Aid for Israel and Egypt

Indications today in Congress were that the Carter Administration’s proviso for “market” rates of interest will prevail for the coming fiscal year on the loans earmarked for Israel and Egypt arising from their peace treaty.

The Senate Foreign Relations Committee voted out the $4.8 billion special economic assistance measure by a vote of 10-1 and sent it to the Senate floor with recommendations for reconsideration next year of the interest rate and calling on European nations and Japan to support the two Middle-East countries. Sen. Jesse Helms (R. NC) alone opposed the bill on final passage.

Sens. frank Church (D. Idaho), the committee chairman, Jacob Javits (R.NY) and Richard Stone (D.Fla.) introduced the proviso that will cause the Administration to report next year on the impact of the interest rate on the Egyptian and Israeli economies. This measure was opposed by Helms and by Sen. Richard Lugar (R. Ind.) who defended the Administration’s position against a review.

Under the bill as it now stands, Egypt and Israel will pay the U.S. government the cost of borrowing the money plus a service charge which will bring the total interest cost to between 9-10 percent. Sen. George Mc Govern (D.SD) won the committee’s approval for his amendment calling on European nations and Japan to “give favorable consideration” to help Egypt and Israel. The Carter Administration under this proviso must report to Congress in six months on the responses the Europeans and Japan make on increasing their economic assistance to Egypt and Israel. The Senate measure provides a grant of $800 million to Israel to relocate two air bases that are being abandoned in the Sinai. The Administration considers this sum will meet 80 percent of the relocation costs.

Israel will get another $2.2 billion in credit for purchase of military equipment. Egypt will receive $1.5 billion in military credits and $300 million in new economic assistance. These are loans subject to the interest rates.

In the House Foreign Affairs Committee this morning, the Assistant Secretary of State for South Asian and Near Eastern Affairs, Harold Sounders, upheld the Administration position that high interest rates are necessary in view of the budgetary impact and President Carter’s anti-inflation policy. When Rep. Gerry Students (D.Mass.) suggested “forgiveness next year” of the loans, Saunders replied that this was not the Administration’s intention.

Under the regular foreign aid program, the military aid of $1 million is half in the form of a loan and the other half is forgiven. Saunders told the House committee that Israel’s debt burden is manageable although substantial. The House Committee will meet again May 2 to receive further testimony on the military aspects of the Egyptian-Israeli treaty and the U.S. funding resulting from it.