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US Aid Compensating Gulf Allies Faces Tough Look-See in Congress

Besides direct war costs some want loan guarantees, others seek arms

THE Gulf war has shifted United States aid priorities in the Middle East, including support of emerging regional security arrangements. Washington is reassessing economic and military assistance to Egypt, Israel, Jordan, Turkey, and Pakistan - US allies that could ill afford the economic disruptions caused by the past seven months of conflict. In addition to the White House's fiscal 1992 budget requests for these longtime beneficiaries, the Bush administration will propose a variety of supplemental packages. Economic sacrifice connected with the Gulf conflict - such as adhering to the United Nations embargo of Iraq, higher oil prices, and lost trade - came at a very bad time for the region. Financial stresses have peaked, with shrinking incomes and burgeoning populations.

Increased US support is already materializing, most notably for the State Department's biggest customers. Israel, Washington's largest aid recipient, will receive $650 million in cash to cover Gulf-war related military costs, somewhat short of Israel's requested $1 billion.

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Israel's Finance Ministry put nonmilitary costs related to the Gulf war - including 8,000 homes damaged by Iraqi Scud attacks, loss of tourism revenues, and higher oil prices - at $2 billion.

The Bush administration recently approved $400 million in loan guarantees toward housing Israel's influx of Soviet 'emigr'es. The cost of absorbing the 1 million Soviets expected over the next five years is put at $50 billion - roughly $50,000 per person, according to a senior Israeli official. He says Israel will seek $10 billion in US loan guarantees over the next five years, at $2 billion a year.

``The guarantees facilitate Israel's borrowing from commercial banks,'' says the official. ``We are very aware of economic difficulties in the US.... We don't expect US taxpayers' money, but hope for US assistance in securing those loans.''

At $2.3 billion, the 1992 budget request levels for Egypt are roughly the same as last year's. But supplemental assistance for new arms sales to Cairo may emerge soon after US Secretary of State James Baker III briefs President Bush on his recent meetings with Arab leaders concerning postwar regional security arrangements. Rewarding Egypt for swiftly joining the coalition against Iraq, Washington forgave almost $7 billion in Egyptian military sales debts.

Rep. Lee Hamilton (D) of Indiana, chairman of the Europe and Middle East subcommittee of the House Foreign Affairs Committee, says this set a precedent that will revisit the US shortly. ``According to the administration, it's a unique case,'' he says, ``but I don't buy it,'' Mr. Hamilton says. ``There are too many other countries'' that are debt-distressed in the region who may qualify for forgiveness.

Turkey, another loyal coalition partner, is one of them. It has some $3.2 billion in outstanding military sales debt to the US, and Turkish financial officials privately suggest that at least partial forgiveness is in order. The Bush administration has recommended $700 million in economic and military assistance to Turkey for fiscal year 1992, $200 million more than 1991 outlays. Turkey's political consul and embassy spokesman here, Tacan Ildem, notes that ``this increase is only a request'' and may dec rease after congressional review.

Ankara has received $82 million from Washington to help defray the $800 million it incurred in Gulf-war defense costs. Turkey's price for closing two Iraqi-Turkish pipelines, sealing off border trade with Iraq, and other revenue losses amount to $7 billion. Mr. Ildem says the economic impact is staggering. Given Turkey's role in the war, he says, it should at least be entitled to the amount of US relief accorded to Israel's $650 million grant.

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Rep. David Obey (D) of Wisconsin, chairman of the House Foreign Affairs Committee's subcommittee on Foreign Operations, says moves to step up aid will spark strong Capitol Hill debate between ``those who want to rearm'' countries and others, Mr. Obey among them, who generally oppose military sales.

``I don't happen to believe that the policy of America ought to be to reload everybody's gun in the region,'' says Obey.

Nonetheless, the administration will pursue strong military components in future relations with Middle Eastern allies. At a recent Senate Armed Services hearing, Defense Secretary Richard Cheney called for a ``security structure to maintain peace.''

Obey, troubled by Bush's ``strong effort to focus on military'' assistance, supports scaling down the region's military buildup. ``I don't favor any additional aid to countries that are not participating fully in the peace process,'' he says.

``Every Arab nation must ... explicitly recognize Israel and her legitimate security requirements,'' Obey maintains.

Jordan and Pakistan are two countries that may suffer from US punitive action rather than its largess. Amman's strident support for Iraq angered both Bush and US lawmakers. Now Congress is carefully reviewing over $50 million in 1992 aid scheduled for the kingdom. Jordan's economy contracted by two-thirds during the Gulf crisis, and now international aid has almost evaporated.

Hamilton says: ``I would not vote right now for an increase in aid to Jordan. It's likely that King Hussein will play an important role in the Middle East and that our common interests will reemerge, but that remains to be seen.''

The US cut off both economic and military aid to Pakistan last year due to Washington's concern about Pakistan's nuclear program. Islamabad was the fourth largest recipient of US aid. Washington's assistance is sorely missed, says a senior Pakistani official, who adds that Pakistan sent 11,000 troops to the Gulf.

Congressman Hamilton does not support increased assistance to the region, especially military. Next week his subcommittee will examine the issue. ``This is a very propitious moment to move arms control forward,'' he says. ``If we can get the Europeans and the Soviets to cease sales, and enlist the restraint of others, then an arms agreement'' is feasible.

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