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34

FRIDAY, DECEMBER 25, 1987

Congress Reaches Agreement
On Israel Debt-Relief Plan

JAMES DAVID BESSER

Washington Correspondent

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I

t's been a good week for
Jewish activists in Wash-
ington. As Congress rac-
ed the clock to complete its
business before the holiday
recess—and before the govern-
ment's authority to spend
money ran out—several last-
minute deals were worked out
on issues considered crucial to
this year's pro-Israel agenda.
The most important action
for the pro-Israel community
was a compromise on the
issue of debt restructuring for
countries beset by high in-
terest rates on their U.S.
loans. Israel and Egypt have
been especially hard hit by
the high interest rates on
loans dating from the mid-
'70s.
An earlier debt relief
measure, sponsored by Sen.
Daniel Inouye (D-Hawaii) and
Sen. Robert Kasten (R-Wisc.),
ran into rough waters when
House-Senate conferees met
to consider the catch-all Con-
tinuing Resolution. The pro-
posal would have allowed
Israel to refinance some $11
billion in high-interest loans
through commercial banks,
with the U.S. government ser-
ving as guarantor. The
refinancing would save the
battered Israel economy
millions in interest—but
result in a significant loss to
the U.S. treasury.
The measure was opposed
by Rep. David Obey (D-Wisc.),
the powerful chairman of the
Foreign Operations Subcom-
mittee of the House Ap-
propriations Committee, on
the grounds that the costs to
the U.S. Treasury could not be
predicted. Obey's forces also
argued that the private
refinancing plan might have
unintended side effects, since
the refinanced loans would be
made with a floating interest
rate. If interest rates increase
dramatically, Israel could face
an even greater drain on its
economy.
But a compromise was ham-
mered out as Congress work-
ed through its annual pre-
Christmas frenzy. House-
Senate conferees ended up
combining the Inouye-Kasten
proposal with a separate pro-
posal offered by Obey. The
result is a two-tiered arrange-
ment that will help credit-
worthy debtor nations like
Israel, but also appeal to
governments in more serious
financial straits.
Obey's plan involves a
government buydown of high

Yitzhak Rabin:
In agreement

interest rates on foreign
loans. Because the buydown
involves only the difference,
between the new interest rate
of ten percent and the
original interest rate of the
loan, the U.S. government is
not on the hook for as much
as in the Inouye proposal,
which involves government
guarantees. There were con-
cerns that countries less
credit-worthy than Israel
could default under the In-
ouye proposal, resulting in
substantial losses for the
federal treasury.
The successful compromise
offers considerable latitude in
debt restructuring. "This is a
bill everybody can live with,"
said a representative of
Obey's office. "It's fair, and it
also provides accountability
for the U.S. government."
There were also reports that
Obey was under tremendous
pressure from House Speaker
Jim Wright (D-Tex.) to work
out a compromise on debt
relief.

Rabin Is A Hit

Pro-Israel activists are also
pleased with the results of
Israeli defense minister Yit-
zhak Rabin's recent visit to
Washington.
The most important out-
come of the visit, according to
several sources, is an agree-
ment reached between Rabin
and U.S. Defense Secretary
Frank Carlucci providing
funding for Israel's participa-
tion in research to develop ad-
vanced antitactical ballistic
missiles (ATBMs).
But according to Senate
sources, the agreement will
run for only one year—and
after its expiration, Israel
may have a far more difficult
time finding money for the

long-term program in the
Defense Department's Stra-
tegic Defense Initiative
budget.
ATBM research is a top
priority for Israel's military
planners because of the pro-
liferation of sophisticated
short and medium range
missiles throughout the Mid-
dle East. A number of coun-
tries, including Syria, now
have missiles capable of hit-
ting targets anywhere in
Israel.
And these same countries
are actively pursuing a
chemical warfare capability.
The combination of the two
technologies, according to
Israel's top military planners,
represents the most signifi-
cant threat facing that
country.
Anti-missile missiles are
seen as the only effective
countermeasure. In theory,
this new generation of
weapons would be able to pick
out and destroy enemy
missiles soon after launch;
defense experts point out that
chemical weapons shot down
near their targets are just as
deadly as weapons that reach
their targets.
But ATBM research is ex-
pensive. The issue has been
how much of Israel's program
would be funded by U.S.
money—and where that
money would come from.
Israel wanted 90 percent of
the funds to come from the
United States; the Pentagon,
under former Defense
Secretary Caspar Weinberger,
pushed for a 50-50 split.
But according to several
sources, the new Defense
Secretary, Frank Carlucci,
was more sympathetic to
Israel's money woes. The
agreement signed last week
calls for 80 percent U.S.
financing of Israeli ATBM
research—and allows Israel
maximum flexibility in
deciding where their 20 per-
cent will come from.
In recent months, the ques-
tion of ATBM money for
Israel has been complicated
by several factors, including
the U.S. budget crisis, arms
reduction negotiations with
the Soviets, and the continu-
ing controversy over Presi-
dent Reagan's SDI program.
Pro-Israel lobbyists express-
ed satisfaction at the new
agreement. But several Hill
staffers who have been involv-
ed in the ATBM debate sug-
gested that Israel now must
begin to seriously consider
other ways of financing the
expensive research in the
future.