and Turkey, the principal effect of the pro-
$44 million to Indonesia for spare parts for
gram is to help those nations defray the costs
U.S.-supplied military transport aircraft and
of purchasing weaponry from U.S. compa-
Textron Bell 205A helicopters. The biggest
nies. As a matter of U.S. law, Israel is allowed
commitment in recent years was a $90 mil-
to use ESF funding from the United States to
lion loan to Romania for the purchase of five
write down its outstanding loans from the
Lockheed Martin FPS-117 radar systems.39
U.S. government for purchasing arms. In the
For the four years from FY95 through FY98,
case of Turkey, virtually all of its ESF funding
Ex-Im Bank also approved loans worth a
over the past decade has come in the form of
total of $326 million for civilian items that
cash payments in amounts that correspond
had a military use. The taxpayer subsidies
almost exactly to the level of that nation's
used to float those loans totaled more than
outstanding military debt to the U.S. govern-
$33 million.
ment. And even in Egypt, where some ESF
Arms Sales Promotion at the Pentagon
money is earmarked for specific projects or
and State and Commerce Departments
imports of commodities, the funding still has
the effect of freeing other government funds
In addition to providing grants and subsi-
to be used to sustain Egypt's ongoing pro-
dized loans to U.S. weapons-exporting firms,
gram of purchasing major weapons systems
the Pentagon and the State and Commerce
from U.S. companies.37
Departments provide extensive marketing
assistance to those companies.
In the FY99 budget ESF funding was set at
At the Pentagon, promotional activities
$2.4 billion. In recent years 23 countries have
for arms sales are centered in the DSCA,
been served by ESF. For FY99 major recipi-
which is involved in promoting, brokering,
ents include Israel ($1 billion), Egypt ($775
administering, and financing billions of dol-
million), Jordan ($150 million), and the
lars' worth of arms sales annually under the
Palestinian Authority in the West Bank and
FMS program. In FY96, the agency and the
Gaza Strip ($75 million).38 (In Table 1, only
military services had 5,877 personnel involv-
about 85 percent of the total ESF funds were
ed in those activities at a cost of $378.2 mil-
counted as subsidies to U.S. arms exporters
lion. As noted above, the Pentagon's arms
because approximately 15 percent of the aid
sales activities are funded by a surcharge on
was not an offset for the cost of weapons pur-
FMS deals brokered by the agency. As the
chases by major buyers of U.S. munitions.)
postGulf War boom in U.S. arms sales has
"Dual Use" Funding: Military-Related Loans
died down, U.S. exports have settled into a
by the Export-Import Bank. Another source of
range of roughly $12 billion to $15 billion
funding for military exports is the U.S.
Subsidies for mil-
per year--down from the near record level of
Export-Import Bank (Ex-Im Bank). For over
itary contractors
$33 billion in 1993. That lower sales volume,
two decades, the bank was prohibited from
to defray the
combined with a move by some companies
financing military exports. That ban resulted
and countries to buy major weapons on the
from abuses of the agency's loan programs
costs of merging
commercial market, has led to a sharp drop
for military purposes during the Vietnam
with or acquiring
in the value of the FMS surcharges that have
War. But starting in the late 1980s, arms
other firms have
traditionally been used to finance DSCA. As
industry lobbyists succeeded in getting Ex-
a result, DSCA is now in a budget crunch,
Im Bank back into the business of financing
cost taxpayers
which has prompted the Pentagon to consid-
arms sales.
over $1 billion.
er restructuring the agency and the FMS pro-
The bank's funding of military exports
gram. In any restructuring, DSCA should be
has included a $1.3 billion loan for the sale of
funded out of the budget instead of being
Sikorsky Black Hawk helicopters to Turkey
financed from fees on FMS sales. That
and a $1.4 billion loan for Raytheon's SIVAM
reform would facilitate congressional scruti-
radar project in Brazil. Other significant Ex-
ny. The change might also make it easier to
Im Bank loans in recent years have included
13