US Taxpayers Pay High Price For Mideast Peace

Billions in US aid go to Israel's neighbors, but some may have trouble paying back

FOR a pipefitter in Texas or a farmer in Iowa, the Middle East peace process is as close as their pocketbook.

While the United States steps up its efforts to secure peace in the region, the price tag for the taxpayer is climbing because of the negotiation. Consider just one number: Expenses for US military operations in the Gulf will amount to $500 million in the first 60 days.

White House policymakers, intent on championing Arab-Israeli ties, curbing Iraqi aggression, and securing a foreign-policy success, assume the efforts are well worth the price, even if it takes a high toll on American wallets.

As President Clinton travels through the Middle East this week to survey the challenges for US intervention, his advisers back home are vexed by mounting charges for existing US military operations in the Gulf and how to collect on $20 billion in Gulf Arab debts to US defense contractors.

They must also contend with the most recent Middle East financial demand - a wish-list that came from Jordan's King Hussein last week: $36 billion in financial and military aid.

Like his Arab predecessors, the Egyptians and the Palestinians, the Jordanian monarch expects a monetary reward for his role in signing a peace treaty with Israel. While Amman's request is unrealistically high, a top State Department official says, Washington is under pressure to deliver something.

There is a compelling reason to do so, say strategic experts. Jordan's treaty with Israel does more than end decades of hostility between the two nations. It exacts a major concession from the Hashemite Kingdom - clipping Jordan's sovereignty by preventing it from housing foreign troops on its soil.

``This provision will effectively move Israel's border by 200 to 300 kilometers to the east'' and block Arab military dispatches through Jordan and the West Bank, says a Washington-based Middle East consultant. ``This adds a crucial dimension to its security.''

If Jordan evolves into a committed Israeli partner, he says, buttressing Jordan's defensive capacity could help obviate the need for $3 billion in annual US economic and military aid to Israel.

The State Department official predicts Israel will undoubtedly provide air cover over the area - no matter what Jordan acquires - and Jordan's scaled-down reward for the peace treaty will include fighter jets.

This week US Pentagon officials are in Saudi Arabia to confront one more potential budgetary burden: tens of billions of dollars' worth of US-government guaranteed Saudi military orders from US defense suppliers.

In recent days, the Saudi royal family informed Washington it will be unable to make full payments on the multibillion-dollar orders and is asking, again, for easier terms.

A senior Pentagon official in Riyadh this week to negotiate Saudi repayment, says while it honored a $3.35-billion debt this year, the kingdom could fall considerably short of the $4.5 billion-plus it owes in 1995.

To accommodate Riyadh's rescheduling request for the current year, US contractors - companies that depend primarily on the kingdom's purchases - have already stretched out payment terms and slowed production.

``The US has approached military sales to Saudi as an issue of how to preserve the US defense industrial base, and that's inappropriate,'' says Patrick Clawson, senior fellow at the National Defense University here. Washington jeopardized US contractors ``by pinning high hopes on the [cash-short] Middle Eastern arms market.''

The kingdom, whose credit ratings have dropped, has balked at Washington's urgings to borrow more money from Western banks to meet its obligations.

The Saudis want US contractors to assume the financial risk, but most of the major firms have rejected this. If the Saudis default on payments, the Pentagon official says, the US government, and ultimately US taxpayers, will have to pay off the US contractors.

US Treasury Secretary Lloyd Bentsen warned Saudi Arabia's King Fahd to honor its debts by exercising fiscal restraint and curbing its generous government subsidies. Failure to do so, he warned, could prove disastrous both for the Saudi economy and many US defense workers whose jobs depend on Saudi purchases.

The prospect of the kingdom heeding that advice is poor, according to oil economist Eliyahu Kanovsky, of the Washington Institute for Near East Policy.

``Saudi Arabia is in a financial bind that will probably worsen in coming years,'' he predicts. While the kingdom is banking on higher oil prices, he says, the commodity's prices will remain depressed as other producers come on-line and users conserve and explore alternative energy.

Some observers see more financial trouble looming ahead. While Syria's ultimate participation is pivotal to an Arab-Israeli peace, Damascus will no doubt count on financial incentives. Syria's slowing economy cannot keep pace with its rapid population growth and popular support for peace with Israel appears contingent on a payoff.

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