Order Code RL32260
U.S. Foreign Assistance to the Middle East:
Historical Background, Recent Trends,
and the FY2007 Request
Updated December 21, 2006
Jeremy M. Sharp
Middle East Policy Analyst
Foreign Affairs, Defense, and Trade Division

U.S. Foreign Assistance to the Middle East:
Historical Background, Recent Trends,
and the FY2007 Request
Summary
This report is an overview of U.S. foreign assistance to the Middle East from
FY2002 to FY2006, and of the FY2007 budget request. It includes a brief history of
aid to the region, a review of foreign aid levels, a description of selected country
programs, and an analysis of current foreign aid issues. It will be updated periodically
to reflect recent developments. For foreign aid terminology and acronyms, please see
the glossary appended to this report.
Congress both authorizes and appropriates foreign assistance and conducts
oversight of executive agencies’ management of aid programs. As a region, the
Middle East is the largest annual recipient of U.S. economic and military aid. With
Iraq in need of long-term reconstruction assistance, many analysts expect Iraq to
become a regular recipient of U.S. foreign aid.
For policymakers, foreign assistance plays a key role in advancing U.S. foreign
policy goals in the Middle East. The United States has a number of interests in the
region, ranging from support for the state of Israel and Israel’s peaceful relations with
its Arab neighbors, to the protection of vital petroleum supplies and the fight against
international terrorism. U.S. assistance helps to maintain the 1979 Camp David peace
accords between Israel and Egypt and the continued stability of the Kingdom of
Jordan, which signed its own peace treaty with Israel in 1994. U.S. funding also
works to improve Palestinian civil society, and aid officials have worked to ensure
that U.S. aid to the West Bank and Gaza Strip is not diverted to terrorist groups.
Since the attacks of September 11, 2001, the United States has established new
region-wide aid programs to promote democracy and encourage socio-economic
reform in order to undercut the forces of radicalism in some Arab countries.
U.S. aid policy has gradually evolved from a focus on preventing Soviet
influence from gaining a foothold in the region and from maintaining a neutral stance
in the Arab-Israeli conflict, to strengthening Israel’s military and economy and using
foreign aid as an incentive to foster peace agreements between countries in the
region. When adjusted for inflation, annual U.S. assistance to the Middle East in the
decades following World War II was only a small fraction of current aid flows.
However, beginning in the early 1970s, the United States dramatically increased its
foreign assistance to the Middle East. After the U.S. withdrawal from South Vietnam,
the Middle East as a whole began to receive more U.S. foreign aid than any other
region of the world, a trend that has continued to today.
For FY2007, Foreign Operations programs are currently operating under the
terms of a continuing appropriations resolution (H.R. 5631/P.L. 109-289, as
amended), which provides funding at the FY2006 level or the House-passed FY2007
level, whichever is less. The continuing appropriations resolution expires February
15, 2007.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Foreign Aid to Support Key U.S. Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Assistance to the Middle East Since 1950 . . . . . . . . . . . . . . . . . . . . . . . 3
1950-1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1971-2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Recent Trends in Foreign Aid to the Middle East . . . . . . . . . . . . . . . . . . . . 7
Country Summaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Economic Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Military Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Other Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Economic Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Military Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Economic Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Military Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Palestinians — West Bank/Gaza
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Direct Aid to the Palestinian Authority . . . . . . . . . . . . . . . . . . . . . . . . 16
Other Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
FY2006 Humanitarian Aid and FY2007 Foreign Operations Bills . . . 16
Other Recipients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Foreign Aid Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Restrictions on Aid to the Palestinians . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Foreign Aid and a Hamas-Controlled Palestinian Authority . . . . . . . . 19
Current Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
State Sponsors of Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The Response to 9/11: U.S. Assistance to Promote Development,
Democracy, and Reform in the Middle East . . . . . . . . . . . . . . . . . . . . 21
The Broader Middle East and North Africa Initiative . . . . . . . . . . . . . 21
The Middle East Partnership Initiative . . . . . . . . . . . . . . . . . . . . . . . . 22
Altering U.S. Assistance to Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Legislative Proposals and Congressional Action on Aid to Egypt . . . 23
Appendix A. Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

List of Tables
Table 1. Total U.S. Foreign Assistance to the Middle East, 1950-1970 . . . . . . . . 4
Table 2. Total U.S. Assistance to the Middle East: 1971-2001 . . . . . . . . . . . . . . 7
Table 3. Total U.S. Assistance to the Middle East: FY2002-FY2007 Request . . 8
Table 4. U.S. Funds for Iraq Reconstruction and Iraqi Opposition,
FY2003-FY2007 Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Table 5. U.S. Assistance to Israel, FY2002-FY2007 Request . . . . . . . . . . . . . . 12
Table 6. U.S. Assistance to Egypt, FY2002-FY2007 Request . . . . . . . . . . . . . . 13
Table 7. U.S. Assistance to Jordan, FY2002-FY2007 Request . . . . . . . . . . . . . 15
Table 8. U.S. Assistance to the Palestinians, FY2002-FY2007 Request . . . . . . 17
Table 9. Other Regional Recipients, FY2002-FY2007 Request . . . . . . . . . . . . . 18
Table 10. Middle East Partnership Initiative Appropriations,
FY2002-FY2007 Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

U.S. Foreign Assistance to the Middle East:
Historical Background, Recent Trends,
and the FY2007 Request
Introduction
This report is an overview of U.S. foreign assistance to the Middle East from
FY2002 through the FY2007 budget request.1 It includes a brief historical review of
foreign aid levels, a description of specific country programs, and an analysis of
current foreign aid issues.2 Congress both authorizes and appropriates foreign
assistance and conducts oversight on executive agencies’ management of aid
programs. As the largest regional recipient of U.S. economic and military aid, the
Middle East is perennially a major focus of interest as Congress exercises these
responsibilities.
In the Middle East, the United States has a number of strategic interests, ranging
from support for the state of Israel and Israel’s peaceful relations with its Arab
neighbors, to the protection of vital petroleum supplies and the fight against
international terrorism. U.S. assistance was provided to support the 1979 Camp
David peace accords between Israel and Egypt and the continued stability of the
Kingdom of Jordan, which signed its own peace treaty with Israel in 1994. U.S.
funding also has attempted to improve Palestinian civil society, and aid officials have
worked to ensure that U.S. aid to the West Bank and Gaza Strip is not diverted to
terrorist groups.3 Since the attacks of September 11, 2001, the United States has
established new region-wide aid programs that promote democracy and encourage
socio-economic reform in an attempt to undercut the forces of radicalism in some
Arab countries.
For readers seeking a general overview of U.S. foreign assistance, see CRS
Report 98-916, Foreign Aid: An Introductory Overview of U.S. Programs and Policy,
by Larry Nowels and Curt Tarnoff. For information on the FY2007 Foreign
Operations Bill, see CRS Report RL33420, Foreign Operations (House)/State,
1 For the purposes of this report, the Middle East region, or Near East, is defined as an area
stretching from Morocco in the west to the Persian Gulf in the east, but not including
Turkey.
2 For assistance with foreign aid terminology and acronyms, please see the glossary
appended to this report.
3 However, since the 2006 Hamas electoral victory in Palestinian Authority elections, most
U.S. assistance to the Palestinians has been suspended with the exception of some
humanitarian aid.

CRS-2
Foreign Operations, and Related Programs (Senate): FY2007 Appropriations, by
Connie Veillette, Susan B. Epstein, and Larry Nowels.
Background
Foreign Aid to Support Key U.S. Interests
Despite changing geopolitical conditions, U.S. foreign aid to the Middle East
has historically been a function of U.S. national security interests in the region. The
United States has pursued a foreign policy that seeks stability in a region with
abundant energy reserves but volatile interstate relationships. Policymakers have
often employed foreign aid to achieve this objective. Foreign aid has been used as
leverage to encourage peace between Israel and her Arab neighbors, while
strengthening bilateral relationships between the United States and Israel and
between the United States and moderate Arab governments. Foreign aid has worked
to cement close military cooperation between the United States and governments in
the region, discouraging local states from engaging in uncontrollable arms races.
Economic aid also has had an underlying strategic rationale, as U.S. funds have been
employed to promote development in an attempt to undercut radicalism in partner
countries.
The degree to which foreign assistance has contributed to the achievement of
U.S. objectives in the Middle East is difficult to measure, but the consensus among
most analysts seems to be that U.S. economic and security aid has contributed
significantly to Israel’s security, Egypt’s stability, and Jordan’s friendship with the
United States. The promise of U.S. assistance to Israel and Egypt during peace
negotiations in the late 1970s enabled both countries to take the risks needed for
peace, and may have helped convince both countries that the United States was
committed to supporting their peace efforts. Excluding Iraq, Israel and Egypt are the
largest two recipients of U.S. aid respectively.
There is debate over using foreign aid more aggressively to pursue various
objectives in the Middle East. Some critics of U.S. policy would like to see additional
conditions placed on U.S. aid to Egypt, for example, to achieve greater respect for
democracy and human rights in that country. Others favor using the aid program
more assertively as leverage to restart the Middle East peace process. Some might
urge that aid should be conditioned on demonstrable progress in extending full
political and economic rights to women. Others, however, assert that the overt use
of aid — or the threat of aid reductions — to promote democracy and reform in the
Middle East region could lead to a backlash against the United States. The debate
over promoting democracy in the Middle East remains vigorous.
Critics of U.S. aid policy, particularly some in the Middle East, have argued that
U.S. foreign aid exacerbates tensions in the region. Many Arab commentators insist
that U.S. assistance to Israel indirectly causes suffering to Palestinians by supporting
Israeli arms purchases. Another common argument asserts that U.S. foreign aid
bolsters autocratic regimes with similar strategic interests to the United States. Some
observers have called U.S. aid policy “contradictory,” accusing the United States of

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bolstering its ties with autocratic regimes through military assistance, while
advocating liberalization in the region with less funds dedicated to reform and
development aid. As noted above, however, other analysts believe aid has helped
protect Israel’s security and stabilize the region.
U.S. Assistance to the Middle East Since 1950
1950-1970. Even when adjusted for inflation, annual U.S. assistance to the
Middle East in the decades following World War II was only a small fraction of
current aid flows to the region. Under vastly different geopolitical circumstances,
U.S. policy was geared toward supporting the development of oil-producing
countries, maintaining a neutral stance in the Arab-Israeli conflict while supporting
Israel’s security, and preventing Soviet influence from gaining a foothold in Iran and
Turkey. U.S. policymakers used foreign aid in the 1950s and 1960s to support these
objectives.
U.S. aid to Israel was far less in the 1950s and 1960s than in later years.4
Although the United States provided moderate amounts of economic aid (mostly
loans) to Israel, at the time, Israel’s main patron was France, which supported Israel
by providing it with advanced military equipment and technology.5 In 1962, Israel
purchased its first advanced weapons system from the United States (Hawk
antiaircraft missiles).6 In 1968, a year after Israel’s victory in the Six Day War, the
Johnson Administration, with strong support from Congress, approved the sale of
Phantom fighters to Israel, establishing the precedent for U.S. support for Israel’s
qualitative military edge over its neighbors.7
Between 1950 and 1967, the United States courted Egypt using foreign aid as
a bargaining chip. Cold War competition for Egypt was fierce during this time
period, as Egypt received a steady stream of surplus U.S. wheat shipments under the
Food for Peace Program (P.L.480). Despite these measures, offers of additional
economic aid failed to convince Egypt to abandon a parallel relationship with the
Soviet Union, as Egypt pursued a strict Arab nationalist and neutral policy that
shunned close alliances with Western powers and cooperation and peace with Israel.
Internationally, after 1955, Egypt obtained military aid mainly from the Soviet Union.
Beginning in 1965, foreign assistance levels to the region began to decline
considerably, culminating in an almost 80% drop in economic aid to the Middle East
by 1970. A host of factors, most notably the June 1967 War and the rising cost of the
4 In 1948, President Harry Truman, who sympathized with the plight of Israel in its early
days, placed an arms embargo on Israel and her Arab neighbors in order to keep the United
States neutral in the ongoing Arab-Israeli conflict.
5 France supplied Israel with military equipment mainly to counter Egyptian power in the
region. In the 1950s and early 1960s, Egypt antagonized France by providing arms and
training to Algerian fighters in Algeria’s war for independence against France.
6 “America’s Staunchest Mideast Ally,” Christian Science Monitor, August 21, 2003.
7 Section 651 of P.L. 90-554, The 1968 Foreign Assistance Act, expresses the sense of
Congress to see the United States negotiate the sale of supersonic aircraft to Israel.

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war in Vietnam, led Congress to cut funding for a number of countries. Egypt, which
had already seen its annual aid reduced, lost food aid entirely after it severed relations
with the United States during the 1967 War. Jordan and other Arab states also saw
their aid reduced. By 1970, annual appropriations to Iran were close to being phased
out, as many policymakers considered Iran to be a middle-income state that was
economically self-sufficient.
Table 1. Total U.S. Foreign Assistance to the Middle East,
1950-1970
(Loans & Grants; Current Year $ in millions)
Country/Region
Economic Military
Total
Iran
750.9
1,396.7
2,147.6
Israel
986.0
277.3
1,263.3
Egypt
884.1
0.0
884.1
Jordan
601.0
95.0
696.0
Libya
220.6
17.4
238.0
Lebanon
111.0
9.6
120.6
Iraq
45.2
50.0
95.2
Total Near East
(including other
5,610.4
2,244.4
7,854.8
recipients not listed)
Source: U.S. Agency for International Development (USAID), Overseas Loans and Grants,
Obligations and Loan Authorizations July 1, 1945 - September 30, 2001. The report is commonly
known at USAID as “The Greenbook.”
1971-2001. The decade of the 1970s witnessed a dramatic increase in U.S.
foreign assistance to the Middle East. After the U.S. withdrawal from South Vietnam,
the Middle East as a whole began to receive more U.S. foreign aid than any other
region of the world, a trend that has continued to today. U.S. foreign aid programs
became more comprehensive in nature driven by large assistance packages to Israel
and later to Egypt and other Arab governments.
Large-scale U.S. assistance for Israel increased considerably after a series of
Arab-Israeli wars created a sense among many Americans that Israel was continually
under siege.8 Consequently, Congress, supported by broad U.S. public opinion,
committed to strengthening Israel’s military and economy through large increases in
foreign aid. In 1971, the United States provided Israel with military loans of $545
million, up from $30 million in 1970. Also in 1971, Congress first designated a
specific amount of aid for Israel (an “earmark”). Economic assistance changed from
8 Between 1967 and 1973, Israel and its Arab neighbors fought the June 1967 War, the
ensuing War of Attrition (1969), and the October 1973 War. Israel also was engaged in
continual low level guerrilla warfare with the Palestinian Liberation Organization and other
guerilla groups, which had bases in Jordan and later in Lebanon. The 1974 emergency aid
for Israel, following the 1973 war, included the first U.S. military grant aid.

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project aid, such as support for agricultural development work, to the Commodity
Import Program (CIP) for the purchase of U.S. goods.9 In effect, the United States
stepped in to fill the role that France had relinquished after French President Charles
De Gaulle refused to supply Israel with military hardware to protest its preemptive
launch of the June 1967 War. Israel became the largest recipient of U.S. foreign
assistance in 1976. From 1971 to the present, U.S. aid to Israel has averaged over $2
billion per year, two-thirds of which has been military assistance.
Just as Israel’s long-standing relationship with the United States was in its
incipient stages, Egypt, its economy in desperate need of investment and capital after
two wars, began to look to the United States to help stimulate economic growth.
Egypt’s new leader, Anwar Sadat, who had been eager to rid Egypt of excessive
Soviet influence and embark on a program of economic liberalization, improved
U.S.-Egyptian relations in the mid 1970s, leading to a resumption in economic aid
in 1975, and the signing of two disengagement agreements with Israel concerning
the Sinai desert. To a lesser extent, the United States significantly increased its
economic and military aid to Jordan after the 1970-1971 civil war, in which the
Jordanian Armed Forces expelled Palestinian guerrillas from Jordan where they had
seriously threatened stability.
The 1979 Camp David Peace Treaty between Israel and Egypt ushered in the
current era of U.S. financial support for peace between Israel and her Arab neighbors.
In exchange for a complete cessation of hostilities and Israel’s return of the Sinai
Peninsula, the United States provided a total of $7.3 billion to both parties in 1979.
The “Special International Security Assistance Act of 1979” (P.L. 96-35) provided
both military and economic grants to Israel and Egypt at a ratio of 3 to 2,
respectively.10 From the Egyptian standpoint, U.S. funds helped to subsidize its
defense budget and upgrade its aging Soviet hardware. Egypt became the second
largest recipient of U.S. aid after 1979.
Since the Camp David Accords, U.S. assistance levels have remained relatively
consistent, and the United States has continued to support the peace process and the
strengthening of Israel. Israel and Egypt have been the top two regional recipients of
U.S. aid for more than two decades, while Jordan became a leading recipient in the
1990s. Notable events involving significant transfers of U.S. aid since the 1979
Camp David Accords include the following.
! In 1985, Congress approved a $2.25 billion supplemental funding
package for Israel, Egypt, and Jordan to help stabilize their
deteriorating economies.
! In 1991, Egyptian support for the U.S.-led international coalition
against Iraq’s invasion of Kuwait led Congress to authorize the
9 The Commodity Import Program for Israel ended in 1979 and was replaced with direct,
unconditional cash transfers.
10 This ratio is not found in the text of the 1978 and 1979 Camp David agreements. U.S.
officials have not officially recognized the ratio. The Egyptian government claims that a 3
to 2 ratio between Israel and Egypt was established during the negotiations.

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cancellation of Egypt’s $6.7 billion military debt. Congress also
provided Israel $650 million in emergency ESF grants to pay for
damage and other costs from the war. In addition, Israel was given
Patriot missiles during the Persian Gulf war. Aid to Jordan was
reduced significantly (nearly 75% overall decrease) after the late
King Hussein was unwilling to join the allied coalition against Iraq.
! In October 1992, Congress approved $10 billion in loan guarantees
for Israel to help it absorb a massive influx of Jews from the former
Soviet Union.11 The approval of the loan guarantees was delayed due
to disagreements between the first Bush Administration and Israel
over use of U.S. funds in the West Bank and Gaza Strip. Of the $10
billion authorized, the United States deducted $774 million as a
penalty for Israeli settlement construction in the West Bank and
Gaza Strip, leaving $9.226 billion available to cover Israeli loans.
! In September 1993, after Israel and the Palestinian Liberation
Organization (PLO) accorded mutual recognition of each other in a
step intended to lead to a future peace agreement, the United States
offered $500 million ($125 million in loans or loan guarantees and
$375 million in grants) over five years for economic development of
the Palestinian entity.12
! In 1994, in recognition of Jordan’s signing a peace treaty with Israel,
President Clinton asked Congress to pass legislation to forgive
Jordan’s $702.3 million debt to the United States (approximately
10% of Jordan’s worldwide debt). Congress appropriated a total of
$401 million in subsidies, which under pertinent budgetary
procedures were sufficient to forgive the entire $702.3 million owed
to the United States at the time.
! In November 1999, Congress approved $400 million in grants for
the Palestinians, $300 million for Jordan, and $1.2 billion for the
Israelis in 2000 to fund the implementation of the Wye River
Agreement.13
11 The U.S. loan guarantee to Israel is not a direct transfer of U.S. government funds to
Israel’s treasury. Rather, it is a guarantee on a commercial loan between the borrower
(Israel) and a private lender. A U.S. subsidy may be appropriated and set aside in a Treasury
account, held against a possible default or may be paid by the borrower (Israel). The subsidy
usually is a percentage of the total loan based in part on the credit rating of the country.
12 See CRS Report RL33530, Israeli-Arab Negotiations: Background, Conflicts, and U.S.
Policy
, by Carol Migdalovitz.
13 Signed on October 23, 1998, the Wye River Memorandum delineated steps to complete
the implementation of 1993 Oslo Peace agreement between Israelis and Palestinians. See
CRS Report RL33530, Israeli-Arab Negotiations: Background, Conflicts, and U.S. Policy,
by Carol Migdalovitz.

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Table 2. Total U.S. Assistance to the Middle East: 1971-2001
(Loans & Grants; Current Year $ in millions)
Country/Region
Economic
Military
Total
Israel
28,402.9
50,505.7
78,908.6
Egypt
25,095.8
27,607.0
52,702.8
Jordan
2,440.1
2,137.2
4,577.3
Lebanon
470.5
273.7
744.2
Palestinians
703.4
0.0
703.4
Syria
539.0
0.0
539.0
Total Near East
(including other
62,449.8
82,519.2
144,969.0
recipients not listed)
Source: U.S. Agency for International Development (USAID), Overseas Loans and Grants,
Obligations and Loan Authorizations July 1, 1945 - September 30, 2001. The report is commonly
known at USAID as “The Greenbook.”
Recent Trends in Foreign Aid to the Middle East
In the past five years, overall U.S. assistance to Middle Eastern countries has
increased moderately (excluding funds for Iraq reconstruction).14 This increase has
largely been a result of U.S. contributions to regional partners in the war on terror,
U.S. commitments to regional participants in the peace process,15 and U.S. support
for new development and democracy-promotion programs in the Middle East.
Supplemental Appropriations Acts in FY2003 (P.L. 108-11) and FY2005 (P.L. 109-
13) were the primary funding vehicles for recent increases.
Additional assistance for Israel and Egypt, which receive almost 93% of all
annual funding to the region, has fueled the increase in aid to the Middle East over
the last several years. Before the renewal of Arab-Israeli violence in 2000, the
September 11, 2001 terrorist attacks, and the Iraq war, annual aid to Israel and Egypt
was trending downward.16 However, the FY2003 Emergency Supplemental
Appropriations Act (P.L. 108-11) included $9 billion in loan guarantees over three
14 Although not part of the traditional foreign aid package to the region, Iraq reconstruction
appropriations, when taken into account, dramatically alter the assistance picture for the
Middle East. In FY2004, foreign aid to Iraq was more than three times the total U.S.
assistance package to the rest of the Middle East.
15 Following the peace talks at the Wye River Plantation in October 1998, President Clinton
proposed an aid package of $1.2 billion for Israel, $300 million for Jordan, and $400 million
for the Palestinians. Congress added $25 million for Egypt.
16 In 1998, Israel and the United States agreed to reduce U.S. economic assistance by $120
million per year and increase U.S. military assistance by $60 million per year over a 10-year
period beginning in 1999. A similar formula for reducing economic aid was applied to
Egypt, but Egypt did not receive an increase in military assistance.

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years for Israel’s economic recovery and $1 billion in military grants. For Egypt, the
United States agreed to allow $655 million in FY2002 economic aid to be
redistributed to help Egypt recover from a steep drop in tourism after 9/11. The
FY2003 Supplemental Act also allocated an additional $300 million in Economic
Support Funds (ESF) and $2 billion in loan guarantees for Egypt.
Although aid to Israel and Egypt accounts for most aid to the region, recent
increases to some smaller Arab states have been significant. For example, the
Kingdom of Jordan, which had already seen steady increases in aid throughout the
late 1990s, received an annual average of $780 million in economic and military aid
between FY2002 and FY2005 (including supplemental funding), up from an average
of $246 million per year between FY1996 and FY2001. In FY2005, aid to Morocco
was nearly doubled and was almost four times as large as its aid package in FY2002.
U.S. officials have praised Morocco for undertaking political and economic reforms
and have pledged to assist the Moroccan government in combating terrorism.
Table 3. Total U.S. Assistance to the Middle East:
FY2002-FY2007 Request
(Regular & Supplemental Appropriations; Current Year $ in millions)
Near
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
East
Actual
Actual
Actual
Actual
Estimate
Request
Region
Totals
5,567.810
8,410.000
5,556.383
5,752.111
5,307.93
5,291.257
When including funds for Iraq Reconstruction:
Near
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
East
Actual
Actual
Actual
Actual
Estimate
Request
Region
Totals
5,567.810
10,646
23,995.383
11,448.727
5,369.013a
6,039
w/Iraq
a. The Bush Administration is seeking an additional $1.6 billion for Iraqi reconstruction and $65
million in funds to promote democracy in Iran as part of its FY2006 supplemental budget
request.

CRS-9
Country Summaries
The following section provides funding details on the largest regular aid
recipients in the Middle East: Iraq, Israel, Egypt, Jordan, and the Palestinians. Each
country section features a table with a more elaborate breakdown of aid by foreign
aid account.
Iraq17
Since the start of U.S. efforts to rebuild Iraq following the ouster of Saddam
Hussein in 2003, the United States has provided about $29 billion in foreign aid for
various civilian and military rebuilding and security projects. Currently, the Bush
Administration is seeking an additional $6 billion in annual and supplemental
appropriations. At these levels, Iraq has been, by far, the largest single recent
recipient of U.S. aid worldwide, as total foreign assistance to Iraq is roughly equal
to the total amount of aid provided to all Middle Eastern countries since the terrorist
attacks of September 11, 2001.With Iraq in need of long-term development and
military assistance, many analysts expect aid requests for Iraqi reconstruction to
continue in the near future.
The FY2007 budget request seeks approximately $748 million in regular foreign
operations appropriations for the fledgling Iraqi government.18 Previously, these
programs were funded by emergency supplementals, mostly under the Iraq Relief and
Reconstruction Fund (IRRF) account. For FY2006, Congress approved $61 million
out of a total $414 million requested by the Administration, in part because billions
in previously appropriated supplemental aid (at the time about $5 billion) had gone
unspent.
Beyond the annual foreign aid budget, the Administration is currently seeking
an additional $1.6 billion for Iraqi reconstruction as part of its FY2006 supplemental
budget request. The request includes, among other things,
! $3.7 billion in Iraq Security Forces Funds to train police and enhance
the capabilities of the Iraqi military.
! $1.4 billion in ESF funds for Iraqi ministries, democracy and good
governance programming, and infrastructure projects;
! $107 million in INCLE (narcotics control & law enforcement) funds
for the rehabilitation of prisons and the protection of Iraqi judges.
17 For more detailed information on Iraq reconstruction, see CRS Report RL31833, Iraq:
Recent Developments in Reconstruction Assistance
, by Curt Tarnoff or CRS Report
RL31339, Iraq: U.S. Regime Change Efforts and Post-Saddam Governance, by Kenneth
Katzman.
18 From 1974-2005, the United States provided no aid to the Iraqi government. After
Congress passed the Iraq Liberation Act in October 1998, the United States began funding
Iraqi opposition groups in exile such as the Iraqi National Congress. From 1998-2003,
Congress appropriated an estimated $88 million in assistance for the Iraqi opposition.

CRS-10
Table 4. U.S. Funds for Iraq Reconstruction and Iraqi Opposition,
FY2003-FY2007 Request
(Regular & Supplemental Appropriations; Current Year $ in millions)
Account
FY2003
FY2004
FY2005
FY2006
FY2007
Actual
Actual
Actual
Estimatea
Request
ESF
-
-
-
61.000
478.770
INCLE -
-
-
-
254.600
NADR (anti-terrorism)
-
-
-
-
14.130
IMET
-
-
-
-
1.185
Iraqi Relief and
2,475.000
18,439.000
-
-
Reconstruction Fund
Iraq Security Forces
-
-
5,700.000
-
Fund (DoD)
Total
2,475.000 18,439.000
5,700.000
61.000a
748.685
Source: CRS Report RL31833, Iraq: Recent Developments in Reconstruction Assistance, by Curt
Tarnoff.
a. The Bush Administration is seeking an additional $5.3 billion for Iraqi reconstruction as part of its
FY2006 supplemental budget request.
Israel19
Overview. Since 1976, Israel has been the largest annual recipient of U.S.
foreign assistance and is the largest cumulative recipient since World War II. Strong
congressional support for Israel has resulted in Israel’s receiving benefits that may
not be available to other countries. For example, Israel can use U.S. military
assistance for research and development in the United States and for military
purchases in Israel.20 In addition, all U.S. foreign assistance earmarked for Israel is
delivered in the first 30 days of the fiscal year. Other recipients normally receive their
aid in staggered installments at varying times. The United States gives all Economic
Support Funds (ESF) directly to the government of Israel as a grant cash transfer
rather than allocating funds for specific development projects.21
19 In addition to U.S. foreign assistance, Israel also receives funds from annual defense
appropriations to support the research and development of new military technologies such
as the Arrow anti-missile system. See CRS Report RL33322, U.S. Foreign Aid to Israel,
by Jeremy M. Sharp.
20 In FY1977, the Israeli government, for the first time, received special permission to use
FMF for research and development in Israel on the Merkava tank. After this precedent was
established, Israel has been allowed to spend a set percentage of its annual FMF inside
Israel.
21 Some other governments, such as Egypt and Jordan, receive a percentage of their
economic aid as a grant cash transfer.

CRS-11
Economic Assistance. Former Israeli Prime Minister Binyamin Netanyahu
told Congress on July 10, 1996, that Israel would end its dependency on U.S.
economic assistance. At the time, Israel was receiving $1.2 billion in grant economic
assistance and $1.8 billion in grant military assistance annually. In 1998, Israel and
the United States agreed to reduce U.S. economic assistance by $120 million per year
and increase U.S. military assistance by $60 million per year over a 10-year period
beginning in 1999 leading to a complete phase-out of economic assistance but
increasing military assistance to $2.4 billion by 2008.22 Israel received $237 million
in ESF for FY2006, down from $407 million in FY2005. The Administration has
requested $120 million in ESF for Israel in FY2007.
Military Assistance. Congress has taken measures to strengthen Israel’s
security and maintain its technological advantage over neighboring militaries. Annual
Foreign Military Financing (FMF) grants to Israel represent about 20% of the Israeli
defense budget and FMF levels are expected to increase incrementally by $60 million
a year to a level of $2.4 billion by 2008.23 Israel also is eligible to receive Excess
Defense Articles under section 516 of the Foreign Assistance Act. For FY2007, the
Administration has requested $2.34 billion in FMF for Israel.
Since FY1988, Congress has allowed Israel to use approximately a quarter of
its FMF funds as cash grant to pay for Israeli defense purchases in Israel ($595
million for FY2006). Since 1990, Congress has provided for Israel to receive its FMF
aid in a lump sum during the first month of the fiscal year, which allows Israel to
invest the funds in U.S. Treasury notes and earn interest similar to ESF early
disbursements.
Other Assistance. The FY2003 Emergency Supplemental Appropriations
Act (P.L. 108-11) provided $9 billion in loan guarantees for Israel over three fiscal
years. On November 26, 2003, the United States announced that the first tranche of
$3 billion in loan guarantees would be reduced by $289.5 million because of Israeli
settlement activity and the continued construction of the security barrier through
Palestinian areas beyond Israel’s 1967 border.
22 This agreement is noted in the conference report for the Security Assistance Act of 2000,
H.R. 4919/P.L. 106-280, October 6, 2000.
23 “U.S. to phase out economic, boost military aid to Israel,” CNN.com, January 19, 2001.
Available at [http://www.cnn.com/2001/WORLD/meast/01/19/us.israel/]

CRS-12
Table 5. U.S. Assistance to Israel, FY2002-FY2007 Request
(Regular & Supplemental Appropriations; Current Year $ in millions)
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
Account
Actual
Actual
Actual
Actual
Estimate
Request
ESF
720
596.100
477.168
357.120
237
120
FMF
2,040
3,086.350
2,147.255
2,202.240
2,257
2,340
Refugees
60
60
50
50
40
40
Othera
28
n/a
n/a
n/a
.500
.320
Total
2,848
3,742.450b
2,674.423
2,609.360
2,534.5
2,500.320
Source: U.S. State Department
a. This category includes funds for counter terrorism, border control, and technical cooperation.
b. This figure does not include $9 billion in U.S. loan guarantees.
Egypt24
Overview. Since 1979, Egypt has been the second largest recipient of U.S.
foreign assistance, receiving an annual average of close to $2 billion in economic and
military aid. Congress typically earmarks foreign assistance for Egypt in foreign
operations appropriations bills. The annual earmark has included a statement that
Egypt should undertake further economic reforms in addition to reforms taken in
previous years. In FY2006, Egypt’s FMF earmark was excluded from the Senate-
approved version of the annual foreign aid bill but was later reinstated by conferees.
Economic Assistance. In January 1998, Israeli officials negotiated with the
United States to reduce economic aid and increase military aid over a 10-year period.
A 3 to 2 ratio similar to U.S. aid to Israel and Egypt was applied to the reduction in
aid ($60 million reduction for Israel and $40 million reduction for Egypt), but Egypt
did not receive an increase in military assistance. Economic aid, projected to decrease
to approximately $400 million by 2008, has dropped in annual $40 million
increments from $815 million in FY1998 to $455 million in ESF for the FY2007
request.25
Economic aid to Egypt has been traditionally divided into three components: (1)
USAID project programming, (2) the Commodity Import Program (CIP), and (3)
direct cash transfer. With annual economic aid in decline, there has been concern
among lawmakers that USAID programming has been adversely affected by recent
24 For additional information on U.S. aid to Egypt, see CRS Report RL33003, Egypt;
Background and U.S. Relations
, by Jeremy M. Sharp. For details on USAID’s Egypt
program, see [http://www.usaid-eg.org/].
25 In FY2003, Egypt, along with Israel and several other regional governments, received
supplemental assistance as part of the FY2003 Iraq Emergency Supplemental
Appropriations Act (P.L. 108-11). It included $300 million in ESF for Egypt, which could
be used to cover the costs of up to $2 billion in loan guarantees. The loan guarantees were
to be issued over three years.

CRS-13
reductions. Congress has specified that more of Egypt’s ESF be devoted to
development projects, specifically in the fields of democracy and governance,
education, and health. As part of the FY2007 request, USAID plans on spending
$255 million in ESF. The Administration intends to provide $183 million of Egypt’s
$455 total ESF package as a direct cash transfer. There is no request for CIP funds
in the FY2007 Administration budget. The CIP program provides hard currency for
the Egyptian private sector to import U.S. goods.26
Military Assistance. The Administration has requested $1.3 billion in FMF
for Egypt in FY2007 — the same amount it received in FY2006. FMF aid to Egypt
is divided into three general components: (1) acquisitions, (2) upgrades to existing
equipment, and (3) follow-on support/ maintenance contracts. According to the U.S.
and Egyptian defense officials, approximately 30% of annual FMF aid to Egypt is
spent on new weapons systems, as Egypt’s defense modernization plan is designed
to gradually replace most of Egypt’s older Soviet weaponry with U.S. equipment.
That figure is expected to decline over the long term due to the rising costs associated
with follow-on maintenance contracts. Egyptian military officials have repeatedly
sought additional FMF funds to offset the escalating costs of follow-on support.
Egypt also receives Excess Defense Articles (EDA) worth hundreds of millions
of dollars annually from the Pentagon. Egyptian officers also participate in the IMET
program ($1.2 million requested for FY2007) in order to facilitate U.S.-Egyptian
military cooperation over the long term.
Table 6. U.S. Assistance to Egypt, FY2002-FY2007 Request
(Regular & Supplemental Appropriations; Current Year $ in millions)
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
Account
Actual
Actual
Actual
Actual
Estimate
Request
ESF
655.000
911.002a
571.608
530.720
490
455
FMF
1,300.000
1,291.550
1,292.330
1,289.600
1,287
1,300
IMET
1.217
1.232
1.369
1.200
1.200
1.2
P.L.480
3.839
2.347
-
-
-
-
Title II
Total
1,960.056
2,206.131
1,865.307
1,821.520
1,778.2
1,756.2
Source: U.S. State Department.
a. $300 million of which could be used to draw on $2 billion in loan guarantees.
26 For more information on CIP, see [http://www.usaideconomic.org.eg/CIP/Home.asp].

CRS-14
Jordan27
Overview. The United States has markedly increased aid to Jordan since the
mid-1990s to help Jordan strengthen its economy, maintain domestic stability, and
pursue normalization of its relations with Israel. Between FY1998 and FY2002,
annual U.S. economic and military aid levels to Jordan were approximately $150
million and $75 million, respectively. Further increases in U.S. aid to Jordan began
in FY2003, in view of Jordan’s support for the war against terrorism and U.S.
operations in Iraq. Since FY2003, Jordan’s total assistance package has averaged
over $736 million per fiscal year. This higher figure is due in part to large allocations
for Jordan in the FY2003 Emergency Supplemental Appropriations Act (P.L. 108-11)
and the FY2005 Supplemental Appropriations Act (P.L. 109-13).
Economic Assistance. For FY2007, the Administration has requested $245
million in ESF for Jordan, almost the same amount it is receiving in FY2006. During
the past four fiscal years, the United States has provided an estimated $1 billion in
supplemental economic assistance for Jordan in order to express support for Jordan’s
efforts in the war on terror and its training of Iraqi police forces.28
The United States provides economic aid to Jordan as both a cash transfer and
for USAID programs in Jordan. The Jordanian government uses these transfers to
service its foreign debt (approximately $10.3 billion). In FY2005, Jordan used $118
million in ESF for debt relief and $129 million for USAID programs.
Jordan is one of the most water-deprived countries in the world, and the bulk of
U.S. economic assistance is devoted to optimizing the management of scarce water
resources. USAID is currently subsidizing several waste treatment and water
distribution projects in the Jordanian cities of Amman, Aqaba, and Irbid.
Military Assistance. The FY2007 budget request includes $206 million for
the Jordanian military, the same amount it is receiving in FY2006. In fiscal years
2002, 2003, and 2005, Jordan received supplemental FMF grants totaling $531
million. U.S. military assistance is primarily directed toward upgrading Jordan’s air
force, as recent purchases include upgrades to U.S.-made F-16 fighters, air-to-air
missiles, and radar systems. FMF grants also provide financing for Jordan’s purchase
of U.S. Blackhawk helicopters in order to enhance Jordan’s border monitoring and
counter-terror capability. Jordan is eligible in FY2006 to receive U.S. Excess
Defense Articles (EDA) under section 516 of the Foreign Assistance Act.
27 For details on USAID’s Jordan program, see [http://amman.usembassy.gov/USAID/
Extamm-March2004.htm]. Also, see CRS Report RL33546, Jordan: U.S. Relations and
Bilateral Issues
, by Alfred Prados and Jeremy M. Sharp.
28 In fiscal years FY2004 and FY2005, Jordan received $350 million in ESF each year: $250
million from annual foreign operations appropriations and $100 million from supplemental
appropriations. In FY2003, Jordan received an additional supplemental ESF grant of $700
million, on top of the $250 million in ESF grants from the FY2003 Consolidated
Appropriations Resolution (P.L. 108-7). In FY2002, Jordan received $100 million in
supplemental ESF funds in addition to the $150 million in appropriations from the FY2002
Foreign Operations Act (P.L. 107-115).

CRS-15
Table 7. U.S. Assistance to Jordan, FY2002-FY2007 Request
(Regular & Supplemental Appropriations; Current Year $ in millions)
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
Account
Actual
Actual
Actual
Actual
Estimate
Request
ESF
250.000
948.000
348.525
348.000
247.500
245.000
FMF
100.000
604.000
204.785
304.352
207.900
206.000
IMET
2.012
2.400
3.225
3.000
3.000
3.0
Total
352.012
1,554.400
556.535
655.352
458.400
454.000
Source: U.S. State Department
Note: This table does not include NADR/EXBS funds or peace corps funds.
Palestinians — West Bank/Gaza29
Overview. Since the 2006 Hamas victory in Palestinian Authority elections,
most U.S. assistance to the Palestinians has been suspended with the exception of
humanitarian aid. U.S. policy makers have stated that foreign aid cannot resume until
Hamas, a U.S. State Department-designated Foreign Terrorist Organization (FTO),
renounces, among other things, its commitment to the destruction of the state of
Israel and the use of terrorist violence. Hamas has not complied with these demands.
Since the signing of the Oslo Accord in 1993, the U.S. government has
committed more than $1.9 billion in economic assistance to the Palestinians.30
Approximately 80% of U.S. funding for the Palestinians has been channeled through
USAID contractors and 20% through private voluntary organizations (PVOs).
According to annual foreign operations legislation, congressionally approved funds
for the West Bank and Gaza Strip cannot be used for the Palestinian Authority (PA),
unless the President submits a waiver to Congress citing that it is in the interest of
national security.31 Regular U.S. assistance to the Palestinians has been averaging
about $140 million a year since FY2002. During the 1990s, U.S. foreign aid to the
Palestinians averaged approximately $75 million per year. There is no current
congressional earmark in annual appropriations bills for economic aid to the
Palestinians.
29 See also CRS Report RS22370, U.S. Foreign Aid to the Palestinians, by Paul Morro. For
details on USAID’s program in the West Bank and Gaza Strip, see [http://www.usaid.
gov/wbg/].
30 The USAID program in the West Bank and Gaza Strip provides assistance to the
Palestinian people through contractors and charities. The PLO, which represents the
Palestinian diaspora, has never received funds from the U.S. government.
31 See H.R. 3057 (P.L. 109-102), Foreign Operations Appropriations Act, FY2006,
Limitation on Assistance to the Palestinian Authority, sec. 550 (b).

CRS-16
Direct Aid to the Palestinian Authority. The United States has provided
direct assistance to the Palestinian Authority on four occasions, though it rescinded
its last direct payment after the Hamas takeover of the PA in March 2006. In1993-
1994, the United States provided $36 million through the Holst Fund at the World
Bank for direct assistance to the Palestinian Authority, and an additional $5 million
in cash and equipment for the Palestinian police. From 1995-2002, no U.S. assistance
went to the Palestinian Authority or any of its constituent bodies. On July 8, 2003,
the United States announced that it would provide $20 million out of a $50 million
FY2003 Supplemental allocation as direct aid to the PA for infrastructure projects.
On December 8, 2004, President Bush again approved $20 million in direct
assistance to the PA. The $20 million was used to pay off overdue Palestinian utility
bills to Israeli companies. Following PA President Mahmoud Abbas’ May 2005 visit
to the White House, President Bush announced that the United States would transfer
an additional $50 million from unobligated FY2005 ESF funds to the Palestinian
Authority. However, after the surprising Hamas victory in Palestinian legislative
election in early 2006, the Bush Administration withheld the delivery of $45 million
in remaining funds to the PA in order to pressure Hamas into abrogating its official
covenant and recognizing Israel.
Other Assistance. The United Nations Relief and Works Agency (UNRWA)
provides food, shelter, medical care, and education for many of the three million
Palestinian refugees from the 1948-1949 Arab-Israeli war.32 U.S. contributions to
UNRWA come from the regular Migration and Refugee Assistance (MRA) account
and also through the Emergency Refugee and Migration Assistance (ERMA) account.
The U.S. contribution to UNRWA usually covers 22 to 25% of the UNRWA total
budget. U.S. support for UNRWA is not treated as bilateral economic aid to the
Palestinians, which is managed by USAID. U.S. contributions to UNRWA have
been averaging around $80 million per year with an additional $20 million annual
contribution to meet crisis needs.
FY2006 Humanitarian Aid and FY2007 Foreign Operations Bills. In
2006, the United States spent approximately $468 million of FY2006 and previously
appropriated funds ($277 million on humanitarian aid and $191 million on
democracy and private sector promotion) on aid to the Palestinians, while the
European Union, which also halted most of its assistance, disbursed $815 million in
humanitarian relief, all of which bypassed the Hamas-led government.
H.R. 5522, the FY2007 Foreign Operations Appropriations bill (passed on June
9, 2006), includes no appropriation for Economic Support Fund (ESF) programs in
the West Bank and Gaza Strip. The Senate version of H.R. 5522 (not enacted)
recommends appropriating $25 million for ESF programs in the West Bank and Gaza
and rescinds $75 million in prior year appropriated funds.
32 See CRS Report RS21668, United Nations Relief and Works Agency for Palestine
Refugees in the Near East (UNRWA)
, by Rhoda Margesson.

CRS-17
Table 8. U.S. Assistance to the Palestinians,
FY2002-FY2007 Request
(Regular & Supplemental Appropriations; Current Year $ in millions)
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
Account
Actual
Actual
Actual
Actual
Estimate
Request
ESF
72.000
124.500
74.558
224.400
150.0*
150.000
(suspended)
P.L.480
-
9.984
-
5.991
-
-
Title II
Total
72.000
134.484
74.558
230.391
468.0**
-
Source: U.S. State Department.
*In FY2006, Congress appropriated $150 million for USAID’s West Bank and Gaza program.
Following the formation of the Hamas-led PA government, some of this funding was suspended.
**In order to alleviate a humanitarian crisis in the West Bank and Gaza stemming from the cutoff of
aid from Western donors, the United States did provide approximately $468 million in funds to the
Palestinians through groups not affiliated with Hamas. The assistance came from several foreign aid
accounts and funds appropriated in prior years, which were reprogrammed and delivered through
international organizations such as the United Nations.
Other Recipients33
Excluding Iraq, Israel, Egypt, Jordan, and the Palestinians, the eight remaining
Middle Eastern recipients of U.S. foreign aid receive on average just 2% of the total
bilateral assistance to the region.34 The United States grants military education and
training funds (IMET), which typically do not exceed more than two million dollars
a year, to a number of states including Algeria and Saudi Arabia. Other wealthy
states, such as Oman and Bahrain, receive modest amounts of FMF funds to upgrade
weapons systems and maritime defense capabilities. The United States also provides
funding to Morocco, Tunisia, and Yemen for counter-terrorism training and for the
purchase of border surveillance and communications equipment. Since the bombings
of the U.S.S. Cole in Yemen in 2000 and the September 11 attacks in 2001, each of
these three countries has seen moderate increases in its FMF aid.
Morocco, Lebanon, and Yemen have active USAID programs that address
development challenges such as illiteracy, malnutrition, and unemployment. In
Morocco, USAID is implementing job training and structural adjustment programs
to transition its economy following the October 2004 signing of the U.S.-Moroccan
Free Trade Agreement. In Lebanon, with its large middle class, U.S. economic aid
helps subsidize American educational institutions like the American University of
33 For details on USAID programs in Morocco, Lebanon, and Yemen, see USAID’s website
at [http://www.usaid.gov/locations/asia_near_east/countries/countries.html].
34 For FY2005, Algeria, Bahrain, Lebanon, Morocco, Oman, Saudi Arabia, Tunisia, and
Yemen received a total of $138 million.

CRS-18
Beirut.35 In Yemen, one of the world’s poorest and fastest growing countries, USAID
is focusing economic aid on five most remote and rural governorates in the hopes of
improving underlying socio-economic conditions, particularly in areas where Al
Qaeda and like-minded groups may have a following.
Table 9. Other Regional Recipients, FY2002-FY2007 Request
(Regular & Supplemental Appropriations; Current Year $ in millions)
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
Country/Account
Actual
Actual
Actual
Actual
Estimate
Request
Algeria (IMET)
.067
.612
.722
.850
.743
.840
Bahrain Total
28.895
90.448
25.250
19.498
16.237
16.390
FMF
28.500
90.000
24.682
18.848
15.593
15.750
IMET
.395
.448
.568
.650
.644
.640
Lebanon Total
36.168
35.470
35.894
40.920
41.283
41.235
ESF
35.000
34.770
34.794
39.720
39.600
35.500
FMF
-
-
-
-
.990
4.800
DA
.600
-
.400
.500
-
-
IMET
.568
.700
.700
.700
.693
.935
Morocco Total
10.307
13.119
17.337
42.843
33.338
37.875
ESF
-
-
-
19.840
10.890
18.000
FMF
3.500
4.900
9.940
15.128
12.375
12.500
DA
5.766
6.644
5.400
6.000
8.217
5.400
IMET
1.041
1.575
1.997
1.875
1.856
1.975
Oman Total
25.481
81.567
25.675
20.940
14.949
15.135
FMF
25.000
81.000
24.850
19.840
13.860
14.00
IMET
.481
.567
.825
1.100
1.089
1.135
Saudi Arabia IMET
.024
.022
.024
.025
.024
.020
Tunisia Total
4.513
6.400
11.726
11.795
10.271
10.475
FMF
3.500
4.900
9.827
9.920
8.415
8.500
IMET
1.013
1.500
1.899
1.875
1.856
1.975
Yemen Total
28.488
14.436
27.228
25.900
17.424
21.585
FMF
20.000
1.900
14.910
9.920
8.415
8.500
DA
-
2.000
-
-
-
-
ESF
8.000
9.898
11.432
14.880
7.920
12.00
IMET
.488
.638
.886
1.100
1.089
1.085
35 Section 1224 of P.L. 107-228 stated that $10 million of the funds available for FY2003
and subsequent years could not be obligated until the President certified to Congress that
Lebanese Armed Forces had deployed to the internationally recognized Lebanon-Israel
border and that Lebanon was asserting its authority over the border area. The amendment
was added to compel Lebanon to exercise control over the border area, now controlled by
Hizballah forces. Lebanon refuses to move to the border until Israel evacuates the Shabaa
Farms disputed area. The $10 million was held in an escrow account pending negotiations
among the United States, Israel, Lebanon, and Members of Congress. The funds were
eventually released in March 2004 after the Secretary of State certified to Members of
Congress that appropriate action had been taken.

CRS-19
Foreign Aid Issues
Restrictions on Aid to the Palestinians36
Foreign Aid and a Hamas-Controlled Palestinian Authority. With
Hamas in control the Palestinian legislature and PA ministries, the Bush
Administration has taken steps to suspend the delivery of most economic assistance
and may do so indefinitely should Hamas not respond to international demands to
amend its covenant, which calls for Israel’s destruction. Policy makers have devised
mechanisms to support humanitarian assistance to the Palestinians by channeling
humanitarian aid only through organizations like the United Nations. The United
States annually provides between $80 million and $100 million in contributions to
the UNRWA.
Current Restrictions. Annual Foreign Operations Appropriations measures
include several limitations on funding for Palestinian organizations and institutions.
Congressionally approved funds for the West Bank and Gaza Strip cannot be used
for the Palestinian Authority (PA), unless the President submits a waiver to Congress
citing that it is in the interest of national security. Nevertheless, some lawmakers are
concerned that a lack of transparency and overall lack of governing authority in the
West Bank and Gaza Strip could indirectly lead to U.S. funds being siphoned off for
use by terrorist groups or for Palestinian uprising activities. A Palestinian audit in
1996 reportedly found that some 40% of the PA’s budget had been wasted or
misused.37 In 2006, the Palestinian Attorney General Ahmed al-Moghani announced
that $700 million was stolen from the PA treasury and that arrest warrants had been
issued for ten former officials who had fled the West Bank and Gaza Strip.
Some U.S. lawmakers are concerned that U.S. donations to the United Nations
Refugee Works Administration (UNRWA), which has provided services to
Palestinian refugees since 1948, could be used to support individuals who also are
terrorists.38 In a 2002 letter to U.N. Secretary General Kofi Annan, Representative
Tom Lantos reportedly wrote that, “it is difficult to escape the painful conclusion that
UNRWA, directly or indirectly, is complicit in terrorism.”39 The United States is the
largest donor to UNRWA, providing a third of its annual budget.
36 For additional detail, see CRS Report RS22370, U.S. Foreign Aid to the Palestinians, by
Jeremy M. Sharp.
37 Judy Barsalou, “Missing the Mark: Foreign Aid to the Palestinians,” Middle East Policy,
Vol.X, No.4, Winter 2003.
38 On November 17, 2003, the General Accounting Office (GAO) released the results of its
investigation of UNRWA. It found that UNRWA does not have an arrangement with
authorities in the West Bank and Gaza to review local job applicants for UNRWA
employment. See [http://www.gao.gov/docdblite/details.php?rptno=GAO-04-276R].
39 “Lantos Call for Probe of UNRWA,” Ha’aretz, May 22, 2002.

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USAID has taken several precautions to ensure that funds for Palestinian NGOs
in the West Bank and Gaza Strip are not used to support terrorism. According to a
USAID factsheet on aid to the Palestinians:
U.S. law prohibits transactions with, and the provision of resources and support
to, individuals and organizations associated with terrorism. USAID/WBG
ensures compliance with this prohibition in several ways. First, before awarding
any contract or grant to an organization, USAID/WBG reviews the list of
designated individuals and organizations involved with terrorism, to ensure that
the organization under consideration has not been so designated. Second, the
U.S. Government reviews the organization and its key personnel for possible
associations with terrorist organizations. Third, every contract and grant awarded
by USAID includes a clause reminding the recipient of its legal obligation to
comply with the prohibition stated above. These three measures offer a high
degree of confidence that no USAID/WBG assistance is being provided to
individuals or organizations involved in terrorism.40
The following restrictions on aid to the Palestinians are found in H.R. 3057
(P.L. 109-102), the FY2006 Foreign Operations Appropriations Act.
! No U.S. assistance to the Palestinian Broadcasting Corporation
(PBC). Israel accuses the PBC of inciting violence against Israelis.
The PBC was originally designed to be an independent corporation.
! No direct U.S. assistance to the Palestinian Authority unless the
President submits a waiver to Congress citing that such assistance is
in the interest of national security.
! No U.S. assistance to a future Palestinian state unless the Secretary
of State certifies, among other things, that the leadership of the new
state has been democratically elected, is committed to peaceful
coexistence with Israel, and is taking appropriate measure to combat
terrorism.
! All U.S. assistance to the West Bank and Gaza Strip must be audited
on an annual basis to ensure that funds are not being diverted to
terrorist groups.
In the 109th Congress, the House on December 7, 2006, passed and sent to the
President S. 2370, the Senate version of the Palestinian Anti-Terrorism Act of 2006
(passed June 23, 2006), which bars aid to the Hamas-led Palestinian government
unless, among other things, it acknowledges Israel’s right to exist and adheres to all
previous international agreements and understandings. It exempts funds for
humanitarian aid and democracy promotion. It also provides $20 million to establish
a fund promoting Palestinian democracy and Israeli-Palestinian peace. The earlier
House version of the bill (H.R. 4681) was seen by many observers as more stringent
40 “Frequently Asked Questions - USAID West Bank and Gaza Program,” The United States
Agency for International Development (USAID) website: [http://www.usaid.gov/wbg/
faq.htm#aa13].

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and would have made the provision of U.S. aid to the Palestinian Authority more
difficult, even if Hamas relinquishes power.
State Sponsors of Terrorism
Under the terms of the Export Administration Act of 1979 (P.L. 96-72; 50
U.S.C. app. 2405(j)(as amended)), countries listed by the Secretary of State as “state-
sponsors of terrorism”are prohibited from receiving foreign aid. In the Middle East,
Iran, Libya, and Syria have long been designated as sponsors of terrorism, though
Libya was removed from the list in 2006. On October 7, 2004, Iraq was officially
removed from the terrorism list, though a Presidential Directive issued in May of
2003 had already lifted most restrictions. Congress authorized the President to waive
application of the terrorism-related sanctions and other restrictions against Iraq in the
Emergency Wartime Supplemental Act, 2003 (P.L. 108-11). Iraq had been listed as
a “state-sponsor of terrorism”from 1979-1982 and then again from 1990-2004. Iran,
Iraq, Libya, and Syria were all recipients of U.S. military and economic aid at one
time or another in the distant past.
The Response to 9/11: U.S. Assistance to Promote
Development, Democracy, and Reform in the Middle East

After the September 11, 2001 terrorist attacks, foreign aid to the Middle East
was no longer seen as exclusively serving regional security needs, but became part
of an evolving U.S. national security strategy in the war on terror. Although most
experts agree that the underlying causes of Islamic radicalism in the region are
complex, many U.S. officials believe that foreign aid used to promote economic
development, educational reform, and democratization can help eliminate terrorist
breeding grounds. Since 2001, several new Administration initiatives have been
designed to promote development, democracy, and reform in the Middle East and in
countries with significant Muslim populations.
The Broader Middle East and North Africa Initiative. On June 8, 2004,
at the G-8 Summit meeting in Sea Island, Georgia, U.S., European, and Arab officials
unveiled the “Broader Middle East & North Africa Initiative,” a multilateral
development and reform plan reportedly aimed at fostering economic and political
liberalization in a wide geographic area of Arab and non-Arab Muslim countries.41
The initiative builds on a November 2003 speech by President Bush and follows
earlier Administration pledges to help spread democracy in Iraq and in other Arab
countries. BMENA was re-named the “Forum for the Future,” though many
observers believe the initiative has lost support. The 2006 Forum for the Future took
place in Jordan but received little international attention. Democracy advocates have
criticized the Forum for lacking substance and showcasing reform rather than
investing more resources and political support in Arab civil society. The Forum for
the Future provides micro-financing and other forms of financial assistance, though
some analysts assert that these initiatives merely duplicate the existing work of
development agencies and focus on economic rather than on political reform.
41 See CRS Report RS22053, The Broader Middle East and North Africa Initiative: An
Overview
, by Jeremy M. Sharp.

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The Middle East Partnership Initiative. On December 12, 2002, Secretary
of State Colin Powell announced the creation of The Middle East Partnership
Initiative (MEPI), a program to encourage reforms in Arab countries by
strengthening Arab civil society, encouraging micro-enterprise, expanding political
participation, and promoting women’s rights.42 MEPI represents an attempt to take
a more thematic approach to foreign aid in the Middle East by stressing its reform
elements. Although funding for MEPI represents only a small portion of total aid to
the region (2%), some U.S. officials stress that MEPI represents a philosophical
commitment to ensure that future U.S. economic aid encourages social, political, and
economic reforms in Arab countries. Some observers assert that if the MEPI reform
agenda were applied broadly to Middle East development projects, it might produce
difficulties or unforeseen consequences.
Table 10. Middle East Partnership Initiative Appropriations,
FY2002-FY2007 Request
(Regular & Supplemental Appropriations; Current Year $ in millions)
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
Actual
Actual
Actual
Actual
Estimate
Request
29.000
90.000 89.469a
74.400
99.000
120.000
a. The FY2004 Iraq Reconstruction Relief Funds Supplemental (P.L. 108-106) specifies that $30
million in Iraq reconstruction funds may be transferred to MEPI for FY2004.
Congress also provides democracy-promotion funds to the State Department and
non-governmental organizations for programs in countries with significant Muslim
populations. In FY2006, the National Endowment for Democracy’s Muslim
Democracy Program and the State Department’s Human Rights and Democracy Fund
will receive $3 million and $12 million respectively. The FY2006 Foreign
Appropriations Act specifies that $6.5 million may be used for grants to educational,
humanitarian, and non-governmental organizations and individuals inside Iran and
Syria to support the advancement of democracy and human rights. The
Administration’s FY2006 supplemental budget request seeks $75 million for
international broadcasting, democracy promotion, and other public diplomacy
activities to support dissidents inside Iran.
Altering U.S. Assistance to Egypt43
Some lawmakers believe that U.S. assistance to Egypt has not been effective in
promoting political and economic reform and that foreign assistance agreements must
be renegotiated to include benchmarks that Egypt must meet to continue to qualify
for U.S. foreign aid. Others have periodically called for restrictions on U.S. aid to
Egypt on the grounds that Egypt suppresses its own population, including minority
42 See CRS Report RS21457, The Middle East Partnership Initiative: An Overview, by
Jeremy M. Sharp.
43 See CRS Report RL33003, Egypt: Background and U.S Relations, by Jeremy M. Sharp.

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Christians, and continues to allow Egyptian state-owned media outlets to publish
unsubstantiated conspiracy theories regarding Israel and the Jewish people.
The Administration and Egyptian government assert that reducing Egypt’s
military aid would undercut peace between Israel and Egypt. Overall, many U.S.
observers believe that U.S. support for Egypt stabilizes the region and extends U.S.
influence in the most populous Arab country.44 Supporters of continued U.S.
assistance note that Egypt helps train Iraqi and Palestinian security forces, cooperates
with the U.S. military, provides access and facilities to U.S. forces in the Middle
East, and is helping patrol the Egyptian-Gaza border after Israel’s 2005 withdrawal
from the Gaza Strip.
For years, Congress has specified in annual foreign operations appropriations
legislation that ESF funds to Egypt are provided with the understanding that Egypt
undertake certain economic reforms and liberalize its economy. USAID believes that
its programs have helped contribute to Egypt’s economic growth and macroeconomic
stability. Others note that Egypt still has a bloated public sector, and assert that U.S.
economic aid mainly helps subsidize Egypt’s social welfare and education budget.
U.S. policymakers have repeatedly suggested that trade with and investment in Egypt
may be as effective as aid in reforming the Egyptian economy.
Legislative Proposals and Congressional Action on Aid to Egypt.
An amendment offered on July 15, 2004, to the House FY2005 foreign operations
bill (H.R. 4818) would have reduced U.S. military aid to Egypt by $570 million and
increased economic aid by the same amount, but the amendment failed by a vote of
131 to 287. An amendment offered on June 28, 2005, to the House FY2006 foreign
operations bill (H.R. 3057) would have reduced U.S. military aid to Egypt by $750
million and would have transferred that amount to child survival and health programs
managed by USAID. The amendment failed by a recorded vote of 87 to 326.
The FY2005 Consolidated Appropriations Act (P.L. 108-447) stipulates that
U.S. funds for democracy and governance activities in Egypt are no longer subject
to the prior approval of the Egyptian government. At this point, it is unclear how this
provision will affect USAID programming in Egypt. USAID completed a $32
million NGO Service Center in order to facilitate the growth of independent, non-
governmental organizations in Egypt.
In the 109th Congress, H.R. 2601, the FY2006/FY2007 House Foreign Relations
Authorization bill, would have reduced U.S. military assistance to Egypt by $40
million for each of the next three fiscal years, while using the funds to promote
economic changes, fight poverty, and improve education in Egypt. There was no
comparable provision in the Senate’s Foreign Relations Authorization bill (S. 600).
The conference report (H.Rept. 109-265) on H.R. 3057, the FY2006 Foreign
Operations Appropriations Bill, fulfills the entire request for Egypt ($495 million in
ESF, $1.43 billion in FMF); however, it designates $100 million in economic aid for
44 “Aid to Egypt: Why the Current Mix Works,” MEI Perspective, Remarks by Ambassador
Edward S. Walker Jr., the Middle East Institute, March 8, 2002.

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USAID education and democracy and governance programming and conditions
another $227.6 million on Egypt’s meeting economic reform benchmarks set out in
a March 2005 memorandum of understanding between the United States and Egypt.
In addition, conferees stated that “not less than 50 percent of the funds for
democracy, governance and human rights be provided through non-governmental
organizations for the purpose of strengthening Egyptian civil society organizations,
enhancing their participation in the political process and their ability to promote and
monitor human rights.” Conferees did not include a Senate provision conditioning
U.S. assistance to Egypt on the construction of an FM transmitter tower for Radio
Sawa.
On May 25, 2006, the House Appropriations Committee in a voice vote rejected
an amendment to cut $200 million in military aid to Egypt during markup of H.R.
5522, the FY2007 Foreign Operations Appropriations Bill. In June 2006, the House
narrowly defeated an amendment (198-225) to the bill that would have reallocated
$100 million in economic aid to Egypt and used it instead to fight AIDS worldwide
and to assist the Darfur region of Sudan. Many supporters of the amendment were
dismayed by the Egyptian government’s spring 2006 crackdown on pro-democracy
activists in Cairo. Representative David Obey of Wisconsin sponsored both
amendments.

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Appendix A. Glossary
Bilateral assistance
Economic aid provided by the United States directly to a country or
through regional programs to benefit one or more countries
indirectly.
Development assistance
Aid provided under Chapters I and 10 of the Foreign Assistance Act
(DA)
primarily designed to reduce poverty and promote economic
growth.
Economic Support Fund
An appropriation account for funding economic assistance to
(ESF)
countries based on considerations of special economic, political or
security needs and U.S. interests.
Foreign Assistance Act,
The primary, permanent authorization for conducting U.S. foreign
1961 (FAA)
assistance programs.
Foreign Military
The major U.S. military aid program extending credits on a grant
Financing (FMF)
basis to finance U.S. overseas arms transfers.
International Military
A U.S. military aid program providing grant military training to
Education and Training
selected foreign military and civilian personnel.
(IMET)
Iraq Relief and
A catch-all development and security account controlled by the
Reconstruction Fund
President containing funds for reconstruction activities in Iraq.
(IRRF)
Middle East Partnership
A State Department program to encourage political, economic, and
Initiative (MEPI)
educational reforms in Arab countries.
Multilateral assistance
Assistance which the United States provides to developing nations
through multilateral development banks, United Nations agencies,
and other international organizations with development purposes.
Non-governmental
Organizations that are independent of government. NGOs are
organizations (NGOs)
frequently used to implement foreign aid programs.
Palestinian Authority
The Palestinian National Authority is a semi-autonomous quasi-state
institution nominally governing the Palestinians in West Bank and
the Gaza Strip
Pipeline
The amount of economic assistance that has been obligated by U.S.
agencies but has not yet been expended.
P.L. 480
Refers to the Agricultural Trade Development and Assistance Act of
1954, which governs administration of the U.S. food aid program.
The Department of Agriculture manages title I of P.L. 480 (food aid
provided on concessional loan terms) and USAID manages title II
(food grants provided for development and humanitarian purposes).
Private Voluntary
Non-profit, tax-exempt and nongovernmental organizations
Organizations (PVOs)
established and governed by a group of private citizens whose
purpose is to engage in voluntary charitable and development
assistance operations overseas.
United Nations Relief
UNRWA provides relief and social services, including food,
and Works Agency for
housing, clothing, and basic health and education to over 4.1 million
Palestine Refugees
registered Palestine refugees living mostly in the West Bank and
(UNRWA)
Gaza Strip, but also in Jordan, Lebanon, and Syria.
U.S. Agency for
An independent government agency under the direction of the
International
Secretary of State that manages most U.S. bilateral economic
Development (USAID)
assistance programs.