ANONYMOUS LOANS BY PENTAGON FINANCING ARMS TO 14 COUNTRIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP69B00369R000100240022-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 15, 2016
• Document Release Date: April 13, 2004
• Sequence Number: 22
• Publication Date: July 24, 1967
• Content Type: NSPR

l OC,(6 TlvvAopro &c6T4&1Release 2004/05/05: CIA-RDP69B00369R000100240022-5
Anonymous Loans by Pentagon
Financing A rms to 14 Countries
WASHINGTON, July 23-The)
Defense .Department has been In addition to the country -x
using anonymous loans from loans since mid-1965, the De-j
fense partmept is believed to
the Export-Import Bank to fi r,.,,,s,,,,"..a;,... -.1
nance arms sales in Latin Amer-
ica, the Middle East, North
Africa and Southeast Asia.
Informants have disclosed
that the "$591-million the . Pen-
tagon obtained from the bank
between mid-1965 and last June
30 through so-called "country-X
accounts" was lent to 14 coun-
tries for purchases of American
armaments.
Under the country-X device, ~
the bank opens a line of credit)
to the Defense Department
arms salesman, Henry J. Kuss
Jr., which Mr. Kuss lends to the
country involved for the arms
purchase.
The loans are guaranteed by
the Defeinse DQpartmedi.rnroug '
its $383 million revolving arms
sales credit fund under a law
i that requires that only 25 per
cent of the loan must be cov-
ered by the fund.
The extent of the bank's in-
volvement in the arms traffic
brought vigorous protests in
Congress last week and has.
held up action on legislation to
extend the life of the Govern-
ment-owned institution for five
more years and expand its lend.
ing authority,
In closed hearings before the
House Banking and Currency
Committee last Monday, Harold
Linder, the bank president, as-
serted that until that day he
had not known nor wanted to
know the names of the coun-
tries that had received the
loans,
Five of the countries are in
Latin America-Brazil; Argen-
tina, Peru, Chile and Venezuela.
Four are Middle Eastern coun-
tries-Iran; Saudi Arabia, Jor-
dan and Israel. Three are in
th nd Southeast Asia-
million in loans to underdevel-
oped countries that the Penta-
gon made directly from the
revolving credit account or ob-
tained from commercial banks.
The Export-Import Bank has
also directly lent at Defense
Department request since the,
fiscal year 1963, $1.1-billion
more to a number.of developed
countries, including Austria,
Italy, Britain and Australia, for
.arms purchases from Mr. Kuss.
Over the last two fiscal
years, arms loans have consti-
tuted more than 39 per cent of
the bank's lending business,
and senior administration offi-
cials have testified that the
bank has made further com-
mitments to lend $1-billion
more for weapons during the
current and future fiscal years.
The exact amounts of the
country-x loans to each of 14
aforementioned nations are un-
known. It is also believed that
some of the loans as of last
June 30 were increments of
large arms purchases that will
require future loans to com-
plete financing of the sales.
The informants, however,
supplied some regional and lo,
cal breakdown.
About 75 per cent of the
country-x loans, they said, ap-
proximately $450-millign, went
to the four Middle Eastern
countries and Morocco.
The five Latin-American
countries reportedly obtained
about $100-million. Brazil is un-
derstood to have received about
$43-million-Argentina about
$21-million and Venezuela ap-
proximately $29-million, with
the remaining $7-million di-
vided between Peru and Chile.
4pproximately $24-million,
about 4 per cent, was lent to
India and Pakistan, and the re,
mainder of the $591-million
went to Malaysia and Taiwan.
Iran apparently obtained its
loan as at least partial credit
towar da $200-million purchase
in 1966 of F-4 Phantom jets,
the most advanced of Ameri-
can operational fighter-bomb-
akistan, India and Malaysia, loan to Saudi Arabia was ap
The North. African country is
Morocco. Taiwan is the 14th
recipient.
patently financed toward a pur-
chase of $120-million in Hawk
antiaircraft missiles and 'as-
sorted other hardware.
Israel is believed to have ob-
tained its loan for Hawk anti-
aircraft missiles and tanks that
Mr. Kuss sold the Israelis in
1965 and 1966. Jordan was ap-
parently lent the money for
the tanks and armored person-
nel carriers it obtained last
year from the United States.
Argentina purchased 25 A-4
Skyhawk fighter-bombers from
the United States in 1965 ahd
Venezuela has reportedly been
sold helicopters for use against
the pro-Communist guerrillas
there.
Morocco has been sold a
squadron of F-5 Freedom fight-
ers and Malaysia reportedly ob-
tained a loan of about $15-mil-
lion for jet trainers and others
equipment.
The loan to India is some-1
what mystifying because until!
last May the Administration of-I
ficially imposed an embargo on
the shipment of so-called lethal
military equipment to India
and Pakistan. Shipments of
what the Administration calls
nonlethal equipment, such as
radar and trucks, had been al-
lowed.
Some military specialists con-
sider the distinction specious
because an armed force needs
support equipment as well as
guns and tanks to be effective.
A sizable number of Demo-
crats and Republicans on the
House and Senate Banking
Committees are angry about the
use of the bank to finance arms
business, but they are even
more disturbed by the fact that
its funds have been employed
to sell arms to countries in-
volved in disputes with their
neighbors.
They point out, that the major
portion the loans within the
last two fiscal years, about
$450-million, went to the
Middle East and North Africa,
the most explosive areas.
Approved For Release 2004/05/05 : CIA-RDP69B00369R000100240022-5