Middle East: U.S. Foreign Assistance, FY2002, FY2003, and Request for FY2004

Order Code RL31774 Report for Congress Received through the CRS Web Middle East: U.S. Foreign Assistance, FY2002, FY2003, and Request for FY2004 Updated April 16, 2003 Clyde Mark Specialist in Middle Eastern Affairs Foreign Affairs, Defense, and Trade Division Congressional Research Service ˜ The Library of Congress Middle East: U.S. Foreign Assistance FY2002, FY2003, and Request for FY2004 Summary The report provides data on United States foreign assistance to the Middle East for FY2002, the FY2002 supplemental, allocated aid for FY2003, the FY2003 supplemental, and assistance requested by the President for FY2004. A narrative section describes unique features of U.S. foreign assistance to some Middle Eastern countries, such as Israel, Egypt, and the Palestinians. The report follows a broad definition of “Middle East” to include countries affected by Middle Eastern events, countries diplomatically engaged with Middle Eastern countries, and all the members of the Arab League. Table 1 lists assistance for each country with separate amounts for economic, military, developmental, and some listings of special aid. Table 2 lists U.S. assistance for regional programs. The report will be updated as needed. Other Congressional Research Service reports dealing with U.S. assistance to the Middle East include: CRS Issue Brief IB85066, Israel: U.S. Foreign Assistance CRS Issue Brief IB82008, Israel-United States Relations CRS Issue Brief IB93085, Jordan: U.S. Relations and Bilateral Issues CRS Issue Brief IB93087, Egypt-United States Relations CRS Issue Brief IB89118, Lebanon CRS Issue Brief IB89140, Cyprus: Status of U.N. Negotiations CRS Issue Brief IB92052, Palestinians and Middle East Peace: Issues for the United States CRS Report RL31342, Middle East: U.S. Foreign Assistance, FY2001, FY2002, and FY2003 Request CRS Report RL31311, Appropriations for FY2003: Foreign Operations, Export Financing, and Related Programs CRS Report RL31829, Supplemental Appropriations FY 2003: Iraq Conflict, Afghanistan, Global War on Terrorism, and Homeland Security Contents Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Middle East Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Wye Agreement Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Loan Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Palestinians (West Bank/Gaza) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Lebanon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Iraq Supplemental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 List of Tables Table 1. Middle East: U.S. Foreign Assistance FY2002, FY2003, and FY2004 Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Table 2. U.S. Foreign Assistance to Middle East Regional Programs . . . . . . . . . . 9 Middle East: U.S. Foreign Assistance, FY2002, FY2003, and Request for FY2004 Background The following tables and explanations of U.S. foreign assistance to key countries or activities in the Middle East include the actual amounts for FY2002, the FY2002 supplemental, the allocated amounts for FY2003, the supplemental request of March 25, 2003, and the President’s requested amounts for FY2004. The President signed the FY2003 supplemental appropriations on April 16, 2003, P.L. 108-11. Some countries not usually listed in definitions of “Middle East” are included here because of their involvement with and proximity to other Middle Eastern countries (such as Greece or Ethiopia), or because of their membership in the Arab League (such as the Comoros or Mauritania). The figures are taken from the President’s FY2004 budget presentation to Congress. Middle East Cap Beginning in FY1998, Congress set a spending ceiling or cap on aid to the Middle East. The cap in Section 555 of H.R. 5410, the foreign operations appropriations bill for FY2003, reported by the House Committee on Appropriations (H.Rept. 107-663), was $5.467 billion for Israel, Egypt, Jordan, Lebanon, the West Bank/Gaza Strip, the Israel-Lebanon Monitoring Group, the Multinational Force and Observers, the Middle East Democracy program, the Middle East Regional Cooperation, and the Middle East Multilateral Working Group. Section 555 was not included in H.J.Res. 2, the omnibus appropriations bill, P.L. 108-7, signed on February 20, 2003. (The President’s FY2004 request for the same countries and programs is $5.248 billion.) Wye Agreement Funding Following the peace talks at the Wye River Plantation in October 1998, President William 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. Congress included $100 million for Jordan in the 1999 supplemental and appropriated the remaining funds in the FY2000 foreign operations appropriations bill. The funding was intended to be paid out over FY2001, FY2002, and FY2003. CRS-2 Israel 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. 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. President Clinton requested and Congress appropriated $1.2 billion in military assistance for Israel following the October 1998 Wye River Agreement. The Wye funding was in addition to the regular foreign assistance of about $3 billion per year and was intended to be paid out over three years, FY2001, FY2002, and FY2003. President Bush requested and Congress passed a supplemental appropriation for FY2002 (P.L. 107-206, August 2, 2002) that included a $200 million grant for Israel for anti-terrorism. But the President withheld disbursing some of the supplemental funds, including the $200 million scheduled for Israel. The House Appropriations Committee added the $200 million to its foreign operations appropriations bill for FY2003, H.R. 5410, but the Senate Appropriations Committee did not add the funds to its bill, S. 2779 (S.Rept. 107-219). The $200 million was not included in H. J. Res. 2, the omnibus appropriations bill passed by Congress and signed into law on February 20, 2003, P.L. 108-7. Israel did not receive the $200 million. The $200 million is not included in the Economic Support Funds (ESF) for FY2003 in Table 1 at the end of this report, although the Department of State did include the $200 million in the ESF account for FY2003 in its presentation to Congress. According to press accounts, Israeli Prime Minister Ariel Sharon requested $4 billion in military grants, and $8 billion in loan guarantees from the United States during his October 2002 visit to the White House. The military grants are intended to help Israel prepare for war against Iraq and to offset costs of the Palestinian uprising in the occupied territories. The loan guarantees are intended to help the failing Israeli economy. In the March 25, 2003, supplemental request to Congress, the President asked for $1 billion in military grants and $9 billion in loan guarantees for Israel. Loan Guarantees. Israel received $600 million in housing loan guarantees between 1972 and 1990, and received $10 billion in loan guarantees for settling Soviet Jews over a 5-year period beginning in 1993. Under the loan guarantee program, the United States underwrites private loans to Israel, but does not provide funds directly. In 1993, Israel agreed to pay the administrative costs and the subsidy (a fund set aside in a U.S. Treasury account held in case of default) of about 4% of the $10 billion total. Israel agreed that none of the 1993 loan guarantees could be used in the occupied territories and that the amount available for each of the five years would be reduced by an amount equal to that which Israel spent on settlements in the occupied territories. Of the $10 billion authorized, the United States deducted $774 million as a penalty for Israeli settlement construction, leaving $9.226 billion available to cover Israeli loans. Of that amount, Israel drew down about $7.5 billion to cover commercial loans. CRS-3 The President’s March 25, 2003, supplemental request stipulated that Israel could not use the requested $9 billion in loan guarantees in the occupied territories, that the loan guarantees could be reduced by an amount equal to the amount Israel spends in the occupied territories for settlements, that Israel will pay the administrative fees and subsidy, and that the President would consider Israel’s budgetary and economic reforms in approving annual loan guarantee allocations. Palestinians (West Bank/Gaza) No U.S. AID funds have gone to the Palestine Liberation Organization. In 1993-1994, the United States provided $36 million through the Holst Fund at the World Bank for direct assistance to the Palestinian Authority, the elected Palestinian government for the occupied West Bank and Gaza, and an additional $5 million in cash and equipment for the Palestinian police. Since 1995, no U.S. assistance has gone to the Palestinian Authority or any of its constituent bodies. Approximately 80% of U.S. funding for the Palestinians has gone through U.S. Agency for International Development contractors, and 20% through private voluntary organizations. Regular U.S. assistance has been averaging about $75 million per year. In addition, the United States pledged $400 million over 3 years as part of the negotiations leading up to the 1998 Wye agreement. The last installment of Wye funding, $158 million, is expected to be obligated in FY2003. In the FY2003 appropriations bill, Congress included $50 million in disaster relief for the Palestinians following the May 2002 Israeli destruction in the Palestinian refugee camp in the city of Jenin. It does not appear that the $50 million in disaster relief was allocated to the Palestinians. The President requested $50 million for the Palestinians in the March 25, 2003, supplement request. It may be surmised that the $50 million in the supplemental request was intended to replace the $50 million in disaster relief that was not allocated. The $50 million for the Palestinians requested by the President is not earmarked in the FY2003 supplemental, P.L. 108-11. If the Administration intends to provide $50 million for the Palestinians out of the FY2003 supplemental, the funds will have to be deducted from other countries or programs because the FY2003 supplemental ESF account is over committed. Note in Table 1 that $50 million appears in both the FY2003 allocated and FY2003 supplemental and may be a double counting. United Nations Relief and Works Agency (UNRWA) provides food, shelter, medical care, and education for many of the 3 million Palestinian refugees from the 1948-1949 Arab-Israeli war.1 U.S. contributions to UNRWA are not included in Table 2 because the Department of State does not list contributions separately. U.S. contributions to UNRWA have been averaging around $80 million per year with an additional $20 million annual contribution to meet crisis needs. 1 The 700,000 refugees from 1948-1949 have grown to over three million today. CRS-4 Egypt Egyptian officials maintain that the United States agreed to a three-to-two ratio in aid to Israel and Egypt at the 1978 Camp David peace conference. U.S. officials deny that the United States agreed to a three-to-two ratio. In keeping with a three-totwo ratio, Congress reduced economic aid to Egypt by $40 million per year beginning in 1999 when Egypt’s economic aid was $815 million per year. (Israeli economic assistance is reduced by $120 million per year, and its military assistance is increased by $60 million, for a net reduction of $60 million; two-thirds of $60 million is $40 million.) Military assistance to Egypt was not changed. The FY2003 supplemental request included $300 million in ESF and $2 billion in loan guarantees for Egypt. Egypt will pay all administrative fees and subsidies for the loan guarantees. In addition, the request stated that $379.6 million in previously committed funds for Commodities Import Program, export financing, and other programs, could be converted to grants for cash transfers to the Egyptian government. Jordan In addition to increasing annual assistance, Jordan received $300 million in the FY2000 Wye Agreement funds, including $100 million in the FY2000 supplemental, and the remaining $200 over fiscal years 2001, 2002, and 2003. The President requested $406 million in FMF, and $700 million in ESF for Jordan in the FY2003 supplemental. Of the ESF, $250 million is for budget support, and $450 million is to offset Iraqi aid that disappeared after the March 19, 2003, U.S. invasion of Iraq. Lebanon Section 1224 of H.R. 1646, P.L. 107-228 of September 30, 2002, the foreign relations authorization act, states that the United States should withhold $10 million of the funds available for Lebanon in FY2003 if the Lebanese armed forces have not deployed to the internationally recognized border with Israel. Lebanon has not deployed its armed force to the border because it claims that Israel occupies Lebanese territory along the border at Shabaa farms. Israel claims the Shabaa farms area is occupied Syrian territory, not subject to the agreement under which Israel withdrew from Lebanon. The total aid for Lebanon for FY2003 is $33.2 million. Iraq Supplemental The United States invaded Iraq on March 19, 2003. On March 25, President Bush sent to Congress a request for supplemental appropriations that included $2.853 billion for humanitarian aid and for reconstruction and rebuilding Iraq. Some of the funds were intended to repay other accounts from which the Administration had withdrawn funds to meet immediate needs in anticipation of the war. For a full breakdown of the funds requested for Iraq, see CRS Report RL31829, Supplemental CRS-5 Appropriations FY2003: Iraq Conflict, Afghanistan, Global War on Terrorism, and Homeland Security. The President signed the supplemental appropriations into law on April 16, 2003, P.L. 108-11. For assistance for other Middle Eastern countries included in the supplemental, see the FY2003 Supplemental column, Table 1, following. Abbreviations Used in the Following Tables CT = Counter Terrorism DA = Development Assistance ERF = Emergency Response Funds ESF = Economic Support Funds FMF = Foreign Military Financing IMET = International Military Education and Training Loan Guar. = Loan Guarantees ME = Middle East MINURSO = United Nations Mission for the Referendum in Western Sahara R & M = Refugee and Migration Account funds for settling Soviet and other Jewish migrants in Israel Suppl = Supplemental UNDOF = United Nations Disengagement Observer Force (Golan Heights) UNFICYP = United Nations Peacekeeping Force in Cyprus UNIFIL = United Nations Interim Force in Lebanon UNIKOM = United Nations Iraq-Kuwait Observation Mission UNMEE = United Nations Mission in Ethiopia and Eritrea CRS-6 Table 1. Middle East: U.S. Foreign Assistance FY2002, FY2003, and FY2004 Request (millions of dollars) Country/ Program FY2002 Actual FY2002 Suppl. FY2003 Allocated FY2003 Suppl. FY2004 Requested Algeria IMET .067 - .550 - .550 Bahrain Total .395 28.500 .450 90.000 25.600 - 28.500 - 90.000 25.000 .395 - .450 - .600 - - .050 - .050 15.000 - 14.900 - 7.500 .163 1.500 .185 30.000 2.225 - 1.500 - 5.000 2.000 .163 - .185 - - - 25.000 - Egypt Total 1,956.217 - 1,903.752 2,300.000 1,876.200 FMF 1,300.000 - 1,291.550 - 1,300.000 ESF 655.000 - 611.002 300.000 575.000 1.217 - 1.200 - 1.200 - - - 2,000.000 - Eritrea Total 6.148 - 5.519 - 1.790 FMF .250 - .500 - .500 5.558 - 4.619 - .840 .340 - .400 - .450 20.895 2.000 19.104 - 21.508 FMF .250 2.000 .500 - .500 ESF - - - - 5.000 DA 20.200 - 18.104 - 15.438 .445 - .500 - .570 .499 - .600 - .600 Iraq Total 25.000 - 50.000 - - Opposition ESF 25.000 - 10.000 - - Contingency - - 40.000 - - Israel Total 2,848.000 - 2,742.245 10,000.000 2,690.000 FMF 2,040.000 - 2,086.350 1,000.000 2,160.000 FMF IMET Comoros IMET Cyprus ESF Djibuti Total FMF IMET ESF IMET Loan Guar. DA IMET Ethiopia Total IMET Greece IMET .225 CRS-7 Country/ Program ESF FY2002 Actual FY2002 Suppl. FY2003 Allocated FY2003 Suppl. FY2004 Requested 720.000 - 596.100 - 480.000 R&M 60.000 - 60.000 - 50.000 CT ERF 28.000 - - - - - - - 9,000.000 - 227.012 125.000 448.400 1,106.000 458.900 FMF 75.000 25.000 198.000 406.000 206.000 ESF 150.000 100.000 248.000 700.000 250.000 2.012 - 2.400 - 2.900 36.168 - 35.970 - 33.200 ESF 35.000 - 34.770 - 32.000 DA .600 - .500 - .500 IMET .568 - .700 - .700 .130 - .100 - .125 10.307 - 13.113 - 17.150 FMF 3.500 - 4.900 - 10.000 DA 5.766 - 6.713 - 5.400 IMET 1.041 - 1.500 - 1.750 Oman Total .481 25.000 20.250 61.500 26.000 - 25.000 19.500 61.500 25.000 .481 - .750 - 1.000 .024 - .025 - .025 Somalia DA 2.267 - 2.700 - .965 Sudan Total 10.631 - 22.000 - 64.613 DA 10.631 - 22.000 - 49.613 ESF - - - - 15.000 4.513 - 6.400 - 11.750 FMF 3.500 - 4.900 - 10.000 IMET 1.013 - 1.500 - 1.750 2.756 248.000 20.300 9,500.000 255.000 FMF - 28.000 17.500 - 50.000 ESF - 200.000 - 1,000.000 200.000 2.756 - 2.800 - 5.000 - 20.000 - - - Loan Guar. Jordan Total IMET Lebanon Total Mauritania IMET Morocco Total FMF IMET Saudi Arabia IMET Tunisia Total Turkey Total IMET ERF CRS-8 Country/ Program Loan/Loan Guar. FY2002 Actual FY2002 Suppl. FY2003 Allocated FY2003 Suppl. FY2004 Requested - - - 8,500.000 - 72.000 - 124.500 50.000 75.000 72.000 - 74.500 50.000 75.000 - - 50.000 - - 5.488 23.000 12.450 - 31.000 FMF - 20.000 1.900 - 15.000 ESF 5.000 3.000 9.900 - 15.000 .488 - .650 - 1.000 West Bank/ Gaza Strip Total ESF Disaster Relief Yemen Total IMET Note: The FY2002 supplemental funds were in addition to the FY2002 funds. FY2003 supplemental funds are in addition to the FY2003 allocated funds. CRS-9 Table 2. U.S. Foreign Assistance to Middle East Regional Programs (millions of dollars) Regional Program FY2002 Actual FY2002 Suppl. FY2003 Allocated FY2003 Suppl. FY2004 Requested ME Regional - - 28.161 - - ME Partnership Initiative ESF - 20.000 - 200.000 145.00 ME Democracy ESF 5.00 - 4.000 - - ME Multilaterals ESF 3.000 - 2.900 - 3.000 ME Regional Cooperation ESF 5.000 - 4.900 - 5.000 ME Television/Radio - - - 30.500 - 4.000 - 3.000 - - 16.015 - 16.400 - 16.400 - - - - .700 UNDOF 10.454 - 8.365 - 10.065 UNIFIL 18.831 - 33.520 - 30.795 UNIKOM 4.595 - 4.479 - 4.784 MINURSO 13.324 - 11.792 - 10.785 UNIFCYP 5.964 - 5.219 - 5.809 67.648 - 55.594 - 53.504 U.S.-North Africa Economic Partnership ESF Multinational Force and Observers UN Guards in Iraq UNMEE Note: The FY2002 supplemental funds were in addition to the FY2002 funds. FY2003 supplemental funds are in addition to the FY2003 allocated funds.