 Foreign Military Sales and Credits totaled $2.4 billion. Of this
amount approximately $2.1 billion were cash sales with $319.3 million of credit
(equivalent to $228.3 million NOA) being concluded under Continuing Resolu-
tion Authority. Major FMS transactions concluded to date in FY 1973 include
the sale to Iran of P-3 and F-5E aircraft, Improved Hawk, helicopters and 707
aerial refuelers ; Republic of China of F-5B and F-5E aircraft ; and Turkey of
F-4 aircraft.
Finally, I would like to insert for the record (Attachment C) brief re-
ports on performance to date in this fiscal year in the transfer of ships and
excess defense articles to foreign countries. We are continuing to emphasize the
sale of ships instead of leases and loans, and the role of excess defense articles
in lieu of grant aid. By selling, the United States recovers in dollars the fair
value of the material which ranges from 5%Jo to 50% of acquisition cost depend-
ing on condition. To the foreign country, this is a relatively inexpensive and
simple step in the transition from grant aid to sales. Limited experience to date
indicates that the foreign country is much more careful and selective in accept-
ing excess equipments when it must pay for them.
Mr. Chairman, gentlemen, that concludes my prepared statement. I welcome
any questions you may have.
(Attachments referred to follow:)
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A-TACHMENT A
FISCAL YEAR 1973 MI':.ITAF`Y ASSISTANCE PROGRAM-GRANT AID
(Do' ars In thousands]
Program
in CPD
Funded'
b, date'
Program
in CPD
Funded
to date
East Asia and Pacific:
Cambodia _ _
$209, 541
$9),034
1
Taiwan __ __-__
7
642
12
171
East Asia and Pacific: Malaysia
Indonesia -------------_--------------------
Korea ---- -----------------
,
. 28,745
215,710
,
12,757
115,025',
--.-.
Near East and South Asia:
Afghanistan ------------------ 215
205
Philipp,nes -------------------
Thailand--- ----- -------------
20,780
59, 954
10,
39,153i
India ------------------------ 234
Lebanon_____________________ 230
133
166
Far East region-,-_----------
375
267
Nepal ---------__29
-----------
26
Near East and South P,sia:
Pakistan--_- --------------- ----- 243
282
4ireece---------------..------
9,554
1,144
Saudi Arabia- . -_------------- 484
231
lordan______________________
42,746
13,410
Sri Lanka___________________. 15
53
'Turkey -------------- -_------
88,611
45,031
Europe:
NESA region-----------------
591
99
Austria ---------------------- 24
'Europe:
Portugal_____________________
905
869
Finland_____________________ 24
Africa :
Spain ----------------- ---___
9,261
8,680
Ghana--------------------- 55
European region:---_
85
99
Mali------------------------ 50
Africa:
Ethiopia ---------------------
12,139
7.233
Morocco_____________________ 956
Senegal---------------------- 25
Liberia------------- - ______
499
117
Zaire________________________ 455
Tunisia ------------ _--------
3,703
1.272
Latin America:
Africa regio-----------------
93
62
Argentina____________________ 550
555
Latin America:
Brazil -_----------------------- 988
669
Bolivia_____________________
4,873
3.006
Colombia --------------------- 778
722
Chile_______________________
1,114
919
Mexico______________________ 87
85
Dominican Republic -----------
1,435
586
Peru ----------------------- 820
783
Ecuador ----- ---------------
1,000
0
Venezuela____________________ 870
866
El Salvador------------------
805
464
Guatemala --__---------------
1,736
711
Total______________________ 7,313
5,640
Honduras--------------------
734
537
Nicaragua ------ --------------
Panama
1,045
527
669
3791
World-wide total program---- 819, 700
4
39, 980
_____________________
Paraguay____ -------------
791
243
1 NOA______________________ 780,000
413,000
Uruguay- --_ ---------------
1,460
601
Latin America region
687
314
General costs ----- _________________
85,246
63,533
Total -----------------------
-------
812,387
--
434.340
1
ATTACHMENT B
FISCAL YEAR 1)73 FOREIGN MILITARY SALES CREDIT
[Do!lars in thousands]
Program
in CPD
Obligated Program
to date in CPD
Obligated
to date
East Asia and Pacific.
Taiwan ------------------------ $55,000 $13,700
Korea ------------------------- 25,000 15,000
Malaysia--_-_ _________________________ 10,000
Far East Region. _____________ 12, 500 _-_-____-
Near East and South Asia:
Greece______________________ 55,000 140.750
Israel_______ _____________ 300,000 $126,250
lordan -------- ------------- 10,000 ----------
Lebanon------.----. ---------- 15,000 ----------
Saudi Arabia-.._______________ 45,000 _._._-__-.
Turkey__-___ _______________ 15,000 20.000
N ESA region_________________ 3,000 ---------
Africa:
Morocco ---------------------- 15,000 ----------
Zaire ------------------------ 3,500 ---------
Latin America:
Argentina____________________ 15,000 ___------
Bolivia ----------------------- 4,000 ----------
Brazil ----------------------- 15,000 ----------
Chile ------------------------- 5,000 ----------
Colombia -------------------- 10,000 ----------
Guatemala -------------------- 2,000 ________-
Mexico---------------------- 2,000 ----------
Peru ------------------------ 5,000 ----------
Uruguay-------------------- 2,000 ----------
Venezuela -------------------- 15,000 ----------
Total ---------------------- 629,000 228,300
I Includes $5,750 for a guaranty of $23,000 prvate ; redit.
2 Includes $26,250 for a guaranty of $100,000 prince credit.
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ATTACHMENT C
FISCAL YEAR 1973 SHIP TRANSFERS BY LOAN OR LEASE
Method
Country and number Ship of transfer
China: 1----------------- AOG-7----------- Lease
Turkey:
DD-709 Loan '
SS-340 ----------- Do'
-------------------
I SS-410----------- Do'
I ATF-75---------- Lease
I APL-47--------- Do
Greece:
AUG 11 - Do
I------------------
I ------- YTM-767--------- Do
---------------- LST-1174-------- Do
Brazil: 1-----
Philippines:
1------------- MSO-436--------- Do
1 ----- --------------- MSO-444--------- Do
------------------- LST-222--------- Do
i LST-488--------- Do
I ----------- LST-546--------- Do
Method
Country and number Ship of transfer
Chile: 1----------------- AOG-8----------- Do
Korea:
I ----------------- DD-805---------- Loan'
I-------- ---------- DD-830------ --- Dot
Italy:
------------------- LST-1171-------- Lease
1------------------ LST-1175-------- Do
I------------------- SS-524----------- Loan.'
I------------------- SS-490------ ----- Do.'
Uruguay:2-------------- LCM-6----------- Lease.
Iceland: 1--------------- Hydra sound boat- Do.
Spain:
------------------- DD-882- ------ Loan'
I ----------- DD-711---------- Do.'
I------------------- SS-382----------- Do.'
I------------------- SS-385----------- Do.'
Mexico: 1---------------- AFDL-28--------- Lease.
Dom. Republic:I --------- ATF-72---------- Do.
Country and
Unit price
Country and Unit price
number Ship
(thousands)
number Ship (thousands)
Ships transferred by
A
B. Ships sold that were on
.
sale:
loan or lease:
--- LST 277
Chile: 1
Spain--------------- AVT-3 (ex-CVL)( 500.0
----------
China:
DD-731
153.0
DD-550 153.0
DD-551 153.0
DD-764
229.5
DD-509 153.0
Turkey:
DD-765
229.5
DD-799 153.0
DO -678 153.0
------------- SS-421
1
153.0
Chile---------------- SS-414 55.0
55
0
--
Greece:
.
Brazil--------------- SS-381
I DD-888
229.5
DD-794 76.5
I--------------- SS-365
153.0
DD-675 76.5
Turkey-------------- DD-656 153.0
Brazil: 1 DD-596
153.0
DD-861 153.0
------- SS-484
I
153.0
DD-872 153.0
-----
--------- SS-350
-
I
153.0
DD-66B 153.0
----
-
--------------- DD-7d5
229.5
DO-709 153.0
SS-320 112.2
Argentina:
ASR 10 51.0
I--------------- DD-702
229.5
1--------------- DO-704
229.5
1------------- DD-877
Colombia:
229.5
I ---------- DD-775
229.5
I --------- DE-1029
122.4
Venezuela: 1--------- DD-756
229.5
Uruguay: I---------- DE-1006
122.4
Mexico: 20---------- MSF
28.0
Indonesia: 1--------- DE-1034--------
145.0
Note: Total number of ships sold during fiscal year 1973: 57; total sales proceeds during fiscal year 1973: $6,500,000;
percent of ships transferred by sale during fiscal year 1973: 66; percent of ships transferred by sale during fiscal year 1972:
33%.
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ATTACHPIENT C-Continued
Fiscal year 1973 allocations of excess defense articles of
February 20, 1973
[Million dollars at acquisition cost]
Country
Cambodia Allocated
----------------- ---- -------
- -- -- -- ---- - - --
China (Taiwan) 18.7
- - ------ -- - ---- --- - --
Indonesia 28.8
--------- ------------ 4
Korea . --- - -
? -- ---- - -- -
- -------- -------
.aos 3.0
--------- 3.2
-------------------------------
------------------
-----------------------------
Thailand 91.9
. 9
V
G ietnam 33.2
Jordaaen - -- - - ------ ------ - - - 7.8
ord ---
Turkey --------- - - ---4. 6
---?------------------------- ----- 52.1
-------------------
Ethiopia ------------------------------------------------------------ .1.6
Tunisia - ---
------------------
--?---------------- 29
-------------------
)
Total ---8166. 1
1 Allocations constitute authorizatio,,s to deliver specific major Items, some of which may
not occur clue to subsequent changes in availability. In addition to the total shown, the
military departments have been author: zed[ to deliver up to a value of $00 million in second-
ary items (acquisition cost) on the bash of requisitions received from the field.
' Less than $50,000.
' Total may not add due to rounding.
The CIIAI n r N. Thank You, Mr. Tarr.
CI3,IECTIVE OF MILITARY ASSISTANCE PROGRAM
I wonder if you could summarize for the committee how you see the
objective of th:i.s military assistance program. What is it the United
States seeks to achieve by it?
Mr. TARR. Mr. Chairman, I think that the U.S. Government recog-
nizes that there are valid recuirements among friendly nations all
over the world to provide for their own defense security requirements.
Many of these nations are not It a position economically to meet those
requirements, and so
The CHAIRMAN. Who determines their requirements? Do you deter-
mine them? Do we determine there?
Mr. TARR. The fundamental determination of requirements for de-
fense must be made by the leadership of each nation. The degree to
which we are prepared to help is a function not only of our appraisal
of the validity of those requirements but also is a function of our
ability actually to take part in terms of the amount of funds we have
available.
The CIIATRIVIAN. It is difficult for me to follow what you consider
to be the basic justification for the military aid program. Is it to as-
sist our own. manufacturers? Is that the primary purpose?
Mr. TARR. Mr. Chairman, the primary purpose is not a means by
which we can keep our factories running or a means by which we can
emphasize the sales of Ameriean manufacturers. We all recognize
that this is a. byproduct of the ef.,'ort.
The fundamental purpose of he program, rather, is to assist foreign
countries to provide for their own security.
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The CHAIRMAN. Their security against whom? I mean who is
threatening all these countries that we are helping?
Mr. TARR. Well, Mr. Chairman, it is not possible to make, a sweeping
generalization.
The CHAIRMAN. You made a sweeping one. This is very sweeping.
Is it our responsibility to provide security for all the countries in the
world or all those to whom we give aid?
Mr. TARR.. Mr. Chairman, it is my feeling that it can be very im-
portant for us to help other nations provide for their own security in
a part of the world where we have interests that are involved.
For instance, in 1950 no real care was given to the preparation of
South Korea for the withdrawal of U.S. forces. We all know the
consequences of that.
The CHAIRMAN. Mr. - Tarr, there have been a lot of changes since
1950. I was talking about the justification today: I know you shy away
from saying that we are restraining communism. Your predecessors
used to say we were restraining communism, we were protecting the
free world from enslavement by Communists.
I am trying to see what is the new rationale. That used to be said to
be the reason. That was the reason we got involved in Vietnam
originally. It was aid to protect them from communism.
PURPOSE OF CONTINUING MILITARY ASSISTANCE PROGRAM
That was the purpose of SEATO. I am trying to bring it up to
date. I am not trying to bedevil you. I thought maybe you had some
new rationale, that you could.. give the committee that this is what our
objective is in going all around the world and spreading arms and aid.
What is the objective? I was trying to get you to express the adminis-
tration's new rationale in view of the President's changed attitude
toward Russia and China. Maybe it is out of order, but I was trying
to lead you along to see if you could tell us clearly what we are up to.
What is our purpose in continuing a program which-as you refer
back to 1950. But this isn't 1950 ; it is 1973.
Mr. TARR. Mr. Chairman, let's use the same nation in 1973. The
purpose of our aid to South Korea right now is to help them maintain
adequate strength against a possible encroachment by the people in the
North.
The CHAIRMAN. Is it probable or possible? Did you use possible in-
tentionally or is it probable?
Mr. TARR. It is possible.
The CHAIRMAN. Anything is possible.
Mr. TARR. To the degree to which it is probable, I would rather not
speculate. But I do feel that the strength of South Korea now puts
that government in a position whereby it can negotiate with the North
with the hope eventually of bringing about normal relations between
the two. We both have read statements where each side hopes even-
tually that the two halves of that nation might someday be unified. We
think that it is important to our interests in the Far East that this nor-
malization, in fact, take place. We think that normalization cannot take
place unless certain fundamental security needs are met in South
Korea. Our program there is aimed at these purposes.
90-989-73-3
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The CHAIRMAN. I have one or two other questions. You state that
restriction on sales to Latin America is apparently paternalism. How
do you arrive at that conclusion?, Why is a restriction on what arms
we sell paternalism?
Mr. TARR. Because, Mr. Chairman, we are saying to nations in Latin
America that if they want to buy and they have the credit potential
to pay back the loan or they have the cash in hand actually to buy,
we are judging they cannot do so. Such judgment, I am saying, is
paternalism.
The CHAIRMAN. I was thinking it isn't our business to promote arm-
ament races. I mean that is our policy, I thought. It has nothing to do
with paternalism, in my view,, to say I don't want to go around spread-
ing arms all over the world, as we did in Pakistan and as we have done
in the Middle East. I don't see it as paternalism.
I might say that the 10-percent deposit was not intended to be
beneficial to the recipient. It was intended to be a slight benefit to the
United States because it, was intended to use that much funds for our
local expenses. You misunderstood our purpose, I think. We didn't put
it in in order to benefit the recipient country.
Mr. 'T'ARR. Mr. Chairman, ,'egardless of what the intention was for
putting it in, the effect is a hardship on the recipient country.
The (1I1AIRREAN. At one time, I think, we had 50 percent. The Senate
approved 50 percent.
One other before I pass you on to my colleagues. I know they want
to ask you some questions.
Are. you aware of the condiion in our Federal budget? Do you know
what the deficit in our Federal budget was last year?
Mr. TARR. NIr. Chairman, I am familiar with it.
The CHATI-MAN. What was ::_t?
Mr. TARR. I will take the adv: L.'e of the chairman if he wants to state
an actual figure.
The CHAIRMAN. I didn't know whether these facts that we were in
deficit condition ever filter into the State Department [Laughter] be-
cause these statements give the impression that you are utterly un-
aware of the condition of either our balance of payments, balance of
trade or domestic budget. I thought maybe you would know.
Mr. TARR. Mr. Chairman--
The. CHAIRMAN. It is more important that you know than I know,
but if you don't know that is all right. I suspected you didn't because
it gives the impression that our budget is quite irrelevant in the view
of the members of the bureaucracy as to whether these programs sho,ild
proceed. This is one reason I asked you the objective of the program..
Mr. TARR. Mr. Chairman--
The CITAIRMAN. I didn't find your answer very persuasive, in all de-
ference to you, that this is an. overwhelmingly important objective
that we are seeking to achieve.
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Mr. TARR. Mr. Chairman, if the Federal budget was in arrears some-
thing on the order of $20 billion last year, it seems to me that the logic
suggested is that no one would ask for any budget this year. I think
that
The CHAIRMAN. No, no; the logic is we have to be more careful and
discriminating where we spend more money. Isn't that the logic of it?
Mr. TARR. Yes, Mr. Chairman. But, Mr. Chairman, what I think you
have every right to expect from me is that I represent to you as honestly
as I can what the valid needs are. Now I recognize that there are re-
quirements placed upon Congress, and there are requirements placed
upon the President to give oversight, and to make a structure of prior-
ities with reference to what programs are valid and what programs are
not and the degree to which some must be cut. But I am simply trying
to bring to your attention what I think the valid requirements are for
this program, and importune you in the best way I can in that light.
PRIORITY OF PROGRAM
The CHAIRMAN. You are not saying then that this should be funded
even though there is not enough money for the domestic programs or
the Farmers Home Administration or the Urban Renewal. You are not
trying to tell us that this is a higher priority than any of those; are
YOU?
Mr. TARR. I can't set an order of priority for all Federal spending.
The CHAIRMAN. What you are saying is If..we have plenty of money
this is a, nice thing to do ; is that right?
Mr. TARR. No, I am saying irrespective of the money we have to
spend I think this is an essential program.
The CHAIRMAN. Does that mean you think it should have priority
over the domestic programs? Is that what you are saying?
Mr. TARR. I think it should have priority in your consideration.
CONSIDERATION OF DEFICIT, TRADE BALANCE AND DOLLAR DEVAL:T.'ATIONS
SUGGESTED
The CHAIRMAN. Do you have any idea of about how much we have
spent on military affairs since World War II, just in the general range?
Mr. TARR. I think on total aid programs of all kinds it is about $100
billion; isn't it?
The CHAIRMAN. No, the total military expenditures of this country
for our own services and others.
Mr. TARR. No.
The CHAIRMAN. I don't want to press you on that. In round num-
bers what we, have spent on military affairs is about $1,500 billion and
we have accumulated in the last 4 years about a hundred billion dol-
lars additional deficit. Last year was the second deficit in our trading
balance since the turn of the century and much the largest. It was
nearly $7 billion last year and, as you know, we have devalued the
dollar twice in 15 months.
Don't you think these are things that should be taken into consid-
eration in this kind of a program?
Mr. TARR. Of course, they should.
The CHAIRMAN. That is all I wanted to know.
Senator Aiken, do you have any questions?
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16
('a)NTINfTiO) USE OF TERM ""SUPPORTING ASSISTANCE" QTTFSTIONED
Senator _ATKEN. I know you refer to supporting assistance. ]is it
necessary to continue. that term "supporting assistance" which has
been more or less a catchall in the AID program? Why don't we
specify directly the purposes that we appropriate for instead of leav-
ing it so open? Are you insistent on calling it supporting assistance?
Mr. TARR. Senator Aiken, we are more concerned about the pur-
poses I' Or which the money is spent than we are the title under which
1111(1v c;;me to youu, and I thin]- in changing times it might be that
aaiothci title' ould be more appropri?i.te.
Semi to AiUcEN.Ithink so.
Mr. TARR. The purposes though that are represented in this budget,
we think, are valid and essential in this transition period.
Senator AiKEN. I would say on the economic assistance you call
that technical assistance and. get away from that catch-all phrase of
supporting assistance.
VAYMENT FOR IRANIAN PURCHASES
In regard to the purchases which Iran is making in this country
of $2 billion, as reported I believe in the papers, do they pay cash
for that? That is strictly a private deal. Does the United States or
any of our agencies underwrite the payment in any way?
Mr. TARP. Senator, they pay cash for the equipment. Most of this
cash comes from their treasu:'y ; some is represented by borrowing.
Senator AE EN. They borrow the money?
Mr. TARR. Yes.
Senator AIItiEN. From our banks, Swiss banks, anywhere they can
borrow it the cheapest. But we don't underwrite it.'
Mr. TARR. We do not underwrite it under our foreign military sales
program, no.
Senator A(KEN. Any other? What about OPIC, for instance? Do
they underwrite any?
Admiral PEST. We don't underwrite any of the loans so far as
Iran is concerned. It is handled through the Export-Import Bank
or straight cash.
NO MILITARY ASSISTANCE TO BANGLADESH, INDIA, OR PAKISTAN
Senator AMEN. We don't give any military assistance to Bangla-
desh; do we?
Mr. TARE. No.
Senator AIKEN. And none to India or Pakistan at this time?
Mr. TARR. As you know, Senator, we have had an embargo in
those areas.
Senator AIKEN. Yes.
AID SOUGHT BY ISRAEI,
One of the 'ih"ashington papers recently printed a story to the effect
that Israel is seeking a promise of $515 million of U.S. aid for this
coming year; is that correct?
Mr. TARR. Well, we are not certain of the amount but a gentleman
representing the Government of Israel recently visited with us and
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talked in preliminary terms about their needs, and the visits early next
month of other officials from that Government certainly will focus on
this question more precisely.
CONGRESSIONAL ACTION ON AID PROMISED BY EXECUTIVE
Senator AIKEN. If the Executive does make a promise to Israel, or
any other country as far as that goes, running up into the hundreds
of millions of dollars, would that be subject to congressional action?
Mr. TARR. I think it is quite clear that it is subject to appropriation.
Senator AIKEN. In this legislation or what?
Mr. TARR. Excuse me?
Senator AIKEN. Would it be included in the military assistance
bill or do you know?
Mr. TARR. Well, I think the article in the paper the other day would
? indicate a request for assistance from a variety of sources.
Senator AIKEN. Yes.
Mr. TARR. My recollection is that the largest portion of that assist-
ance would come from the Foreign Assistance Act. Most of it is under
foreign military sales, but some of it would come under supporting
assistance. It would all come out of fiscal Year 1974 authorizations, and
so it would involve our request to you If we went along with their
requests in any amount, in the legislation that we will bring up. for
fiscal year 1974.
FUNDS FOR KEY WEST, FLA., NAVAL TRAINING CENTER
Senator AIKEN. Probably my last question could be better directed
to Admiral Peet, but we do have naval training and other training for
military personnel covering Latin American countries. Last year sev-
eral Members of Congress proposed funds be taken from military
assistance to finance the naval training facility at Key West, Fla. Is
this an administration idea?
Admiral PEET. I think you are referring, Senator, to the $2.5 mil-
lion that is earmarked for a training unit in Florida.
Senator AIKEN. Yes.
Admiral PEET. Key West, Fla. Those funds have not been released
and there are no plans right now to go ahead with that project.
Senator AIKEN. I wondered if that shouldn't be considered more aid
to Florida than aid to Peru and Venezuela.
The CHAIRMAN. Sure.
Senator AIKEN. I will pose that question for my chairman's con-
sideration. There is certainly no naval training in Arkansas; is there?
The CHAIRMAN. No, not at all.
Senator AIKEN. Not at all. I think that is all I have now.
The CHAIRMAN. Senator Symington.
Senator SYMINGTON. Thank you, Mr. Chairman.
NO ADDITIONAL REQUESTS BASED ON FURTHER DOLLAR DEVALUATION
Mr. Secretary, we have now devalued the dollar twice in 15 months;
and there are rumors already it is going to be further devalued. Gold
went to its highest level in history today, $83 an ounce. Not too long
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ago we were buying it and selling it at $36 an ounce. If you succeed
in obtaining this money would you request an additional amount
based on further devaluation?
Mr. TAR:R. Senator Syrnin ton, it would not affect our operations
in fiscal year 1973.
Senator S71fINCTON. So you would not ask for additional money.
Mr. T,AARn. No, sir.
Senator SYMINOTON. Thank you.
ADDITIONAL CLASSIFICATION OF REQUESTED INFORMATION
In preparation for consideration of this bill, the staff of this com-
mittee requested information from the Departments of State and De-
fense. When it came, a considerable amount of information was classi-
fied that was not classified la:.t year. For example, the latest estimate
for Government cash and commercial military sales is classified con-
fidential, although the same data in last year's presentation book is
unclassified. Inasmuch as the new figure is considerably higher and
some of us are becoming increasingly apprehensive about the billions
of dollars we continue to ship out of this country to sustain the vari-
ous foreign programs, why is there this classification, additional clas-
sification, from the people?
The country-by-country lisi. of distribution of excess arms is also
now classified confidential. But last year only two countries, both in
the Middle East were so classi. red. Why is there this change in policy?
Admiral PKET. If I might answer that, Senator, in m , prepared
statement to be inserted in the record, I have listed the allocation of
excess defense articles for fiscal year 1973 in an unclassified chart.
Senator SYMINCTON. So now we can consider it as declassified even
though in preparation for the hearing the staff was told it was
classified?
Admiral PErT. Right. The c.ctual expenditures to date so far as the
sales programs are concerned, are unclassified and also our estimate
for the year is unclassified.
Senator SYI4IINOTON. Admiral, I would ask you or the Secretary,
what is the amount of the military assistance funds program for the
current fiscal ,year?
Admiral PEEr. For military assistance program, the total amount--
Senator SYMTNCTON. MASF, military assistance service funded.
admiral PEST. The MASF program is not my responsibility but
we could provide the data for the record.
Senator SYMI NOTON. Do you know, Mr. Secretary?
Admiral PEEr. Although I am not involved in MASF funding, the
total that was just handed to rme is $2.73 billion for fiscal year 1973.
Senator SYMIN(GTON. That is what you plan for the fiscal year 1974?
Admiral PEET. The fiscal y3ar 1974 total budget authority in Be
budget is $1.871 billion. However, it is a new ball game as far as recent
events are concerned and I am sure that will be recen.sider^d.
Senator SYMINOTON. Do you think it will be less or snore?
Admiral PEET. So far as I know. it would be less.
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Senator SYMINGTON. Thank you.
If our military assistance to South Vietnam and Laos is to be re-
Pro-
stricted y? Did yprevious vious answer mean you belwe cut this ieve it will
ram be
gram your
heavily cut?
Admiral PEET. Well, there is certainly a different ball game now
that we have a peace agreement. We are in the process of evaluating
and reassessing it, and I would rather not make any predictions along
that line.
REDUCED SPENDING CEILING FOR CAMBODIA
Senator SYMINGTON. I am particularly sensitive about the Cam-
bodian situation
Admiral PEET. Yes, sir.
Senator SYMINGTON. About a year ago I went to Cambodia. I have
seen a lot of messed up situations, but never seen one to beat that
setup. This is no criticism of our people there. We tried in the Senate
to get a limitation on the aid, but the Administration objected; in fact,
there was objection to even a limit at what it said was wanted. They
just didn't want to be bothered with any congressional interference
when it came to the money.
To date, in this fiscal year, your obligations for Cambodia, the
program, totals only $116 million I am told, as against a figure which
finally got through the Senate of $341 million. Since more than half
of this fiscal year is now passed, is there any reason why the expendi-
ture ceiling for Cambodia cannot be reduced heavily; and, if so, to
what figure do you think it could be reduced?
Admiral PEET. Senator, the obligation ceiling last year was $341
million. This year, although I think there is a technical question as to
whether we have a ceiling under CRA, we are operating under a ceiling
that is in fact lower than the $341 million.
Senator SYMINGTON. What is that figure?
Admiral PEET. It is a total ceiling for aid and we are well within
the ceiling. In fact, right now as you have indicated, for the first two
quarters economic and military assistance amounted to only $116
million.
Senator SYMINGTON. Do you think it would be
Admiral PEET. It would not be appropriate for me to give a new
ceiling.
Senator SYMINGTON. Our economy continues to deteriorate. Nobody
would argue that fact. We in the Congress are trying to get a handle
on what we are spending out of the country. Last year the only handle
we could get through the Senate was that amount of money the admin-
istration asked for; otherwise enough Senators on both sides of the
aisle refused to go for any reduction. But you didn't spend anything
like what you asked for. I ask now, what do you think your estimate
would be for this. year in Cambodia?
Admiral PEET. Senator, it is not firm, it would be just a guess on my
part, and I would rather not get involved in a guessing game. I would
hope you would have confidence in our desire to keep it as low as
possible because we want to.
Senator SYMINGTON. Will you make a guess and then correct it for
the record?
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Admiral PERT. I would certainly say it would be less than $300
million, sir.
Senator SYMINGTON. All right. I thank you.
Admiral PrrP. But I don't have control of the whole thing. This
is a total figure for the Government. AID is involved as well ss the
Defense Department.
Mr. TAint. Senator, the supporting assistance program for Cam-
bodia this year will run about $70 to $75 million, and also Public Law
480 shipments would come under your ceiling also. So that the $116
million military assistance ti ure alone might be somewhat misleading.
Senator SYMINGTON. All those items are included in an estimate we
have been given, everything mentioned so far. It totals $226 million,
so I don't see why you need around $300 million? even as a guestimate.
I would hope we would try co put sound accounting principles of :man-
agement in this field.
RECOVERING MONEY STOLEN BY (CAMBODIAN MILITARY PAYROLL PADDING
An article last January =aid the Minister of Information of Cam-
bodia acknowledged at a recent news conference that because of pay-
roll padding by military commanders the Government had at times
paid salaries to as many as fc hundred thousand nonexistent soldiers-
a wasted total of around $2 million a month.
Has anything been done to get the money back that was stolen
through this payroll padding?
Mr. TARE. Senator, I think one thing that we need to keep in mind
about the so-called phantom troops in Cambodia is that those troops
are paid out of the Cambodian Government's budget. Now it is- true
that in our program this year of about $70 million of supporting as-
sistance, we provide commodity imports sold in Cambodia, and the
proceeds of some of these go toward. that military budget. They go
toward approximately one-half of that military budget.
Now, it would be difficult for us in this kind of argument to honestly
plead that t i United States ha.l supported these phantom troops, be-
cause the payments to'troops actually on board were considerably in
excess of the budget that had been undertaken by the U.S. subsidy.
Senator SYMINGTON. What percent of the total Cambodian budget
does theIT.S. support?
Mr. TARR. I have said that IN e support approximately one-half of
their military budget.
Senator 5'YMINGTON. I understand it is about 75 percent. In any
case, if we are putting up that much of the American taxpayers'
money, don't we take steps when they admit themselves they have
been paying a hundred thousand soldiers who were not there?
Mr. TARR. Senator, as you know, we have a small military mission
there, and one, thing we have done through that mission is to help the
Cambodians install the kind of payroll systems that,
Senator S YMINGTON. Mr. Secretary, I understand all that and am
sure you have a lot of plans and organizations and setups, and I am
not being critical of you, just asking a question. I would like an answer.
Have we done anything specific about recovering this stolen money,
inasmuch as we put up an estimate of 75 percent of their total budget?
Have we or haven't we? That :'.s the question.
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Mr. NoOTISR. Senator Symington, if.I could speak to that, let me say
that the belief is widespread that, as you have indicated, the Cam-
bodian Government payroll system was paying a number of troops
that weren't on the payroll. That was of concern to the Cambodian
Government as well as to ourselves and, in fact, when I was out there,
last November they had just come to us at very high levels and asked
for assistance in trying to bring that situation under control.
But let me say that having an awareness of this problem is quite
different from having an accountancy of what the shortfall is, and I
was aware out there in talking with our people, as they were beginning
to take on this problem, that it was extremely difficult to actually count
heads on the battlefield and see how many people were on board. I
will say that we made representations at very high levels frequently.
We took severe steps to bring that condition to an end.
Senator SYMINGTON. I understand that, especially as you are work-
ing with our own people's money. As I understand it, we are support-
ing an army of 200,000 people, but now they say,? the Cambodian Gov-
ernment itself says, 100,000 of those were fictitious.
FINANCIAL ADJUSTMENT CONCERNING CAMBODIAN MILITARY PAYROLL
PADDING
All I. aim asking, is there any financial adjustment? We still have ,a
force ceiling agreement with Cambodia that calls for 200,000 soldiers,
and are equipping 200,000; but we sent people out there to look. They
reported only 125,000 in being. We are back in the same kind of a
situation discovered several years ago .in the Philippines, a great deal
of our taxpayers' money being paid to get soldiers from the Philip-
pines to go to Vietnam. The soldiers never got the money.
Do we pass this money over and then turn our backs on it, or do we
demand repayment?
Mr. NooTiR. Well, we have not turned our backs at all. Incidentally,
the agreement
Senator SYMINGTON. Then what have we done specifically?
Mr. NoOTER. We have worked with their people tgo out into the
field and we are operating there, as you know, with a very small
staff' which both we and the Congress agree is desirable in terms
Senator SYMINGTON. Are we working with people on this specific
problem?
Mr. NoorEn. Yes, sir,
Senator SYMINGTON. When do you think you can give a report to
this committee as to the result?
Mr. TARR, Mr. Chairman, we have a statement that we would be
willing to submit for the record if the committee wishes to have it.
(See p. 49.)
Senator SYMINGTON. I am also on the Armed Services Committee
and I would like to know where this money is going. We pile it in,
year after year. It seems to me if the American people are being told
they are supporting a 200,000 man army, and the Government of
Cambodia states 100,000 of those are fictitious, it ought to be explored
and, if possible, some money saved for us. Every day it is becoming
more clear the United States is running out of money as the dollar
90-989-73--.-?
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continues to deteriorate. And the re is continuing overall deterioration
in our own economy. If you cvil.i supply that for the record I would
appreciate it, Mr. Secretary.
E3i''BARG0 ON MILITARY EQLrIPMENT TO INDIA AND PAKISTAN
Have we continued the tota:_ embargo on military equipment, spares,
and supplies to India and Pakistan, without reservation?
Mr. TARR. We have.
Senator SYMINGTON. Thank you. Thank you, Mr. Chairman.
The CHAIRMAN. Senator Case,
Senator CAssE. Thank you, T/.Ir. Chairman.
RETURNING MILITARY ASSISTANCE FUNDING TO FOREIGN ASSISTANCE A('T
Gentlemen, since 1966 military assistance for Vietnam and Laos
has been funded out of the defense budget. With cease fires now in
Vietnam, in Laos, and, I hape, not too far away in Cambodia, do
you think the. administration would 'have any objection to returning
military assistance funding for these countries to the regular Foreign
Assistance Act?
Mr. TARR. Senator, a considerable amount of discussion has gone
on in the Department of Defense and the Department of State and
with the White House on this matter since the cease-fire in Vietnam.
I think that the President has not made a final decision yet with
respect to the total submission of the budget for fiscal year 1974. But
I can tell you that we have been exploring this very carefully.
Senator CASE. The admin`.st-ration hasn't made up its mind yet?
Mr. ARR.No.
Senator (',ASE. Mr. Chairlaar, I would hope that before the Senate
considers the aid program for fiscal year 1974, the administration will.
advise us what it has in mind so that we may be guided accordingly.
We have to make a decision, but we would like to have the administra-
tion's recommendation.
USE OF DEFENSE DEPARTMENT hEQUEST FOR SOUT]-I VIETNAM AN,1) LAOS
The Defense Department's budget request for 1974 asks for au-
thority to use $2,100 million for funding of South Vietnamese and
Laotian military forces. That is as much as was asked last year before
the North Vietnamese offer.sive brought about the need for a supple-
mental request.
In your judgment-and i!,hi,: is tied in with my questions yesterday
to Secretary Rogers--can these funds be used or could they be used
for purposes like building bridges, buying bulldozers, repairing rail-
roads, improving transportation systems generally, or for other pur-
poses in connection with re:iabilitation of the economy, the infrastruc-
ture of the countries of Indocl-lna ?
Admiral. PEST. The figures we mentioned a little while ago in the
fiscal year 1974 budget a:'e ;approximately $1.56 billion for South
Vietnam and $0.3 billion for Laos, for a total of $1.871 billion. How-
ever, that was under a different set of ground rules. It was before we
had--
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Senator CASE. This is my question, Admiral. I am asking whether
that money, in your judgment, can be used by the Defense Depart-
ment, by the administration, for other than strictly hardware military
purposes? Can it be used for reconstruction, whatever the amount?
Admiral PEET. What I am saying, Senator, is that this whole thing
is out of date, so to speak; it is overtaken by events. We are revising the
whole program.
Senator. CASE. What is the sense of our considering it now?
Admiral PEET. I am. sorry, sir?
Senator CASE. What is the sense of our considering it now if the
whole thing is in flux?
Admiral PEET. Well, it is my understanding so far as this session
this morning is concerned we are not considering MASF funding.
Senator CASE. We are talking about the balance of 1973, the rest of
this fiscal year.
Admiral PEET. But it is not considered MASF funding, and what
we are talking about is not considered MASF funding; we are not
talking about those figures.
Senator CASE. I see, on this matter then you are not ready to make
up a recommendation or to follow up the recommendation in the
budget.
Admiral. PEET. That is correct, sir.
Senator CASE. So the budget figure,
Admiral PEET. So far as MASF funding for fiscal year 1974 is
concerned.
Senator CAsr. This is massive, all right. What I am trying to get
at is, do you regard it as proper under existing law to use money like
this for reconstruction purposes ?
Mr. TARE. Senator, I don't believe that we can elaborate any more
than the Secretary did yesterday on this point.
Senator CASE. No; what be said was that wherever it was possible
to get away with it you might do it. That is a reasonable paraphrase
of what he said. He refused to say the administration wouldn't do it.
Now I am not asking you what your intentions are. I am asking you
what, under existing law, you think can be done, because we may have
to change the law-that is what I am getting at, you see.
Admiral PEET. Senator, as manager of the program, so far as the
Department of Defense is concerned, I assure you we will manage it
within the law.
Senator CASE. That is a fine statement and I think you are right at
least as you interpret the law in any event.
Admiral PEET. Yes, sir.
Senator CASE. But that isn't the question. The question is what is
the l aw ?
Mr. TARR. Senator, I don't believe we are prepared to answer on that.
Senator CASE. Would you ask counsel to give an opinion on this,
please?
Mr. TARR. We Will.
Senator CASE. For the Defense Department, for AID, and for the
Department of State.
(The information referred to follows:)
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(Supplied by Department of Defonse for themselves and Department of State)
Section 737 of the Department of Defense Appropriations Act, 1973, authorizes
Department of Defense appropriations to be used "for their stated purposes"
to support. Vietnamese forces. Th( words "for their stated purposes" have the
effect of limiting the use of the appropriations line items on behalf of the Viet-
namese forces to such activities end projects that the Department of Defense
could perform for the United States Armed Forces. Accordingly, section 737
does not authorize Department of Defense appropriations to be used for general
rehabilitation of the economy of Vietnam.
Mr. Tz m. My understandirg is that your question is could MASF
appropriations be used for AID projects for which they were not
originally intended when the---
Senator CASE. As an example, could funds which we are appro-
priating or expect to be appropriating with the understanding they
are for military hardware purposes be put into reconstruction pro-
grams to which we are not necessarllyy oppposed. I am trying to find out
what authority and what degree of flexibility exists. Without blaming
any of you gentlemen, I would just point out that we have been faced
in the past with enormous transfers. Cambodia is the example that
comes most readily to my mind. In that case the administration di-
verted hundreds of millions of dollars for the Cambodian military
aid program without congressional authorization. This is the kind of
thing I am concerned about, and my interest in it was sharpened by
my discussion yesterday with the Secretary on the basis of that News-
week article with which you are all familiar.
The staff has just called to my attention that MASF funds are
already being used for civil engineering purposes. What is the author-
ity for that, Admiral?,
Admiral PEET. The general authority for MASF activities is sec-
tion 737 of the DOD Appropriations Act, 1973.
Senator CASE. Yes. I am not necessarily criticizing the purpose. I
want to know about the legislative authority and the flexibility that
the administration believes it has.
Admiral PEET. Yes, sir.
Senator CASE. This is what we are concerned about; at least this is
rrry own concern.
c;IASSr[f1CATION OF FOREIGN MILITARY BASE AUTHOItrrY LIST
Why was the list that we got for country-by-country authority for
foreign military base establishments sent up as secret? We are very
glad to have the information, but why was it classified as secret?
Could you find this out for us ?
Admiral PESST. I will check and find out, and supply it for the
record.
Senator CASE. 1)o you have any idea? Were you familiar with this
list?
Admiral PEST. No. sir, I was not.
Senator C.LsE. I see. Would you find that out for us and have the
information furnished to us?
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Admiral PEET. Yes, sir ; I will find out.
(The information referred to follows :)
,CLASSIFICATION OF COUNTRY-BY-COUNTRY LIST OF FOREIGN MILITARY INSTALLATIONS
(Supplied by Department of Defense)
The list entitled "Agreements Authorizing US Military Installations in For-
eign Countries and Areas," January 23, 1973, is classified SECRET due to
individual entries having that classification (indicated by an "(S)" preceding
each item). There are also items classified CONFIDENTIAL (indicated by a
"(C)" preceding each Item). The items not preceded by an (S) or (C) are
unclassified. The classification of the entries is governed by the classification
of the agreements to which they refer.
Senator CASE. At the moment, Mr. Chairman, I think I have taken
as much time as I should. Excuse me.
The CHAIRMAN. Senator McGovern.
Senator SYMINGTON. Would the Senator yield?
Senator MCGOVERN. Yes.
STATEMENT ON QUESTION OF CAMBODIAN PILFERAGE
Senator SYMINGTON. You have a statement you mentioned in reply
to my question. Would you read it if you have it?
Mr. TARR. It is three pages long and if the chairman wants it read
we will read it. (See p. 49.)
Senator SYMINGTON. Thank you, Senator McGovern.
MILITARY AID. TO CAMBODIA IN VIEW OF CEASE-FIRE AGREEMENTS
PROHIBITION
Senator MCGovEUN. Mr.. Tarr, article 20 (b) of the Vietnam cease-
fire agreement concerning Cambodia and Laos has this to say, and I
quote from the agreement :
Foreign countries shall put an end to all military activities in Cambodia
and Laos, totally withdraw from and refrain from re-introducing into these
two countries troops, military advisers and military personnel, armaments, mu-
nitions and war material.
As I understand it, the bill before us would fund a considerable
amount of military aid for Cambodia. Two hundred ten million dol-
lars was requested for the 1973 fiscal year.
As I understand it the military budget for Laos comes out of the
Defense budget. But how can additional military aid be furnished to
Cambodia in view of the specific prohibition of such military aid
under the Vietnam cease-fire agreement, as has been mentioned in the
press ?
Mr. TARR. Senator McGovern, my understanding is that subpara-
graph (b) of article 20 to which you refer must be read in context
with subparagraph (a) which simply says that the parties to the
agreement will abide by the Geneva agreements on Cambodia of 1954
and on Laos of 1962.
We ourselves raised questions on this point, and we were assured
by those from the State Department and the White House who were
involved in these, discussions that the understanding at the time of the
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26
cease-fire agreement was that subparagraph (b) could not be read
except in the l?ontext of subparauraph (a).
Senator McGovERN. The net result of that, whether you read it in
context or not, is to prohibit military aid; is it not?
Mr. T. Not under the Geneva agreements.
senator McGovFRN. I don't; sere how the language I read from article
20, putting an end to all milir,arv activities in Cambodia and Laos and
an end to all shipments of munitions and war materials, is qualified
in any way. It is a flat prohiaition against any further military ship-
ments into that area by either side. It is not really a question of what
the other side is doing. I don't see how either side can do it. As I
read it, it is an unqualified prohibition against such military assist-
ance.
l1a. TARR. Senator, all I can tool you is that we have been told that
the understanding was that chapter 7 regarding Cambodia and Laos
was to ixing back in force the Geneva agreements that do permit at
the request of the various governments involved items of military
assistance.
Senator MCGOVERN. That i, just one more piece of the evidence that
seems to be growing, as far is I am concerned, that this agreement
which we are arriving at now in 1972 and 1973 is pretty much a re-
statement of what we found unacceptable in 1954. If what you say is
true, then even the language :n this agreement has its validity in the
1954 agreement, and it really underscores the tragedy of all these
things we have been doing for th,a last 19 years if we are now going to
end up with the same agreement we found unacceptable back in 19;4.
I don't know what we have accomplished over the last 19 years.
(The articles referred to follow:)
[From the New York Times, Feb. 3, 1973]
ARMS TO CAMBODIA AND LAOS DEBA'CED---PENTAGON SAID To FEEL PACTS BAR HELP
WITH THE STATF D_4EPARTMENT DIFFERING
(By John W. Finney)
WASHINGTON, Feb. 2.-A disagreement has reportedly broken out within the
-Nixon Administration over whether the recently concluded agreement for a cease-
fire in Vietnam allows the United States to continue military aid to Laos and
Cambodia.
Senate Democratic sources report that they have been informed by State De-
partment officials that the Defense Department is being urged by the State De-
partment, and apparently by the White House office of Henry A. Kissinger, to con-
tinue military aid to Laos and Cambodia and not to withdraw any of the military
aid personnel assigned to the two countries. The aid amounts to some $500-million
a year.
Directom of the military aid program in the Pentagon have reportedly ques-
tioned whether such continuation of military aid was permissible under the Viet-
nam peace agreement and are said to be demanding that any orders to continue
the aid programs be put in writing by either the State Department or the White
House.
The agreement is specific in restri,!ting the military aid provided to the contend-
ing sides in South Vietnam. It provide, that from the start of the cease-fire last
Sunday, all military aid must be :limited to replacing, on a one-tor-one basis,
equipment and armaments that have become worn out or destroyed.
But when it comes to military aid to Laos and Cambodia, the agreement is less
specific and subject to varying interpretations within the Administration.
Article 20 of the agreement, dealing with Cambodia and Laos, provides in Secr-
tion A that all parties "shall strictly respect" the 1954 Geneva Agreements oa
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Cambodia and the 1962 Geneva Agreements on Laos-agreements that basically
establish the independence and neutrality of the two nations.
Section B of Article 20 goes on to provide : "Foreign countries shall put an end
to all military activities in Cambodia and Laos, totally withdraw from and re-
frain from reintroducing into these two countries troops, military advisers and
military personnel, armaments, munitions and war material."
It is Section B that Defense Department officials cite in questioning whether a
continuation of the military aid programs is permissible under the agreement.
To Defense Department officials, the clear intent of this section is to cut off mili-
tary aid to the two nations, although no precise deadline is set for the
termination.
However, State Department officials, in arguing that continued military aid is
permissible, cite Section A of the article, which calls on all parties to respect the
1954 and 1962 Geneva accords. They note that both the 1954 Agreements on Cam-
bodia and the 1962 Agreements on Laos permit each country to request and re-
ceive military aid needed for self-defense.
Therefore, State Department officials contend, the Vietnam cease-fire agree-
ment permits military aid to be continued if requested by the governments in Laos
and Cambodia. Describing Section B as redundant, they said they were governed
by Section A.
The present intention, State Department officials said, is to continue military
aid to Laos and Cambodia unless such aid is specifically prohibited in any truce
agreements worked out by the contending factions in the two countries.
The Senate majority leader, Mike Mansfield of Montana, said in an interview
that he would advocate "a cut-off of military aid to Laos and Cambodia as soon
as a cease-fire is reached and a truce is arranged."
In the defense budget submitted to Congress earlier this week, the Administra-
tion asked for $2.1-billion in military aid for South Vietnam and Laos in the
fiscal year beginning July 1, with about a sixth of the total for Laos. Military aid
for Cambodia is handled in separate legislation.that has not yet been submitted
to Congress.
For the current fiscal year, which ends June 30, the Defense Department has
scheduled $49-million in military aid for Laos plus $50-million in "supporting
assistance," an indirect form of military aid used to help a nation carry a heavy
defense budget.
For Cambodia, the Defense Department has proposed $209.5-million in military
aid in the current fiscal year, plus $75-million in supporting assistance.
Because of a stalemate that developed in the last Congress on foreign aid
legislation, however, foreign aid for Cambodia and other countries is being pro-
vided under a continuing resolution, with spending at basically least year's rates.
That continuing resolution expires at the end of this month.
The United States maintains a military mission of more than 500 in Laos.
In Cambodia, where the United States resumed military aid in 1970 after the
ouster of Prince Norodom Sihanouk as chief of state, there is a 50-man "military
equipment delivery team," that is not supposed to give military advice to the
Cambodians.
U.S. AIR STRIKES IN LAOS
HONOLULU, Feb. 2.-The Office of the Commander of United States forces in
the Pacific said today that American aircraft continued bombing missions in
Laos for the fifth straight day.
A three-line announcement said only that United States aircraft, including
B-52's, continued operations over Laos at the request of the Laotian Government.
[From the Washington Star-News, Feb. 5, 1973]
INDOCHINA ABMs LOOPHOLE?
(By Oswald Johnston)
The United States is free to continue supplying military aid to both Laos and
Cambodia after a cease-fire there, the State Department said today.
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Despite language in the V iet lair peace agreement banning a reintroduction
of war material into Laos or Cambodia after the withdrawal of foreign troops,
the State Department says the agreement allows continuing aid to the established
governments, both of which have been U.S. allies in Indochina.
State Department spokesman John F. King said this interpretation of the
complicated article in the Vietnam peace document referring to Laos and Cam-
bodia was not objected to by Ncrth Vietnamese negotiators when the agreement
was haiumered out last month.
King refused to say however, whether this point was covered in a secret under-
standinvg, either oral or written, with the North Vietnamese.
"The right of the government, of Laos and Cambodia to import arms for self
defense is in no way impaired," King said.
To explain this. King pointed out that the peace accord's ban on reintroducing
war supplies "has to be read in context" of language saying the Geneva Agree-
ments of 1954 and 1962 are still to be enforced.
Under those accords, King explained, the governments of both Laos and
Cambodia are allowed to receive aid, military and economic, from "any source."
"In negotiating Article 20 of the Vietnam agreement (which refers to Laos and
Cambodia cease-tires and foreign troop withdrawal), there was no intent to
change those accords of 1954 and 1962," King said.
The operative language in A::?ticle 20 is aimed at withdrawal of the 1'orth
Vietnamese forces now operating in both Laos and Cambodia. The terminology
"foreign troops" also refers, however, to U.S. ground forces operating in Laos
and to Thai troops who have been fighting on the government's side in Laos.
There is one hitch in this readin;t of the Laos-Cambodia situation, and King
declined to discuss it. This is the fact that the North Vietnamese recognise as
the governments of both Laos and Cambodia the rebel forces they have been
supporting.
The Laotian rebels, the Pathei Lao, regularly refer to the Royal Laotian gov-
ernment of Prince Souvanna Phoume (as the State Department styles it) as the
government in Vientianethe current and temporary capital of the country.
Likewise, forces loyal to Prince Norodom Sihanouk, the deposed Cambodian
ruler now in, agile in Peking, refuse to recognize the legitimacy of Premier Lon
Nol's regime in Phnom Penh.
UNITED STATES GA.N GIVE ARMS TO LAos, CAMBODIA, STATE DEPARTMENT INSISTS
The United States can continue to supply arms to Laos and Cambodia under
the Vietnam peace accord, the State Department said yesterday.
The statement, issued by depart:inent spokesman John King, came in re-
sponse to a flew York Times report Saturday that there was division be-
tween the State and Defense departments over interpretation of this point in
the peace accord.
The newspaper said the Defense Department felt a provision requiring for-
eign countries to refrain from nilitary activities in the two Southeast Asian
countries, including the reintrod-icti.on of arms and war material, banned future
U.S. military aid.
But King said that Article 20 of the 'Vietnam cease-fire agreement, which
contains the provision banning reintroduction of troops and war material, allows
the supply of arms to the governments of Cambodia and Laos for self-defense.
He cited Paragraph A of Article 20, which calls on the Vietnam cease-fire
signatories to adhere to the 11154 and 1962 Geneva agreements. It is these
accords that allow the supply of arms for :elf-defense, the spokesman explained.
The State Department would not address itself, however, to the question of
whether North Vietnam or China would be free to supply arms to Prince Noro-
domn Sihanouk, whom they recognize as the legitimate head of Cambodia.
King said that "in negotiating Article 20 of the Vietnam agreement there was
no intent to change those [The Geneva] agreements." The agreements ended
French involvement in. Indochina indestablished. the neutrality of the two
Southeast Asian countries neighbjri:ng Vietnam. ,
King said that Paragraph B of Article 20, which The New York Times said
was read by the Defense Department as a ban on future U.S. military aid, was
aimed at foreign troops and the arms they had with them.
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When asked whether the removal of foreign forces provided for in this sec-
tion meant that the roughly 4,000 so-called Thai volunteers fighting on the royal
Laotian side must be withdrawn, King said only that the agreement meant
"all foreign troops."
U.S. military aid to Laos and Cambodia is currently running at about $500
million a year.
[From the New York Times, Feb. 15, 1973]
FUTURE MILITARY AID To LAOS
To THE EnITOR : John Finney's Feb. 3 report that the State Department and
the Defense Department hold differing views over future military aid to Laos
snakes depressing reading for anyone familiar with the history of U.S. involve-
ment with that country. In the mid-fifties, there was a strikingly similar dispute
between these two departments, with which your readers should be made
familiar.
Then, following the signing of the SEATO Treaty in September, 1954, Secre-
tary of Defense Charles E. Wilson requested the Joint Chiefs to prepare recom-
mendations regarding the optimum size of the Lao Army and the amount of
U.S. military aid that would be required. In a move which must continue to
perplex those who always see the U.S. military as single-minded proponents of
large armies and war, the Joint Chiefs concluded that, with the end of the war
in Vietnam and with the inclusion of Laos under the "umbrella" provided by
SEATO, it was desirable to reduce the Lao Army from its wartime strength of
15,000 to a level needed for routine police work.
It was the State Department that urged a massive commitment of U.S. re-
sources. Concerned that the Lao Army appeared to be the only cohesive force
in the country, Department of State officials successfully opposed the Joint
Chiefs' view. More importantly, they persuaded the U.S. Government to support
a Lao Army of 25,000, or a 66 per cent increase in the size of an army the U.S.
military thought should be reduced into nonexistence.
The political and economic consequences of supporting such a large army are
apparent to anyone who has visited Laos. In an underdeveloped country with
no industrial base, the salaries of the ballooning Lao Army-it was to climb
toward 100,000 in the 1960's-had a catastrophic effect on the local economy.
Run-away inflation developed since there were no goods to buy. To counter the
inflation, the U.S. had to pour massive amounts of aid into the country. This
in turn corrupted Lao political and social life. Moreover, with so many young
men in the army, Laos could not even produce enough rice to feed itself ; large
imports from neighboring Thailand became necessary.
In the mid-fifties, a key factor influencing the Joint Chiefs' decision to recom-
'mend a cut in the size of the Lao Army was the prohibition inherent in the
Geneva agreements against U.S. establishment of a Military Assistance Group
in Laos to supervise training. Ironically, Pentagon officials today are question-
ing whether continuation of military aid is permissible under the Vietnam
peace agreement. Citing one clause of the agreement, they say it isn't; citing
another, State Department officials say it is.
This is not meant to suggest that historical parallels always enlighten. Some-
times they mislead. But enough has been said to make clear that Congress
should insist on a very persuasive case indeed before it concludes again that
in Southeast Asia the Pentagon is always wrong and the State Department is
always right. CHARLES W. MAYNES,
New York, Feb. 6, 1973.
(The writer is a former foreign service officer, U.S. Embassy, Laos.)
USE OF U.S. AID TO FINANCE COMMERCIAL IMPORTS
Senator McGovERN. In another connection, Mr. Tarr, as you know,
much of the U.S. economic aid to South Vietnam, Cambodia, and Laos,
I think a very high percentage of it, is now used to finance commercial
imports. There have been stories appearing in the press over the last
90-989-73-5
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30
few months, two of which, Mr. Chairman, I would like to ask unani-
mous consent to have made part of the record--
7')!e CHAIRMAN. I'Vithoiit objection it is so ordered.
(The information referred to follows:)
[From the (Washington 1 Sunday Star and Daily -News, Nov. 26, 19721
CAMBODIA'S ELITE Grows Rica WITH U.S. Ala
(By a'amniy Arbuckle)
PIINOM PENIr, CAUnonrA.--The Cambodian economy is running on a "more busi-
ness than usual" basis despite the war, courtesy of the American taxpayer, diplo-
matic and Cambodian officials who are disgruntled with rampant corruption and
fat living in this capital say.
"'There is no belt tightening here," one diplomat said, commenting on effects
of the war on Cambodia.. The vehicle which brought opulence in time of war is
once again the same as in the other countries of Indochina, an American eco-
nomic aid program with the same old ingredients, the setting np of It corrupt local
official and Chinese merchant elite, insufficient control of U.S. funds, economic
thinking on the part of American officials which takes no account of the effects of
U.S. economic aid on the recipient country's society and, in the case of C'anthodia,
outright bribery of a foreign government.
Auocrican economic aid to Cambodia is tied almost completely to financing im-
ports into Cambodia. This is done through two programs--the Commodity Import
Program (CI1') and the Exchange Support Fund (ESF).
U.S. of iiciaLsa in Phnom Penh admit one of their aims is to keen the Cambodian
volume of imports at a prewar level. After two years of war, Cambodian exports
of rice, rubber and tobacco have become almost non-existent as the Communists
have seized control of large areas of the countryside, cut roads and rail coni-
munica.tion. of course, without axports, Cambodia cannot pay for imports. There-
fore the IJni,ted States has stepped in to finance Cambodian imports.
American economic reasoning on financing Cambodian imports is this : the out-
break of war in Cambodia brought r.hout a large Cambodian military budget. In
order to pay the troops and other war expenses, the Cambodian National Rank
printed large numbers of bankrotee for Cambodian government use. This meant
there was a large supply of monev in the country. As people had more paper
money there was a eorrespondir.g rise in prices and inflation. The United States,
by financing imports, makes goods available to soak up the extra money supply
and movement of currency nfner:attes funds for the Cambodian government
through customs revenues and tuxes.
It all sounds very feasible until a close look is taken at the $110 million U.S.
aid economic program and what it actually does.
Some $75 million is budgeted in fiscal year 1973 for the CIP, an aimmnf ecn-
nonic sources say is about $25 million in excess of Cambodia's actual import
needs. Some of the money is being used to import luxury articles such as air
conditioning- equipment and tele-ision sets.
Informed sources say it is ridiculous that these luxury articles should ii? mr
ported to- be sold to a small group of people who can only afford them because
of the large profits they make our of the C1P in the first place.
This group is a small elite groun of high-ranking Cambodian officials and
businessmen. They are getting rich because the U.S. import program allows then[
to import goods from the Unites` States at a preferential rate of 130 Cambodian
riels to the U.S. dollar compared to a current market rate of about 190 riels to
the dollar. These businessmen do nor pass on this bonus to the Cambodian con-
sumer whom they charge at the 190-riel rate this profit is instead transferred into
black market U.S. dollars which are slipped out of Cambodia to Hong Kong
and Singapore, large-scale capital flight of Cambodian foreign exchange.
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U.S. embassy officials, asked about this state of affairs, explain lamely that
importers have a waiting period for goods purchased in the United States of five
or six months. Without this preferential tariff they would not risk funds to order
U.S. goods. Because it is U.S. money involved Congress insists Cambodia buy
U.S. goods officials said.
Junior officials in the Cambodian ministries complain this preferential tariff
system has led to formation of a small business elite while the ordinary Cambo-
dian has various imported goodies dangled in front of his eyes which he can't
afford. Desire to have luxury items has led to an increase in already rampant
corruption in government offices and social dissatisfaction, sources said. Nor does
the Cambodian government benefit from customs revenues or taxes. Economic
sources charge there have been irregularities in the agency which processes im-
porters applications and importers have not been paying customs dues or tax.
"Cambodia is an undisciplined society, there is no way of checking on these
things here or collecting revenues properly," sources said. Thus the U.S. aim of
adding to government revenues is imperfectly attained.
Sources here say the U.S. Cambodian import program would be more viable
if it were confined to essential goods for the average Cambodian, cumbersome
paper procedures eliminated making faster delivery times, the preferential tariff
eliminated and therefore more Cambodian riels soaked up. U.S. financed imports
and the whole tied to cleanup of corruption in various Cambodian government
departments, particularly customs.
The CIP accounts for 70 percent of Cambodian total imports. The remainder
is handled through the exchange operations fund, a $35 million fund to which
the United States officially contributes $12.5 million.
U.S. economic sources here are enthusiastic about the ESP because the Cam-
bodian national bank fixes the dollar-riel rate daily, forcing would-be importers
to bid for dollars for their import needs. This prevents "runs" by merchants on
U.S.-supplied funds, U.S. officials say, because the bank can enforce a high ex-
change rate simply by refusing to sell dollars if importers' bids are too low.
OUT OF SIGHT
This should not give U.S. officials reason for jubilation, however. What ESP
does in fact is provide the Cambodian government with foreign exchange with
which it finances local businessmen to import luxuries from countries like Japan.
The United States has no means or rights to audit just how the $12.5 million
is used by Cambodia, economic sources here say.
Press reports in Cambodian newspapers published Nov. 9 revealed some abuses
that go on. They alleged 1,000 Honda motorcycles were imported from Japan
but no customs tax was paid and that one of the defendants in the case would
be the chief of Camdodian customs. The case was postponed because the customs
chief failed to appear in court.
[Prom the New York Times, Nov. 30, 19721
CAMBODIAN WAR 1ONRICUIES TIIE CORRUPT, DEBASES TIIE POOR
(By Sydney II. Schanberg)
PNOMPENII, CAZMBOnIA, Nov. 29.-The sons of generals drive Alfa Romeos and
Cougar fastbacks. The governor of a province is known to sell ammunition and
drugs to the enemy. Other government officials can be seen selling automatic
rifles and uniforms to wealthy merchants, who in turn sell them to both sides.
Low-salaried colonels-some accused of pocketing the payrolls of their units-
build luxury villas here in the capital and rent them to Americans for $700 a
month.
At the other end of the scale hundreds of thousands of Cambodian refugees
uprooted by the fighting and janinied into 1'nompenh often cannot afford to buy
enough rice. The price has rocketed as the Communists have blocked supply
routes and officials have engaged in profiteering with the emergency supplies
brought in by the Americans.
The refugees live in new shantytowns, in empty railroad cars and with rela-
tives in houses with wall-to-wall people.
This is the distraught face of Cambodia after two and a half years of war-a
country of open green spaces that is now a country of human islands, where
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people huddle in the isolated :ow,as and cities still under Government control
and await the next rocket or sapper attack by the Communist forces, which are
all around them.
`?I'he mind protests," says a reft