95. Memorandum of Conversation1
Washington, September 23, 1964, 4 p.m.
Supply of Tanks to Israel
His Excellency, Avraham Harman, Ambassador of Israel
Mr. Mordechai Gazit, Minister, Embassy of Israel
Col. Ram Ron, Military Attache, Embassy of Israel
NEA--Phillips Talbot, Assistant Secretary
NEA/NE--H. Earle Russell, Jr., Israel Desk
Ambassador Harman summarized developments with respect to Israel's acquisition of tanks:
Prime Minister Eshkol had asked for the direct supply of M-48A3 and M-60 tanks and had been told we would consider it. Then the transaction through Germany had come up. Israel had needed 300 tanks quickly. The Germans had 232. Israel proposed to take up the slack with Centurions, which it regarded as inferior. By mid-June the German transaction was well underway.
The first shock had come in July; Germany offered only 150 tanks that it proposed to send to Italy. Next, Mr. Sloan had said that the Israeli request for 80 trainees could not be approved on grounds of security and that only if there were no other possibility for training could a small number be considered. Israel had revised its request downward and hoped that it might receive sympathetic consideration. In a letter dated October [September?] 18,2 Mr. Solbert had stated there was no possibility of supplying conversion kits and ammunition at excess prices. He had doubts about the wisdom of direct supply of these items to Israel. He indicated the need for a lead time of at least three months in procuring conversion kits. These factors jeopardized the feasibility of the whole project. Delays in procurement meant Israel would not be able to obtain the first tanks until 1966 and the last until 1968.
Prime Minister Eshkol was deeply concerned and had proposed the following solution to keep the transaction from foundering:
1. Training: Israel had asked the Department of Defense (DOD) for 26 training slots. This was the limit even of Israel's capability of improvisation. Training courses normally last 12-14 weeks. Israel suggested two successive phases of 13 men each, scattered in three or four different courses. No single course was limited to the M-48A3 specifically, so pinpointing would be difficult. There was already an Israeli Lieutenant Colonel in training at Fort Knox, so that the arrival of additional Israeli trainees would create no new precedent. Moreover, Israel was fully cognizant of the need for secrecy and committed to it.
2. Delivery Schedule: The amount of lead time required by DOD threatened to disrupt Israel's proposed schedule for conversion of tanks. Israel had suggested delivery of 50 conversion kits by March 1965, 50 more in September 1965 and the last 50 in March of 1966. This would permit delivery of the last tanks to Israel by the end of 1967. Only this or a similar schedule would assure timely deliveries.
3. Acquisition of Conversion Kits, Spare Parts, and Ammunition: When Deputy Defense Minister Peres was in Washington, he had indicated the need to do some work on the tanks in Italy, but the general idea was direct delivery to Israel. Cost would determine the proportion of conversion work to be performed in Italy and Israel. Direct delivery was indispensable to the success of the transaction because a) negotiations with the Italians did not cover purchasing or procurement, only work on the tanks; and b) direct delivery required that only three people in Italy be aware of the transaction, while, if Italy were to engage in procurement, knowledge of the transaction would spread to many others, including members of the Italian Embassy in Washington. The U.S. had already shipped 500 tank engines (for Sherman M-4's) as well as a number of tank guns directly to Israel. These transactions had remained secret. To refuse direct delivery of conversion kits, spare parts and ammunition would be a retrogression.
4. Financial Arrangements: The cost of tanks would be high, amounting to $30,000 per unit plus large conversion expenses. Israel hoped to cushion the impact of these large expenditures by a) obtaining a mark-down on equipment purchases through classification as excess, b) indirect aid through increases in development loans and PL-480 sales, and c) agreement to provide conversion kits, spare parts and ammunition as non-reimbursable aid. On the basis of quoted prices, Israel estimated that conversion kits and spare parts would amount to $14 million; and ammunition for 300 tanks to about $14.75 million. Since Israel was already listed as a recipient of MAP aid, it would make little political difference whether this aid were in grants or loans. Israel would be unable to handle the tank transaction without such assistance. Despite Israel's apparent prosperity, it had severe economic problems. Israel's foreign debt amounted to about $1 billion, as against foreign exchange reserves of $430 million. Israel hoped last year's level of development loans and PL-480 might be maintained, with increases in development loans to cushion foreign tank purchases. The cost of the whole transaction could be spread over three fiscal years.
The Secretary replied:
1. DOD hoped to provide an answer to Israel's request for training shortly.2. Delivery of conversion kits by March might be possible but at higher cost. Since the equipment must be manufactured, we could not provide surplus pricing. The need to work overtime to meet Israel's proposed delivery would increase costs. We would try to meet this deadline if Israel considered it important. Meanwhile, we would undertake to obtain firm cost figures.
3. Regarding the manner of delivery and its relation to problems of security and use of a cut-out, further talks with DOD would be desirable. We did not know whether this would involve Munitions Control. There seemed some likelihood that MC licenses might be open to public inspection.
4. Did we have information on Israel's external defense purchases? A program of Israel's defense buying would be helpful.
5. We were considering the determination of the level of development loans, PL-480, and related matters. We hoped to have an answer soon, though certain problems continue to concern us.
Ambassador Harman said he had not supplied material on Israel's defense purchases, but could do so. He wished to convey the Prime Minister's feeling of urgency about the supply of tanks and his worry that it was not moving rapidly. The Prime Minister had said everyone agreed that Israel needed tanks but it seemed impossible to obtain concrete results. Meanwhile, 46 tanks had been sent to Jordan. The need to arm in the wake of belligerent statements at the Second Arab Summit Conference increased the economic burden on Israel. The Prime Minister was desperately looking for some way to freeze arms escalation in the Near East and turn the tide of arms acquisition. He hoped there might be some possibility of broaching the subject with the Soviet Union. Also he had heard in the U.S. of a possible approach to Nasser. Jordan needed no additional arms; Hussein was merely responding to pressure from the UAC. Additional acquisition of arms by Jordan would force Israel to recalculate its arms needs. Finance Minister Saphir had given Mr. Bell a five-year forecast on economic development in Israel. This assumed no absolute increase in arms in the area, which, of course, was not a valid assumption.
Ambassador Harman confirmed that acquisition of new tanks by Israel resulted in removal of old tanks from inventory. The first "bite" of 300 replacement tanks would mean the removal of 300 unreconstructed Shermans from Israel's armed forces.
Ambassador Harman confirmed that Israel had ordered 250 tanks from the U.K.; 150 by the end of 1966 and the remaining 100 by the end of 1967. Israel was not pleased with Centurions, however, and had hoped to obtain M-60's as the "second bite."
Ambassador Harman suggested that, if desirable, one of Israel's Deputy Defense Ministers, an expert on tank procurement, could come to Washington to confer with DOD. The visitor could, or course, come to the U.S. indirectly since he was scheduled to visit Canada in the near future. Mr. Talbot agreed to look into this matter with Defense.
The Secretary commented on the needlessness of the Near East arms race. A regional approach on arms control at Geneva, however, had met with colossal indifference, despite the presence of a regional representative (Israel). Nasser's position toward this problem was affected by the attitude of the other Arab states. Jordan was indeed under pressure to acquire arms but so far had not reacted. The Soviet track was not promising. It had not proved possible to limit arms control to one or two countries. Inevitably U.S. aid to countries such as Korea and Turkey became involved. We were prepared, however, to give the matter further thought and would discuss it with Mr. Foster, Director of the Arms Control and Disarmament Agency.
The Secretary inquired whether Israel was looking into the possibility of developing an anti-tank capability rather than proceeding on the tank vs. tank thesis. Col. Ram Ron noted that all large countries continued to develop new tanks. Moreover, south Israel was ideal tank country.
The Secretary assured Ambassador Harman that he would follow up personally on Israel's problems on tank acquisition.