Secretary Schneider: Only one of Zaire's five C-130s is currently operational. Two are grounded in Zaire for lack of spare parts. Two overhauled C-130s along with 14 additional engines and $5-6 million in spare parts are being held in Italy by the firm of Siai-Marchetti pending payment by Zaire of the more than $10 million balance owed the firm under a maintenance contract. Zaire has recently begun negotiations with Siai-Marchetti to resolve this impasse. Assuming that it is successful in recouping the impounded planes and equipment, we estimate that Zaire would still need at least $25 million over the next two years to maintain its five C-130s in proper flying condition.

Senator Inouye: The proposed FY 1984 program for Zaire is a departure from prior years: MAP grants take the place of FMS guarantees. Does this indicate that Zaire cannot afford to repay FMS loans? If that is the case, why does the Congressional Presentation suggest that Zaire "may request to purchase defense articles through FMS cash procedures or commercially?"

Secretary Schneider: We propose MAP grants for Zaire in FY 84 rather than additional FMS guaranteed credits because Zaire's overall debt service burden already exceeds its ability to satisfy all its creditors from its own resources. In these circumstances, both Treasury and OMB have consistently taken the position that additional security assistance provided to Zaire should be in the form of grants, rather than commercial-rate loans. MAP grants are used to finance FMS purchases.

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We cannot rule out that Zaire may have other requirements in addition to those foreseen in our MAP request that it considers of sufficient priority to seek to acquire with its own funds. We are certainly not encouraging Zaire to make any additional large commercial or FMS cash purchases.

Senator Inouye: Is Zaire in arrears on prior-year FMS loan repayments? What is Zaire's record of repayment? Does it show prompt repayments made as scheduled or does it show protracted delays?

Secretary Schneider: Zaire is presently in arrears on its repayments on FMS loans in the amount of $18.4 million. During the past year Zaire has twice fallen under Brooke Amendment sanctions, most recently from January 1 to February 2, 1983. Since January, however, Zaire has been making regular payments against its arrears in order to avoid again becoming subject to sanctions.

FREE WORLD ASSISTANCE TO SOUTHWEST ASIA

Senator Inouye: Mr. Schneider, the Security Assistance Congressional Presentation Document indicates that our support for countries in the Southwest Asia/Persian Gulf region is prompted by our concern to maintain energy exports from that region to the Free World. What is meant by the Free World? To what extent are the members of the Free World contributing to the development of self-defense capabilities in the Southwest Asia/Persian Gulf area?

Secretary Schneider:

The Free World refers to the United States, the Western allies, Japan, the ANZUS countries and Latin America. In another sense, the Free World refers to those countries that are not dominated by the Soviet Union.

and we

Now as to what the Western countries are doing to assist the Southwest Asian countries to strengthen their self-defense capability, they are doing the same thing. They are providing those countries training, arms, and armaments at very attractive prices and credit terms.

I can tell you candidly that sometimes I wish they were not doing so much because our manufacturers have lost out on some sales we would have liked to make. For example, Kuwait is flying the French Mirage fighter, Pakistani infantrymen carry the German G-3 rifle and the Indian Air Force is flying the Britsh Jaguar.

Many of those countries want to diversify their defense relationship and do not want to depend exclusively on any one supplier. But I think that it is fair so say that if any country in Southwest Asia wants assistance in improving its security, there is no dearth of countries from the West ready and willing to help out. Of course, you know that the bulk of these sales, including our own, is on a cash or credit basis and not as a grant.

MOROCCO IN SOUTHWEST ASIA

Senator Inouye: How did you determine to include Morocco in Southwest Asia? As I look at a map, Morocco appears to be almost as close to the Straits of Florida as it is to the Straits of Hormuz.

Secretary Schneider: We recognize that geographically Morocco is not directly contiguous to the other Southwest Asian countries. Its inclusion is based on its strategic relationship to this area. Our overall ability to defend our interests in Southwest Asia depends on our ability to move men and supplies to the region in the event of a clear threat to those interests. То do so requires enroute access agreements allowing our planes to land and refuel. The agreement signed with Morocco last year granted us such contingency access. Accordingly, it is Morocco's direct and vital link to the operation of our overall Southwest Asian strategy rather than its geographic proximity that has caused us to include it in our Southwest Asian Security Assistance package.

MILITARY TRAINING ASSISTANCE TO ARGENTINA AND CHILE

Senator Inouye: Mr. Schneider, how do you justify the request for military training assistance to Argentina and Chile? Are these countries not presently engaged in a dispute over the Beagle Channel Islands?

Mr. Schneider: We have requested $50,000 each in IMET training for Argentina and Chile and in FY'84. These funds will not be distributed unless the Presidential certification required by Congress is made, thus ending the prohibition on military training to these two countries. The IMET programs would then provide professional career training in the United States for a limited number of military personnel. This would enhance future security cooperation.

The demarcation of the Beagle Channel remains a point of contention between Argentina and Chile. Both parties, however, continue to seek a settlement through the Papal mediation process and it is unlikely that this dispute will lead to armed conflict. In the event of certification, we would review any request carefully, bearing in mind our interest in maintaining balance and supporting a peaceful resolution to disputes in the region.

INITIATION OF ARGENTINE MILITARY TRAINING

Senator Inouye: How would NATO allies, specifically the United Kingdom, respond to our initiation of a military training relationship with Argentina?

Secretary Schneider: The United Kingdom is for obvious reasons the NATO ally most concerned about the United States military relationship with Argentina. The U.K. opposes United States arms sales to Argentina until that country formally agrees to end hostilities in the South Atlantic. We have not consulted with the British about military training, and, therefore, do not know what their reaction would be. We do not believe that a United States military training relationship with Argentina, if reestablished, would endanger British interests.

U.S. FORCES IN LEBANON

Senator Inouye: Mr. Schneider, rumors abound that the Department of Defense is becoming concerned about the cost of maintaining U.S. forces in Lebanon. Is there any intention of paying these costs out of foreign assistance funding?

Secretary Schneider: No. The cost of maintaining our forces in Lebanon are met from normal Department of Defense funds.

Senator Inouye: What is the reason for requesting $25 million emergency drawdown authority under Peacekeeping Operations? Is it to pay for U.S. forces in Lebanon?

Secretary Schneider: Our "drawdown" request is a separate matter. It is an effort to be prepared with the proper authority to respond rapidly to emergency peacekeeping situations in which a rapid drawdown of U.S. assets is deemed appropriate.

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ESF PROGRAM FOR LIBERIA

Senator Inouye: Mr. Schneider, you are proposing a $35 million Economic Support Fund program for Liberia. The need for this assistance is attributed, in the Congressional Presentation Document, to the 1979-1981 increases in oil prices. With the recent, and accelerating, decline in oil prices, can we assume that the full $35 million is no longer required?

Secretary Schneider: As pointed out in the Congressional Presentation Document, the 1979-1981 increase in the price of oil was only one of many economic problems leading to Liberia's need for ESF. The primary cause of the economic decline was the downturn in the world markets for Liberia's major exports, iron ore, rubber, and timber. A heavy debt burden inherited from the previous government has also placed a strain on the Liberian economy. Finally, Liberia is still suffering from capital flight and a loss of business confidence stemming from the coup of 1980.

Our ESF program, carried out in close coordination with the IMF, has played a crucial role in preventing an economic collapse and political instability. The program has also provided the government of Liberia with the support it needed to enable it to implement difficult policy reforms and austerity measures. Any diminution of the program could threaten both the process of economic recovery and our substantial interests in Liberia.

SUDAN AND THE IMF

Senator Inouye: Mr. Schneider, I note that you propose to provide $120 million in grant ESF to Sudan. Is this assistance being proposed in conjunction with an IMF program? What are the terms and conditions of the IMF program for the Sudan? What roles have other donors played in the development of this program? private banks participated?

Have

Secretary Schneider: Sudan's present IMF program, a one-year standby arrangement, will end three months into FY '84. While we cannot be certain, we fully expect Sudan will negotiate a follow-on program with the IMF to cover FY'84. Under the present stand by arrangement, Sudan devalued its currency by 44 percent, raised the prices for petroleum products to free market values and agreed to restrict imports of some nonessential goods. The program also placed limits on borrowing by the Sudanese government and on the size of the budget deficit. Though the IMF negotiates its programs directly with Sudan, implementation of the last two standby arrangements has been dependent on Sudan's donors providing enough program aid to close the balance of payments gaps unfinanced by Sudanese and IMF resources. Debt servicing is a major claim on Sudan's foreign exchange. Since Sudan cannot even finance its essential imports without IMF and other resources, it is virtually impossible to service its debt. Creditors, including commercial banks, have recognized Sudan's inability to make more than token repayments and they have negotiated rescheduling agreements which take this reality into account.

BUREAU FOR INTERNATIONAL NARCOTIC MATTERS

STATEMENT OF DOMINICK L. DiCARLO, ASSISTANT SECRETARY, BUREAU FOR INTERNATIONAL NARCOTIC MATTERS, DEPARTMENT OF STATE

ACCOMPANIED BY:

CLYDE TAYLOR, DEPUTY ASSISTANT SECRETARY, BUREAU FOR INTERNATIONAL NARCOTIC MATTERS

JAMES VANWERT, EXECUTIVE DIRECTOR, BUREAU FOR INTERNATIONAL NARCOTIC MATTERS

INTRODUCTION OF ASSOCIATES

Senator KASTEN. Our next witness is Mr. Dominick DiCarlo, Assistant Secretary for the Bureau for International Narcotic Matters.

Mr. DiCarlo, your entire statement will be made a part of the record. So, what we would like you to do is proceed with a summary of your statement.

Mr. DICARLO. Thank you.

I would first like to introduce Mr. James Van Wert seated to my left who is the Executive Director of the Bureau for International Narcotic Matters [INM], and to my right Mr. Clyde Taylor who is a Deputy Assistant Secretary.

BUDGET REQUEST

Mr. Chairman, in my opening remarks I will concentrate on the highlights of our budget request of $53,030,000 for fiscal year 1984. Most of the proposed increase of $13,030,000 over the 1983 request consists of $6,770,000 to reduce coca production in Bolivia and $5,445,000 to eradicate marihuana in Colombia, subject to agreements we hope to negotiate this year.

We propose to allocate $30,185,000 or 57 percent of our budget in Latin America, which is the single source of cocaine, the primary source of imported marihuana and the current source of about 36 percent of our heroin imports.

Our Colombian program request of $8,945,000 is based on our goal of successfully negotiating a marihuana eradication program and an expanded coca control program.

BOLIVIAN COCA CULTIVATION LEVELS

We are attempting to negotiate an eradication program to reduce Bolivia's enormous coca cultivation to levels required for legitimate purposes. Continued United States economic assistance is contingent upon Bolivian action to control illicit coca. We budgeted $900,000 in fiscal year 1983 to establish the basic program and believe the level necessary for a major crop control and interdiction program in fiscal year 1984 is $7,670,000.