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JEW
CAPITOL REPORT
Did Goldwater, Nunn
Kill Israel Arms Sale?
Finance Minister Yitzhak
Modai has been invited to
Washington early next month to
continue talks with the Reagan
'Administration on increased
U.S. economic assistance to
Israel.
Modai, who will meet with
Secretary of State George
Shultz, Treasury Secretary
James Baker and other senior
U.S. officials, will be pressing
Israel's case for a two-year $1.5
billion emergency supplemental
economic aid request which
would be attached to the al-
ready-passed 1985 fiscal year le-
gislation.
Assuming that U.S. and Is-
raeli economic and legal experts
manage to complete all of the
outstanding, largely technical
details of the proposed Free
Trade Area, Modal might also
sign such a document at the
ceremony in Washington.
U.S. and Israeli officials said
Modal would spend several days
in Washington, probably during
the first week of March. They
said he would also meet with
leading members of the Senate
and House of Representatives
as well as with Jewish leaders.
It would be his first visit to
Washington since becoming Fi-
nance Minister in the national
unity government. An earlier
visit scheduled for late last year
was postponed because of the ef-
forts then underway to complete
the first phase of the price-wage
"package deal." -
U.S. and Israeli officials
agreed that it was by no means
certain that any economic aid in-
crease for Israel would be an-
nounced during the Modal visit.
But they also refused to rule out
this possibility.
The Americans are clearly pre-
pared to increase economic aid
to Israel beyond the $1.2 billion
level appropriated last year. But
there is no final decision about
a final amount.
The Administration has an-
nounced that it will increase
military grants for Israel from
last year's $1.4 billion level to
$1.8 billion in the 1986 fiscal
year budget, just submitted to
Congress.
The Administration has de-
ferred Israel's request for
emergency economic assistance
until more progress has been
achieved in reducing inflation
and cutting the budget. Wash-
ington is continuing its policy of
using economic aid increases for
Israel as leverage in seeking to
encourage greater Israeli econo-
mic reforms.
But at the same time, U.S. of-
ficials do not want to strain
Prime Minister Shimon Peres's
leadership. They fear that a Li-
kud-led government would
weaken broader U.S. policy ob-
jectives in the Middle East.
Plans for a Modai visit to
Washington have been dis-
cussed for several weeks, and
were not the immediate out-
growth of the visit here by
Defense Minister Yitzhak Ra-
The first week in March, U.S.
and Israeli officials said, was an
appropriate time — as far as ac-
commodating the schedules of
the various leaders directly con-
cerned.
The visit will come just days
before Egyptian President Hos-
ni Mubarak's scheduled meeting
at the White House with Presi-
dent Ronald Reagan on March
12.
Israeli officials said Modai
will be pressing his case for an
increased U.S. financial "safety
net" to bolster Israel's dwindl-
ing foreign currency reserves.
K
L\
The U.S. is clearly
prepared to increase
economic aid to
Israel.
They said that this mostly in-
volves more direct U.S. econo-
mic grants for Israel.
Israel has been assured of re-
ceiving at least $1.2 billion in
economic grants as part of the
1986 budget. But by proposing
an increase over the $1.2 billion
economic aid level as part of a
1985 supplemental budget re-
quest, the Administration would
avoid increasing the ceiling of
the 1986 budget. Such a book-
keeping maneuver, U.S. officials
said, would help placate those
congressmen most opposed to
the mounting U.S. budget defi-
cits.
• The Americans also noted
another side benefit from this
bookkeeping maneuver — it
would be presented to Congress
and to Israel as a one-time,
emergency package, and not as
part of the regular foreign aid
allocation for Israel. No annual
precedents would thus be set.
There is general agreement
that the Administration will
propose some economic aid in-
crease for Israel, although ex-
actly how much is by no means
certain. "We're waiting to see
what Modai has to say," one
U.S. source commented.
Meanwhile, there was some
bad news for Israel at the end of
Rabin's talks here in Washing-
ton.
(\
In a last-minute setback, two
U.S. Senators may have suc-
cessfully blocked the completion
of a massive Israeli sale of mor-
tars to the Pentagon.
Authoritative U.S. sources
said the blocking action was
coordinated by Republican Sen-
ator Barry Goldwater of Ari-
zona and Democrat Sam Nunn
of Georgia, both of the Armed
Services Committee. Their ac-
tion represented a serious disap-
pointment to Rabin who had
been led to believe that the mor-
tar sale would be wrapped up
during his Washington visit.
The sale, according to U.S.and
Israeli sources, has a potential
value of several hundred million
dollars, spread out over many