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Document Number (FOIA) /ESDN (CREST): 
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Document Creation Date: 
December 15, 2016
Document Release Date: 
April 13, 2004
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Publication Date: 
July 24, 1967
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PDF icon CIA-RDP69B00369R000100240022-5.pdf126.09 KB
l OC,(6 TlvvAopro &c6T4&1Release 2004/05/05: CIA-RDP69B00369R000100240022-5 Anonymous Loans by Pentagon Financing A rms to 14 Countries WASHINGTON, July 23-The) Defense .Department has been In addition to the country -x using anonymous loans from loans since mid-1965, the De-j fense partmept is believed to the Export-Import Bank to fi r,.,,,s,,,,"..a;,... -.1 nance arms sales in Latin Amer- ica, the Middle East, North Africa and Southeast Asia. Informants have disclosed that the "$591-million the . Pen- tagon obtained from the bank between mid-1965 and last June 30 through so-called "country-X accounts" was lent to 14 coun- tries for purchases of American armaments. Under the country-X device, ~ the bank opens a line of credit) to the Defense Department arms salesman, Henry J. Kuss Jr., which Mr. Kuss lends to the country involved for the arms purchase. The loans are guaranteed by the Defeinse DQpartmedi.rnroug ' its $383 million revolving arms sales credit fund under a law i that requires that only 25 per cent of the loan must be cov- ered by the fund. The extent of the bank's in- volvement in the arms traffic brought vigorous protests in Congress last week and has. held up action on legislation to extend the life of the Govern- ment-owned institution for five more years and expand its lend. ing authority, In closed hearings before the House Banking and Currency Committee last Monday, Harold Linder, the bank president, as- serted that until that day he had not known nor wanted to know the names of the coun- tries that had received the loans, Five of the countries are in Latin America-Brazil; Argen- tina, Peru, Chile and Venezuela. Four are Middle Eastern coun- tries-Iran; Saudi Arabia, Jor- dan and Israel. Three are in th nd Southeast Asia- million in loans to underdevel- oped countries that the Penta- gon made directly from the revolving credit account or ob- tained from commercial banks. The Export-Import Bank has also directly lent at Defense Department request since the, fiscal year 1963, $1.1-billion more to a number.of developed countries, including Austria, Italy, Britain and Australia, for .arms purchases from Mr. Kuss. Over the last two fiscal years, arms loans have consti- tuted more than 39 per cent of the bank's lending business, and senior administration offi- cials have testified that the bank has made further com- mitments to lend $1-billion more for weapons during the current and future fiscal years. The exact amounts of the country-x loans to each of 14 aforementioned nations are un- known. It is also believed that some of the loans as of last June 30 were increments of large arms purchases that will require future loans to com- plete financing of the sales. The informants, however, supplied some regional and lo, cal breakdown. About 75 per cent of the country-x loans, they said, ap- proximately $450-millign, went to the four Middle Eastern countries and Morocco. The five Latin-American countries reportedly obtained about $100-million. Brazil is un- derstood to have received about $43-million-Argentina about $21-million and Venezuela ap- proximately $29-million, with the remaining $7-million di- vided between Peru and Chile. 4pproximately $24-million, about 4 per cent, was lent to India and Pakistan, and the re, mainder of the $591-million went to Malaysia and Taiwan. Iran apparently obtained its loan as at least partial credit towar da $200-million purchase in 1966 of F-4 Phantom jets, the most advanced of Ameri- can operational fighter-bomb- akistan, India and Malaysia, loan to Saudi Arabia was ap The North. African country is Morocco. Taiwan is the 14th recipient. patently financed toward a pur- chase of $120-million in Hawk antiaircraft missiles and 'as- sorted other hardware. Israel is believed to have ob- tained its loan for Hawk anti- aircraft missiles and tanks that Mr. Kuss sold the Israelis in 1965 and 1966. Jordan was ap- parently lent the money for the tanks and armored person- nel carriers it obtained last year from the United States. Argentina purchased 25 A-4 Skyhawk fighter-bombers from the United States in 1965 ahd Venezuela has reportedly been sold helicopters for use against the pro-Communist guerrillas there. Morocco has been sold a squadron of F-5 Freedom fight- ers and Malaysia reportedly ob- tained a loan of about $15-mil- lion for jet trainers and others equipment. The loan to India is some-1 what mystifying because until! last May the Administration of-I ficially imposed an embargo on the shipment of so-called lethal military equipment to India and Pakistan. Shipments of what the Administration calls nonlethal equipment, such as radar and trucks, had been al- lowed. Some military specialists con- sider the distinction specious because an armed force needs support equipment as well as guns and tanks to be effective. A sizable number of Demo- crats and Republicans on the House and Senate Banking Committees are angry about the use of the bank to finance arms business, but they are even more disturbed by the fact that its funds have been employed to sell arms to countries in- volved in disputes with their neighbors. They point out, that the major portion the loans within the last two fiscal years, about $450-million, went to the Middle East and North Africa, the most explosive areas. Approved For Release 2004/05/05 : CIA-RDP69B00369R000100240022-5