US Department of State 

Dispatch, Vol 1, No 4, September 24, 1990


Proposal to Forgive Egypt's Foreign Military Sales Debt

Eagleburger Source: Deputy Secretary Eagleburger Description: Statement before the House Appropriations Subcommittee on Foreign Relations, Washington, DC Date: Sep 19, 19909/19/90 Category: Speeches, Testimony, Statements Region: MidEast/North Africa Country: Egypt Subject: Military Affairs [TEXT] Under Secretary [of the Treasury David] Mulford and I are here today before you and the members of the Foreign Operations Subcommittee to support the President's proposal to forgive Egypt's foreign military sales (FMS) debt, a major component of the "Desert Shield" appropriation request that was sent to the Congress last Friday. When Saddam Hussein's forces invaded Kuwait in the early days of August, Iraq violated the sovereignty of a small, virtually defenseless nation. His actions violated accepted standards of international conduct and posed a preeminent threat to the hopeful, but as yet fragile, world order which is emerging in the wake of the Cold War. Saddam Hussein also threatened the vital interests of the United States and the rest of the world by seeking a stranglehold over a major share of an energy source which is critical to economic growth and development, not only in the industrialized nations but in the developing world as well. As Secretary Baker noted before Congress 2 weeks ago, Iraq's unprovoked aggression is a political test of how the post-Cold War world will work. And the world has responded to Saddam Hussein's aggression with unprecedented unity and resolve. The UN Security Council has passed seven resolutions condemning Saddam's illegal occupation of Kuwait and imposing economic sanctions. In addition to the United States, over 20 nations have contributed either troops, direct financial support, or humanitarian assistance to the region--nations that range from the United Kingdom and France to Korea; from Japan to Australia; from Bangladesh to Syria to Canada. While Saddam Hussein would like to portray the current crisis as a fight with the United States, it is not. It is Iraq against a united world community.
US Leadership
What the United States can on its own take credit for, however, is the political leadership which was necessary to marshal and to mobilize the world coalition against Iraqi aggression. If there is one thing which this crisis demonstrates, it is that the United States alone possesses the will and the credibility to exercise global leadership--the will to bear sacrifices commensurate with our unique status and responsibility in the world, the credibility needed to persuade others to share equally and equitably both the risks and the burdens of our common effort. We have, if I may say so, done our job well. But we have not been alone. While our role is international in scope, the nature of the crisis is such that courageous and compelling leadership at the regional level has been equally critical to the success of this unprecedented multilateral undertaking.
Egypt's Critical Role
Indeed, at the moment of gravest danger, when lesser men might have succumbed to the intimidation or blandishments of the aggressor, Egyptian President Hosni Mubarak stepped alone to the fore and rallied an Arab consensus upon which all subsequent international efforts have been based His actions have been timely, they have been bold, and they carry with them obvious political and military risks and economic costs. President Mubarak quickly mobilized Arab opposition to Saddam, convening in Cairo an Arab League ministerial meeting that condemned the invasion and demanded an Iraqi withdrawal. He immediately sent 5,000 Egyptian troops to Saudi Arabia to join the international force gathering to defend that country from Iraqi aggression; he is now sending an additional 15,000 troops. Egyptian strategic cooperation also has been essential for our deployment under Operation Desert Shield. In short, President Mubarak is and must continue to be the solid foundation of Arab leadership in the gulf crisis. President Mubarak has done the right thing; we are all in his debt as a result. But his actions have had very direct political and economic costs to him and to the people of Egypt. An Egyptian economy that was strained before August now faces serious difficulties that are the consequence of Iraq's invasion of Kuwait and of the Egyptian government's courageous response.
Costs to Egypt's Economy
It is estimated that, on an annual basis, remittances from Egyptian workers in Kuwait and Iraq will decline by $500 million to $1 billion. Suez Canal receipts will fall by $150 million to $200 million. Revenues from tourism will decline by $500 million to $1 billion. And another estimated $500 million a year will be lost because of exports, service contracts, etc. And on top of all of these burdens, President Mubarak will have to come up with the means to absorb one-half million Egyptians--workers and their families--who are now returning to Egypt as a result of the crisis. Housing will have to be built; jobs will have to be created; and services will have to be provided. Failure to meet these needs could threaten political stability in Egypt, with potentially serious consequences for everything we and our Egyptian friends are now doing to resist Saddam's aggression. The exact costs of absorbing these Egyptians back into the fabric of Egypt's economy are difficult to predict with accuracy at this time, but they are conservatively estimated to run between $500 million to $1 billion.
The President's Proposal
In light of Egypt's critical role in the current gulf crisis, the longstanding, close political relationships between the governments and people of the United States and Egypt, and the potentially overwhelming financial burdens for Egypt that have resulted from the crisis, the President decided to do two things. First, he instructed Secretaries Baker and Brady to approach the gulf states and the industrialized countries around the world, countries that are vitally dependent on the free flow of oil, to encourage them to share in the burden of opposing Saddam. This burden-sharing, or responsibility sharing, is aimed at increasing direct contributions of military forces, where possible, to the gulf region; helping defray incremental US military costs associated with Operation Desert Shield; and helping front-line states--such as Egypt, Turkey, and others--absorb some of the economic burdens brought on by the crisis. Second, he proposed the elimination of Egypt's $6.7 billion of FMS debt, the subject of today's hearing. As you know, we have made important progress on the first part of our program. Significant, generous pledges have been made by several of our key friends and allies. We are still engaged in the process of clarifying the pledges and developing a follow-up system to ensure that the funds are distributed appropriately--unconditionally at the outset (that is, through the rest of this calendar year) and integrated with appropriate conditionality through the medium term, which we have defined as calendar year 1991. We believe that the second part of the President's program, the forgiveness of Egypt's FMS debt, is as important as the first. President Mubarak's stand in the gulf crisis can be compared with no risk of exaggeration to Egypt's decision to sign a peace treaty with Israel in 1979. Indeed, Egypt's current efforts to turn back Iraqi aggression should be viewed against the backdrop of more than a decade of constancy and cooperation with the United States on the Middle East peace process. Egypt paid a high price for its decision to choose peace, having been kicked out of the Arab League and ostracized by most Arab states. Nevertheless, it never altered its course and, today, is back as the leader of an Arab League which has rejected the extremism of a decade ago. Another important result of the treaty with Israel was that Egypt abandoned its dependence on Soviet- made military equipment and turned instead to the United States as a military supplier. Today, US equipment is being used by Egyptian soldiers who are standing shoulder to shoulder with American soldiers in Saudi Arabia. Between 1979 and 1984, Egypt incurred $4.5 billion of FMS loans that carried interest rates comparable to Treasury's cost of borrowing. Interest rates on some of these loans are as high as 14%. By 1984, the debt service burden on these loans--loans that by their military nature drained rather than stimulated economic activity--was beginning to strain Egypt's ability to pay. Between 1984 and 1990, the burden of servicing Egyptian FMS debt became the largest political irritant in US-Egyptian relations. President Mubarak consistently stated his view that FMS debt was political debt and should be forgiven. We, in turn, consistently maintained that debt was debt and had to be paid. Because of the Brooke/Alexander amendment and its requirement that military and economic assistance be cut off if a country were to go more than 1 year in arrears on its military debt service payments, the Egyptian government began to make its required payments just short of the 1-year trigger. By the fall of 1989, Egypt's economic situation had reached the point where we expected that Egypt would have to reschedule its official debt in the Paris Club and that it would have to do so for at least the next 5 years. Our FY [fiscal year] 1991 budget estimates reflected this judgment. President Mubarak told us in increasingly strong messages that he would not be able to meet even these "brink of Brooke" payments, which in 1990 would exceed $700 million; our own analysis supported his conclusion. Let me make it perfectly clear, however, that we were not prepared to seek cancellation of Egypt's FMS debt on the basis of these factors. Our decision to do so now is solely related to the unique circumstances and, in particular, to the urgent political and military challenges Egypt is facing as a consequence of the ongoing crisis in the gulf. Our proposal should by no means be viewed as setting any kind of a precedent for any future action on the part of the United States. Let me make another important point. We recognize that when the dust settles in the Middle East, Egypt has a formidable task in front of it in the area of economic reform. The United States will continue to work with Egypt and the international financial institutions to insure that the difficult choices are made, choices that will be necessary to get Egypt's economy on a sound footing. The forgiveness of FMS debt, in short, will not lessen in any way our commitment to engaging the Egyptians on the kinds of structural reforms which alone will enable them to profit economically from the climate of stability which we expect to prevail in the wake of this crisis. These are not normal times. Egypt's bold and courageous leadership in generating and maintaining Arab support for the efforts against Saddam Hussein, and the sacrifices Egypt is making incident to this exercise in leadership, make this the unique case it is and make the forgiveness of Egypt's FMS debt the right thing to do, and now the right time to do it. We do not support FMS debt forgiveness for any other country. No other country meets the unique combination of political, military, and economic factors that I have described here today.
I noted at the outset that one of the principal tasks of American diplomacy has been to achieve an equitable distribution of risks and responsibilities in this multilateral effort. By any standard of measure, Egypt has of its own accord accepted a lion's share of the risks and a lion's share of the responsibilities, and this at a time when its economy was beset with substantial difficulties. In this context, our action on the question of FMS debt involves the same principle of fairness which compelled us to seek equitable contributions from the many nations around the world who have a stake in our common cause. Your action on this matter will send an important message to the people of Egypt--and to the peoples united in the regional coalition which Egypt leads--that the United States is willing to support fully a nation whose soldiers are manning the front lines alongside American GIs. At times of crisis and peril, there is no substitute for bold and farsighted leadership. History will judge that President Bush and President Mubarak, among others, have demonstrated this kind of leadership. In our constitutional system, no less is expected from the legislative branch. I hope and trust that this subcommittee, and the Congress as a whole, will keep the Desert Shield package together, and in so doing, respond quickly and positively to our request for Egyptian FMS debt forgiveness. (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

Country Profile: Egypt

Date: Sep 24, 19909/24/90 Category: Country Data Region: MidEast/North Africa Country: Egypt Subject: History, Trade/Economics, International Organizations [TEXT] Official Name: Arab Republic of Egypt
Area: 1,001,450 sq. km. (386,650 sq. mi.); slightly smaller than Texas, Oklahoma, and Arkansas combined. Cities: Capital--Cairo (pop. over 12 million). Other cities-- Alexandria (4 million), Aswan, Asyut, Port Said, Suez, Ismailia. Terrain: Desert except Nile Valley and Delta--desert, wasteland, urban (96.5%), cultivated (2.8%), inland water (0.7%). Climate: Dry, hot summer, moderate winters.
Nationality: Noun and adjective--Egyptian(s). Population (1989): 54.8 million. Annual growth rate: 2.6%. Ethnic groups: Egyptian, Bedouin Arab, Nubian. Religions: Sunni Muslim 90%, Coptic Christian. Languages: Arabic (official), English, French. Education: Years compulsory--ages 6-12. Literacy--45%. Health: Infant mortality rate--(1989) 93/1,000. Life expectancy-- 59.3 yrs. Work force: Agriculture--44%. Government, public service and armed forces--36%. Privately owned service and manufacturing enterprises--20%.
Type: Republic. Independence: 1922. Constitution: 1971. Branches: Executive--president, prime minister, cabinet. Legislative--People's Assembly (448 elected and 10 presidentially appointed members) and Shura (Consultative) Council (140 elected members, 70 presidentially appointed). Judicial--Court of Cassation, State Council. Administrative subdivisions: 26 governorates. Political parties: National Democratic Party (ruling), New Wafd Party, Socialist Labor Party, Socialist Liberal Party, National Progressive Unionist Grouping, Umma Party. Suffrage: Universal over 18. Flag: Three horizontal stripes--red, white, and black from top to bottom--with a golden hawk in the center stripe.
GDP (FY 1987-88): $34.5 billion. Annual growth rate: 2%. Per capita GNP (1987 ): $680. Natural resources: Petroleum and natural gas, iron ore, phosphates, manganese, limestone, gypsum, talc, asbestos, lead, zinc. Agriculture: Products--cotton, rice, onions, beans, citrus fruits, wheat, corn, barley, sugar. Industry: Types--food processing, textiles, chemicals, petrochemicals, construction, light manufacturing, iron and steel products, aluminum, cement, military equipment. Trade (FY 1988-89): Exports--$2.5 billion: petroleum, cotton, manufactured goods. Major markets--US, Japan, Italy, FRG, France, UK. Imports--$10.1 billion: foodstuffs, machinery and transport equipment, paper and wood products. Major suppliers--US, FRG, France, Japan, Netherlands, UK, Italy. Free market exchange rate: 2.59 Egyptian pounds=US$1 (fluctuates).
International Affiliations
UN and some of its specialized and related agencies, including the International Monetary Fund (IMF), World Bank, General Agreement on Tariffs and Trade (GATT); Arab League; Nonaligned Movement; Organization of African Unity (OAU); Organization of the Islamic Conference (OIC). (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

American Leadership in the Middle East

Kelly Source: John H. Kelly, Assistant Secretary for Near Eastern and South Asian Affairs Description: Statement before the Subcommittee on Europe and the Middle East of the House Foreign Affairs Committee Date: Sep 18, 19909/18/90 Category: Speeches, Testimony, Statements Region: MidEast/North Africa Country: Iraq, Kuwait Subject: Military Affairs, Terrorism [TEXT] Between September 5 and 17, I accompanied Secretary Baker on a visit to eight countries in the Middle East and Europe. I want to tell you at the outset that in every country we visited, American leadership was acknowledged, appreciated, and recognized as essential for resolution of the [Persian] Gulf crisis. There is gratitude for the American military presence on the Arabian Peninsula. There is recognition of the sacrifices being made by the men and women of the American armed forces. There is solidarity that Iraqi aggression must not stand, and there is willingness to share the responsibilities for implementation of the UN Security Council resolutions. Politically, this was acknowledged in Arab capitals, by NATO and the European Community, and in the joint statement issued by Presidents Bush and Gorbachev in Helsinki. Militarily, this is recognized by the decisions of many nations to contribute forces to the effort in the gulf. Economically, the shared responsibility is manifested by pledges of up to $20 billion to help share the costs of the American defense contribution and to cushion the economic shock resulting from Iraqi aggression. Today, 7 weeks after the invasion of Kuwait, Iraqi occupation forces remain dug in throughout that country and continue to threaten the security of Saudi Arabia and neighboring states. Iraq continues to hold hostage thousands of foreign nationals, including about 1,600 Americans. Many US citizens have been incarcerated to be used as human shields at Iraqi military and industrial facilities. Since Iraq's invasion of Kuwait, the civilized world has spoken with a nearly unanimous voice in its determination that Iraqi aggression must be contained and reversed. As President Bush said on September 11 in his address to a joint session of Congress, this will require patience and strong will. I last appeared before this subcommittee on July 31, at a time when Iraqi threats and intimidation had raised tensions in the region to very high levels. I said then that administration policy was "to do all we can to support our friends when they are threatened and to preserve stability" in the area. Two days later, the Iraqi government demonstrated the depths of its irresponsibility and its contempt for civilized standards of behavior by carrying out an unprovoked act of aggression against Kuwait. In the weeks since then, the world has mobilized to reverse Iraq's aggression. The United States has carried out a massive military deployment of personnel and material to the gulf region. We have been joined in our military efforts by many other states. Today, 26 nations have responded to requests from Saudi Arabia and Kuwait for assistance to deter further Iraqi acts of aggression by contributing ground, air, or maritime forces. We also have been active on the diplomatic front as we have molded an international consensus to deter further Iraqi aggression. We have met with an exceptionally high degree of international cooperation in this effort. The UN Security Council has passed seven resolutions on the gulf crisis. Three meetings of the Arab League have produced strong condemnation of Iraqi behavior. At least 98 countries have announced publicly that they support UN Security Council Resolution 661 establishing mandatory sanctions against Iraq and have taken, or will take, steps to implement that resolution. A number of nations are providing financial and economic support to those states enduring particular economic sacrifices due to their adherence to the sanctions. OPEC nations-- such as Saudi Arabia, the United Arab Emirates, and Venezuela-- have agreed to increase production to offset the loss of Iraqi and Kuwaiti oil exports. Iraq today stands as an international pariah, an outlaw isolated from the Arab League majority and condemned by the international community. The Iraqi economy is feeling the bite of sanctions. That bite will become more painful in the weeks and months ahead. Iraq loses approximately 2.7 million barrels a day in lost oil exports, or more than $2.4 billion per month, from its inability to sell Iraqi oil on the international market.
Diplomatic Strategy
The President has clearly defined our objectives: the immediate, complete, and unconditional withdrawal of all Iraqi forces from Kuwait; restoration of Kuwait's legitimate government; the security and stability of the gulf region; and the protection of the lives of American and other foreign citizens held hostage by Iraq. We have wide international support for this position. When I accompanied the Secretary on his recent trip, I heard Arab and European leaders agree strongly with this determination. The joint communique issued by President Bush and Soviet President Gorbachev at the conclusion of their September 9 meeting in Helsinki stresses that "nothing short of the complete implementation of the UN Security Council resolutions is acceptable." During the Secretary's visit to NATO headquarters on September 10, our European allies were united in rejecting the idea of a partial solution. Given the inflexible Iraqi position, our diplomatic strategy must focus on sustaining the international sense of firmness, the unity of purpose, and the sense of cohesion that have confronted Saddam Hussein. We must work to maintain and strengthen sanctions against Iraq while increasing multinational military forces in the area to deter further Iraqi acts of aggression.
We must assure that the military and economic burdens of deterring aggression while the sanctions take effect are shared equitably. As the President said on August 30, "It is important that the considerable burden of the effort be shared by those being defended and those who benefit from the free flow of oil. Indeed, anyone who has a stake in international order has an interest that all of us succeed. . . . We're more than willing to bear our fair share of the burden. . . . But we also expect others to bear their fair share." We must also assure that those states, such as Egypt and Turkey, whose economies have been hit particularly hard by adherence to the sanctions are given the financial assistance necessary to help them weather the storm created by Iraqi aggression. Jordan's economy stands to lose proportionately more than any other nation as a result of strict adherence to UN Security Council Resolution 661. We hope that Jordan will distance itself from Iraq and vigorously enforce sanctions. We were shocked by the rally of radical Arab forces held this weekend in Amman. We find it hard to understand why some of the same forces who were driven out of Jordan in 1970 because they undermined Jordanian stability are today assembling in Amman to declare their support for Saddam Hussein. We fail to understand the ambivalence of the Jordanian government on the question of clear opposition to aggression against a small nation. We look forward to Jordan's rejoining the Arab League majority, lest there be irreversible erosion of American and international support for Jordan.
Hostages in Iraq
Iraq still continues to hold about 1,600 American citizens hostage, as well as hundreds of thousands of other foreigners. About 3 weeks ago, I was at Andrews Air Force Base to meet the first plane bringing home women and children from our embassy in Kuwait. I saw families who had displayed great courage but who also remained full of anxiety for relatives left behind. These feelings are shared by thousands of families across the United States and the world who have relatives still trapped in Iraq and Kuwait. The US embassy in Kuwait remains open, and our flag still flies, to demonstrate the commitment of the American government and people to do all we can to protect our fellow citizens and secure their safe return home. The men and women serving at our embassy in Kuwait and our embassy in Baghdad have been an inspiration to us all. They have displayed courage and resilience under some of the most trying conditions imaginable. I know all members of the committee join me in saluting the performance of our fellow Americans who remain in Baghdad and Kuwait. We and the civilized world demand that Iraq comply with UN Security Council Resolution 664. We demand that the Iraqi government facilitate the immediate departure of all foreign nationals wishing to leave Iraq and Kuwait.
The international reaction to the Iraqi invasion of Kuwait is truly unprecedented. The United States and the Soviet Union, emerging from the Cold War, have taken a common stand. The Arab League majority, the majority of the Organization of the Islamic Conference, the European Community, NATO, the Organization of American States, the Organization of African Unity, and members of the Association of Southeast Asian Nations have spoken out forcefully against Iraqi aggression. This is truly international cohesion--and this cohesion exists because the cause is just. The United States is leading, but the United States is not alone. The UN Security Council has voted seven resolutions. On the issue of Iraqi aggression, there is no East or West; there is no North or South. There is unity that echoes President Bush's statement, "Iraqi aggression will not stand." Two weeks ago, in his testimony before the full committee, Secretary Baker pointed out that the United States remains "The one nation that has the necessary political, military, and economic instruments . . . to catalyze a successful collective response by the international community." We must continue to utilize our unique assets to maintain the international consensus, strengthen the sanctions regime, and continue to deter further Iraqi aggression so that Saddam Hussein at last will be forced to face the fact that his actions have been based on miscalculation and have caused severe damage to the Iraqi nation. (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

UN Security Council Resolution 666 on Iraq's Invasion of Kuwait

Date: Sep 13, 19909/13/90 Category: Fact Sheets Region: MidEast/North Africa Country: Iraq Subject: United Nations [TEXT]
Resolution 666 (Sep. 13, 1990)
The Security Council, Recalling its resolution 661 (1990), paragraphs 3 (c) and 4 of which apply, except in humanitarian circumstances, to foodstuffs, Recognizing that circumstances may arise in which it will be necessary for foodstuffs to be supplied to the civilian population in Iraq or Kuwait in order to relieve human suffering, Noting that in this respect the Committee established under paragraph 6 of that resolution has received communications from several Member States, Emphasizing that it is for the Security Council, alone or acting through the Committee, to determine whether humanitarian circumstances have arisen, Deeply concerned that Iraq has failed to comply with its obligations under Security Council resolution 664 (1990) in respect of the safety and well-being of third State nationals, and reaffirming that Iraq retains full responsibility in this regard under international humanitarian law including, where applicable, the Fourth Geneva Convention, Acting under Chapter VII of the Charter of the United Nations, 1. Decides that in order to make the necessary determination whether or not for the purposes of paragraph 3 (c) and paragraph 4 of resolution 661 (1990) humanitarian circumstances have arisen, the Committee shall keep the situation regarding foodstuffs in Iraq and Kuwait under constant review; 2. Expects Iraq to comply with its obligations under Security Council resolution 664 (1990) in respect of third State nationals and reaffirms that Iraq remains fully responsible for their safety and well-being in accordance with international humanitarian law including, where applicable, the Fourth Geneva Convention; 3. Requests, for the purposes of paragraphs 1 and 2 of this resolution, that the Secretary-General seek urgently, and on a continuing basis, information from relevant United Nations and other appropriate humanitarian agencies and all other sources on the availability of food in Iraq and Kuwait, such information to be communicated by the Secretary-General to the Committee regularly; 4. Requests further that in seeking and supplying such information particular attention will be paid to such categories of persons who might suffer specially, such as children under 15 years of age, expectant mothers, maternity cases, the sick and the elderly; 5. Decides that if the Committee, after receiving the reports from the Secretary-General, determines that circumstances have arisen in which there is an urgent humanitarian need to supply foodstuffs to Iraq or Kuwait in order to relieve human suffering, it will report promptly to the Council its decision as to how such need should be met; 6. Directs the Committee that in formulating its decisions it should bear in mind that foodstuffs should be provided through the United Nations in co-operation with the International Committee of the Red Cross or other appropriate humanitarian agencies and distributed by them or under their supervision in order to ensure that they reach the intended beneficiaries; 7. Requests the Secretary-General to use his good offices to facilitate the delivery and distribution of foodstuffs to Kuwait and Iraq in accordance with the provisions of this and other relevant resolutions; 8. Recalls that resolution 661 (1990) does not apply to supplies intended strictly for medical purposes, but in this connection recommends that medical supplies should be exported under the strict supervision of the Government of the exporting State or by appropriate humanitarian agencies. VOTE: 13 for, 0 against, 2 abstentions (Cuba and Yemen) (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

UN Security Council Resolution 667 on Iraq's Invasion of Kuwait

Date: Sep 16, 19909/16/90 Category: Fact Sheets Region: MidEast/North Africa Country: Iraq Subject: United Nations [TEXT]
Resolution 667 (Sep. 16, 1990)
The Security Council, Reaffirming its resolutions 660 (1990), 661 (1990), 662 (1990), 664 (1990), 665 (1990) and 666 (1990), Recalling the Vienna Conventions of 18 April 1961 on diplomatic relations and of 24 April 1963 on consular relations, to both of which Iraq is a party, Considering that the decision of Iraq to order the closure of diplomatic and consular missions in Kuwait and to withdraw the immunity and privileges of these missions and their personnel is contrary to the decisions of the Security Council, the international Conventions mentioned above and international law, Deeply concerned that Iraq, notwithstanding the decisions of the Security Council and the provisions of the Conventions mentioned above, has committed acts of violence against diplomatic missions and their personnel in Kuwait, Outraged at recent violations by Iraq of diplomatic premises in Kuwait and at the abduction of personnel enjoying diplomatic immunity and foreign nationals who were present in these premises, Considering that the above actions by Iraq constitute aggressive acts and a flagrant violation of its international obligations which strike at the root of the conduct of international relations in accordance with the Charter of the United Nations, Recalling that Iraq is fully responsible for any use of violence against foreign nationals or against any diplomatic or consular mission in Kuwait or its personnel, Determined to ensure respect for its decisions and for Article 25 of the Charter of the United Nations, Further considering that the grave nature of Iraq's actions, which constitute a new escalation of its violations of international law, obliges the Council not only to express its immediate reaction but also to consult urgently to take further concrete measures to ensure Iraq's compliance with the Council's resolutions, Acting under Chapter VII of the Charter of the United Nations, 1. Strongly condemns aggressive acts perpetrated by Iraq against diplomatic premises and personnel in Kuwait, including the abduction of foreign nationals who were present in those premises; 2. Demands the immediate release of those foreign nationals as well as all nationals mentioned in resolution 664 (1990); 3. Further demands that Iraq immediately and fully comply with its international obligations under resolutions 660 (1990), 662 (1990) and 664 (1990) of the Security Council, the Vienna Conventions on diplomatic and consular relations and international law; 4. Further demands that Iraq immediately protect the safety and well-being of diplomatic and consular personnel and premises in Kuwait and in Iraq and take no action to hinder the diplomatic and consular missions in the performance of their functions, including access to their nationals and the protection of their person and interests; 5. Reminds all States that they are obliged to observe strictly resolutions 661 (1990), 662 (1990), 664 (1990), 665 (1990) and 666 (1990); 6. Decides to consult urgently to take further concrete measures as soon as possible, under Chapter VII of the Charter, in response to Iraq's continued violation of the Charter, of resolutions of the Council and of international law. VOTE: Unanimous (15-0) (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

Taped Address to the Iraqi People

Bush Source: President Bush Description: Remarks in a videotape to the people of Iraq from the Oval Office Date: Sep 12, 19909/12/90 Category: Speeches, Testimony, Statements Region: MidEast/North Africa Country: Iraq Subject: Military Affairs [TEXT] (The following message was broadcast in Iraq, September 17, 1990) I am here today to explain to the people of Iraq why the United States--and the world community--has responded the way it has to Iraq's occupation of Kuwait. My purpose is not to trade accusations, not to escalate the war of words, but to speak with candor about what has caused this crisis that confronts us. Let there be no misunderstanding. We have no quarrel with the people of Iraq. I've said many times, and I will repeat right now, our only object is to oppose the invasion ordered by Saddam Hussein. On August 2, your leadership made its decision to invade, an unprovoked attack on a small nation that posed no threat to your own. Kuwait was the victim; Iraq, the aggressor. And the world met Iraq's invasion with a chorus of condemnation: unanimous resolutions in the United Nations. Twenty-seven states--rich and poor, Arab, Muslim, Asian, and African--have answered the call of Saudi Arabia and free Kuwait and sent forces to the gulf region to defend against Iraq. For the first time in history, 13 states of the Arab League, representing 80% of the Arab nations, have condemned a brother Arab state. Today, opposed by world opinion, Iraq stands isolated and alone. I do not believe that you, the people of Iraq, want war. You've borne untold suffering and hardship during 8 long years of war with Iran--a war that touched the life of every single Iraqi citizen, a war that took the lives of hundreds of thousands of young men, the bright promise of an entire generation. No one knows better than you the incalculable costs of war, the ultimate cost when a nation's vast potential and vital energies are consumed by conflict. No one knows what Iraq might be today, what prosperity and peace you might now enjoy, had your leaders not plunged you into war. Now, once again, Iraq finds itself on the brink of war. Once again, the same Iraqi leadership has miscalculated. Once again, the Iraqi people face tragedy. Saddam Hussein has told you that Iraqi troops were invited into Kuwait. That's not true. In fact, in the face of far superior force, the people of Kuwait are bravely resisting this occupation. Your own returning soldiers will tell you the Kuwaitis are fighting valiantly in any way they can. Saddam Hussein tells you that this crisis is a struggle between Iraq and America. In fact, it is Iraq against the world. When President Gorbachev and I met at Helsinki, we agreed that no peaceful international order is possible if larger states can devour their neighbors. Never before has world opinion been so solidly united against aggression. Nor, until the invasion of Kuwait, had the United States been opposed to Iraq. In the past, the United States has helped Iraq import billions of dollars worth of food and other commodities. And the war with Iran would not have ended 2 years ago without US support and sponsorship in the United Nations. Saddam Hussein tells you the occupation of Kuwait will benefit the poorer nations of the world. In fact, the occupation of Kuwait is helping no one and is now hurting you, the Iraqi people, and countless others of the world's poor. Instead of acquiring new oil wells by annexing Kuwait, this misguided act of aggression will cost Iraq over $20 billion a year in lost oil revenues. Because of Iraq's aggression, hundreds of thousands of innocent foreign workers are fleeing Kuwait and Iraq. They are stranded on Iraq's borders, without shelter, without food, without medicine, with no way home. These refugees are suffering, and this is shameful. But even worse, others are being held hostage in Iraq and Kuwait. Hostage-taking punishes the innocent and separates families. It is barbaric. It will not work. And it will not affect my ability to make tough decisions. I do not want to add to the suffering of the people of Iraq. The United Nations has put binding sanctions in place, not to punish the Iraqi people, but as a peaceful means to convince your leadership to withdraw from Kuwait. That decision is in the hands of Saddam Hussein. The pain you now experience is a direct result of the path your leadership has chosen. When Iraq returns to the path of peace, when Iraqi troops withdraw from Kuwait, when that country's rightful government is restored, when all foreigners held against their will are released, then, and then alone, will the world end the sanctions. Perhaps your leaders do not appreciate the strength of the forces united against them. Let me say clearly, there is no way Iraq can win. Ultimately, Iraq must withdraw from Kuwait. No one--not the American people, not this President--wants war. But there are times when a country, when all countries who value the principles of sovereignty and independence, must stand against aggression. As Americans, we're slow to raise our hand in anger and eager to explore every peaceful means of settling our disputes. But when we have exhausted every alternative, when conflict is thrust upon us, there is no nation on earth with greater resolve or stronger steadiness of purpose. The actions of your leadership have put Iraq at odds with the world community. But while these actions have brought us to the brink of conflict, war is not inevitable. It is still possible to bring this crisis to a peaceful end. When we stand with Kuwait against aggression, we stand for a principle well understood in the Arab world. Let me quote the words of one Arab leader--Saddam Hussein himself: "An Arab country does not have the right to occupy another Arab country. God forbid, if Iraq should deviate from the right path, we would want Arabs to send their armies to put things right. If Iraq should become intoxicated by its power and move to overwhelm another Arab state, the Arabs would be right to deploy their armies to check it." Those are the words of your leader, Saddam Hussein, spoken on November 28, 1988, in a speech to Arab lawyers. Today, 2 years later, Saddam has invaded and occupied a member of the United Nations and the Arab League. The world will not allow this aggression to stand. Iraq must get out of Kuwait for the sake of principle, for the sake of peace, and for the sake of the Iraqi people. (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

Gulf Crisis Needs International Solidarity

Baker Source: Secretary Baker Description: Opening statement from press conference following meetings with Chancellor Helmut Kohl and Foreign Minister Hans-Dietrich Genscher, Bonn, Federal Republic of Germany Date: Sep 15, 19909/15/90 Category: Speeches, Testimony, Statements Region: MidEast/North Africa, Europe Country: Saudi Arabia, Iraq, Kuwait Subject: Military Affairs [TEXT] As President Bush has made clear, our preference is to resolve this crisis through diplomatic means. For that to happen, we really must continue to have strong international solidarity: the unprecedented international consensus that exists out there must be sustained and sanctions, of course, must be fully implemented. In addition to that, the responsibility must be shared equitably. Our goal on this trip was to strengthen the international consensus, and it was to take steps to sustain it. We also wanted to signal Saddam Hussein that the isolation and pressure on him would continue to build rather than diminish. To simply say we are pleased with the results of the trip, I think, would be an understatement. We have received financial commitments that will ease the burden of those states who are paying a very high price for implementing the sanctions, thus helping make their actions more sustainable. We have received unprecedented military commitments--for troops, ships, aircraft and other support--from countries in the region, as well as from our European allies. And with this support came some political commitments, as well. Commitments to accept no outcome of the crisis that does not provide for Iraq's unconditional withdrawal and the restoration of the legitimate Kuwaiti leadership, and commitments to consider additional measures. The international community has given the term "responsibility sharing" real content. We are collectively making a statement that, in this new era, responsibility sharing cuts across alliances, embracing traditional friends, as well as others. In an effort to give you some idea of how the world community continues to maintain this unprecedented consensus continues to build pressure on Saddam Hussein, let me sketch for you in broad terms the commitments that have been pledged. We began in the gulf states, where the leadership of Saudi Arabia, Kuwait, and the United Arab Emirates pledged a total of $12 billion in contributions for the remainder of 1990. This will provide both support for US defense costs and economic assistance to the critical front line states: Egypt and Turkey particularly, as well as to other worthy states contributing troops or hit hard by the economic dislocations resulting from Iraqi aggression. We have completed our discussions with the leadership of the German government, and as I related to you outside the Chancellor's home, the German government has pledged $2 billion in economic assistance and support for our military efforts to be dispersed promptly during 1990, a measure--a commitment, I should say-- that we see as very positive, very forthcoming, and in which we are very pleased. The European Community is expected to announce soon its significant commitment in community and member state contributions. The Italian government told us in Rome of an initial $145 million in bilateral economic assistance to the front line states. And so the approximate total of the pledges that have been received, including support for United States defense costs and economic assistance to the front line states, is over $16 billion. If you add Japan's $4 billion contribution to that, of course, the total is over $20 billion. Let me say a quick word about military commitments. As you know, the United Kingdom is sending to Saudi Arabia ground combat forces in the form of an armored brigade and a third squadron of Tornados, adding to aircraft and Royal Navy ships which are already on the scene. France today announced that it would send a light armor brigade and associated combat aircraft. This, of course, is in addition to attack helicopters and commandos already in the region and it's in addition to the substantial French naval presence in the gulf. Canada announced yesterday a squadron of CF-18 aircraft in addition to the two destroyers that are en route, Italy is sending a squadron of eight Tornado aircraft and another frigate in addition to the two frigates and other ships already committed. Egypt, as you know from the visit there--the stop there--will put up to two divisions in Saudi Arabia. Syria, again as you know from our stop in Damascus, will send at least a division-size force. So the summary demonstrates clearly that the whole world is responding and responding in an unprecedented way to Iraq's aggression. It is an unprecedented story and I think it conveys an unmistakable message. That message is the world will not tolerate this aggression. (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

Country Profile: Saudi Arabia

Date: Sep 24, 19909/24/90 Category: Country Data Region: MidEast/North Africa Country: Saudi Arabia Subject: History, Trade/Economics, International Organizations [TEXT] Official Name: Kingdom of Saudi Arabia
Area: 2,331,000 sq. km. (830,000 sq. mi.); about one-third the size of the continental US. Cities: Capital--Riyadh (pop. 1.5 million). Other cities--Jiddah 1.4 million, Makkah 837,000, Taif 455,000, Dammam 426,000, Medinah 412,000, Tabuk 340,000. Terrain: Mainly desert, with rugged mountains in the southwest. Climate: Arid with great extremes of temperature.
Nationality: Noun--Saudi(s). Adjective--Saudi Arabian or Saudi. Population (1988 est.): 11 million (7 million Saudi nationals, 4 million foreign nationals). Annual growth rate: 3.5%. Ethnic groups: Arab (90% of native pop.), Afro-Asian. Religion: Islam. Language: Arabic. Education: Attendance (primary school)--80%. Literacy--men 50%; women 25%. Health: Infant mortality rate--78/1,000. Life expectancy--60 yrs. Work force: 4.8 million (25% Saudi, 75% foreign): Agriculture--14%. Industry--11%. Service, commerce, and government--53%. Construction--20%. Oil and mining--2%.
Type: Monarchy with Council of Ministers. Unification: September 23, 1932. Constitution: None; governed according to Islamic law (Sharia). Branches: Executive--king (chief of state and head of government). Legislative--None. Judicial--Islamic Courts of First Instance and Appeals. Administrative subdivisions: 14 provinces. Political parties: None. Suffrage: None. Central government budget (1989): $38 billion. Defense (1985): 35% of budget. Flag: Green and white; bears the Muslim creed in Arabic script: "There is no God but God; Muhammad is the Messenger of God." Under the script is a white horizontal sword.
GDP (1989): $72 billion. Annual growth rate (1987, current dollars): 2.9% overall; non-oil share, 1.5%. Per capita GDP: $7,700. Avg. inflation rate (1987): 1%. Natural resources: Hydrocarbons, iron ore, gold, copper. Agriculture (5% of GDP): Products--dates, grains, livestock, vegetables. Cultivated land--0.3%. Industry (oil, 30% of GDP; nonoil; 4%): Types--petroleum production, petrochemicals, cement, fertilizer, light industry. Trade (1989): Exports--$24 billion (f.o.b.): petroleum and petroleum products. Imports--$22 billion: manufactured goods, transportation equipment, construction materials, processed food products. Major markets--US, Western Europe, Japan.
International Affiliations
Charter Member of the UN and many of its specialized and related agencies; observer status in the General Agreement on Tariffs and Trade (GATT); Arab League; Gulf Cooperation Council (GCC); International Wheat Council (IWC); Nonaligned Movement, Organization of Petroleum Exporting Countries; INTELSAT; Organization of the Islamic Conference (OIC); Islamic Development Bank (IDB); Arab Satellite Organization (ARABSAT). (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

The New Europe in a New Age: Insular, Itinerant, or International? Prospects for an Alliance of Values

Zoellick Source: Robert B. Zoellick, Counselor of the State Department Description: Address before the American-European Community Association International's Conference on US/EC Relations and Europe's New Architecture, Annapolis, Maryland Date: Sep 21, 19909/21/90 Category: Speeches, Testimony, Statements Region: Europe Subject: Military Affairs, Trade/Economics [TEXT] The letter inviting me to speak to you tonight described this conference as a "brainstorming" session. And I was asked to speculate about the future. Since my speculation often starts with an observation on history, that's where I'd like to begin this evening. History books identify seminal events and years; they mark the end of one age and the beginning of the next. But reality is more complex, as patterns of thought evolve and leaders and publics shift their thinking toward new challenges. We are living in a transition between two eras. What came before was the post-war era--the Cold War. So far, the next period has been labeled the post-Cold War era. It does not even have a name of its own because we do not yet know its dominant characteristics. But we must take actions today that will shape this next age. So we need to speculate about both continuing and new challenges. And we need to consider how the United States, Europe, and others might meet them. Tonight, I will focus on three questions about the new Europe in this new age: -- Will the new Europe be insular, itinerant, or international? -- What are the primary challenges Europe will share with the United States in the post-Cold War age? -- What practical steps should the European Community (EC) and the United States take to get on with the job?
Insular, Itinerant, or International?
Imagine a place in the not-so-distant future, with tall mountains, clear streams, and picturesque meadows. The cities are clean. The people speak a number of languages--Romance, German, and English. The political system is a federal republic, and the citizens are prosperous. You may believe you already know the land I'm envisioning. But when the flag comes into view--a white cross on a red field--it's the ensign of Switzerland. Might the new Europe be akin to a large Switzerland? My European colleagues are startled when I suggest the new Europe could be an insular Europe. After all, Americans and Asians are supposed to be insular; Europeans are cosmopolitan. But consider the possibility of insularity. The Germans could be preoccupied with unification. The EC could be absorbed by the economic, monetary, and political integration of Western Europe. The new market democracies of Central and Eastern Europe could be concentrating on making their reform efforts work and on drawing closer to their Western neighbors. The EFTA [European Free Trade Association] nations could be focusing on their relationship with the Community. The Balkans could be intensely involved in reconciling nationalisms with nationhood. Some might reason that there's no shortage of work to be done in Europe, which is, after all, where the "horizons" all come together. Besides that, the outer reaches might be portrayed as unappealing: Exports, especially from Asia or foreign farmers, could disrupt European harmony; people to the south want to migrate north or start deadly conflicts; and perhaps the Americans have had a say in European affairs for too long. If that were not enough, the new Europe is also going to have to accommodate and help determine the place of its large, Eurasian neighbor, the Soviet Union. Frankly, I do not believe the insular Europe is the most likely new Europe. But some public and political currents, as well as some policies, reflect this insular spirit.
A second possibility for the new Europe would be to become what I call the itinerant Europe. By this, I mean a Europe that will engage around the world, but autonomously, without much interest in new, durable alliance ties for this new era. This itinerant Europe could reflect recovered self-confidence. It also could draw from Europe's past, when wandering, unsettled spirits from missionaries to colonial adventurers roamed the globe carrying a singular European perspective. Indeed, as in the past, this regional outlook on global issues could turn out to be a product of intense intra-regional discourse that overlooks the perspectives of non-Europeans. Or it might reflect the difficulty of accommodating additional preferences after the European view has been determined through a complex, negotiated process.
My third speculation for the new Europe is as an international Europe. An international Europe would be cognizant of its capabilities and responsibilities. It would accept the importance of cooperative, collective action in addressing the challenges of this new era. Perhaps most important, this Europe would recognize that the bonds of ideas and values are at least as important as geographic propinquity. The Economist recently offered a similar view, explaining that "Euro-America," as the editors called it, grows from the common roots of the Renaissance, the Reformation, and the Enlightenment. Moreover, they pointed out that the politico-cultural ties are backed by movements of people, trade, investment, and thought. I believe that shared ideas and values will become increasingly important as we create the "alliances," institutions, and regimes that will address the challenges of this new era. The Cold War alliance structure was fastened together primarily with the glue of anti-communism. Our bond was the hostile threat to our common values, rather than just our mutual commitment to these principles. As the perception of that threat recedes, neither the United States nor Europe can take these associations for granted. New generations may not proceed on the basis of old assumptions. For example, an insular or itinerant Europe might instead define its connections or policies on the basis of geographic separateness, not shared values. It will be no small achievement in coming decades just to maintain the assumption that the United States, the European Community, and Japan are colleagues in pursuit of common ends. The three of us together could, however, accomplish a great deal more. We can be the catalysts and major contributors toward addressing the post-Cold War problems. We can draw other nations into existing or new international structures that support our common interests and objectives. With the changes in what had been labeled the second world, the concept of a residual third world has lost much of its meaning. Many of the nations in that heterogeneous group may find it in their interest to associate with us through new or adapted international structures. An international Europe is the only Europe that will enable us to take on the work ahead. An insular Europe would ignore its responsibilities within an interdependent world. An itinerant Europe would be incompatible with and would disrupt the development of a global system that can address our new challenges.
Primary Challenges of the Post-Cold War Age
Turning then to my second question, what are the primary challenges for the United States and an international Europe in this post-Cold War era? I will briefly describe four topics on our common agenda. First, perhaps the surest indicator that the Cold War age of containment has passed is the crumbling of the communist nemesis. This development offers both opportunity and risk. Empires in transition can prove dangerous, both internally and externally. Fearing the erosion of power, a challenged leadership, or the counterreaction it provokes, can strike back violently, as we witnessed in the People's Republic of China (PRC) in 1989. Or old problems, submerged by repression, can be revived, as is the case with smoldering nationalities throughout the Soviet Union and Eastern and Central Europe. New, dangerous figures can prey on fears and frustrations rising out of the turmoil. And the devastation long wrought by communist systems--to individual initiative, civil structures, economic capabilities, the environment--may take many years to overcome. Yet the people of these nations have high expectations and modest patience. These are the dark sides of the new instability; when combined with still-mighty military force, the bubbling brew threatens to spill over and ignite. The reform or abandonment of communist systems also offers enormous opportunities. People are experimenting with economic and political freedoms. Their leaders want to embrace democratic and market institutions. They are looking for ways to overcome conflicts and dangers around the globe, not to fuel them. There is no simple formula for moving beyond containment to seize the opportunities and overcome the threats of a crumbling communism. Indeed, it would be a mistake to assume that the task will be the same for dealing with the Soviet Union, the PRC, the old Eastern bloc in Europe, Vietnam, or other residual communist outposts. Each involves unique national characteristics and circumstances. This shift will be of such scope and duration as to require sustained management by new structures and regimes. Our second challenge is to stop or dampen regional conflicts, now made even more threatening by the proliferation of advanced weaponry. Throughout the post-war era, regional disputes were the most probable points of conflict, violent or otherwise. While the tanks, missiles, and massive armies faced off in Europe, the greatest likelihood of people dying turned out to be elsewhere. And although regional protagonists might have maneuvered for superpower support, the superpowers also maintained a rough capability to restrain clients, or at least prevent an escalation to the verge of obliteration. In the post-Cold War era, regional conflicts remain as highly probable as before, but the proliferation of dangerous technologies- -especially missiles and chemical and nuclear weapons--has raised the costs of encounter exponentially. Moreover, some of the superpower restraints have been lifted. As the threat of East-West conflict recedes, new powers are seeking to establish regional influence. Some, such as Iraq, demonstrate no respect for international norms. There are many old scores to be settled, territories in dispute, and ethnic rivalries ready to flare up. We need collective approaches to resolve or deter regional conflicts before they spark. We also need joint action to address those that nevertheless erupt. And since our record is unlikely to be perfect given the causes of potential conflict that have been amassed over generations, we need to turn back or at least limit the proliferation of new weapons technologies that can transform battle into regional and even worldwide tragedy. Our third task involves international economic policy. The post-war system produced an array of highly beneficial economic structures, particularly the IMF [International Monetary Fund], the development banks, the OECD [Organization for Economic Cooperation and Development], and the GATT [General Agreement on Tariffs and Trade]. These institutions will continue to play key roles, although they will need to continue to evolve to meet changed circumstances. Indeed, foreign economic policy will face no shortage of challenges with commensurate political implications. Successful policies will necessitate strong support from international structures. For example, the democracies of Central and Eastern Europe need economic support, market access, and links to Western institutions. Each new stage of economic perestroika is bringing the Soviet Union's reform program closer to a market system that can benefit from international interaction. Eventually, new stages of development in the PRC, both economic and political, will need to draw from abroad. Many Latin American nations want to unshackle their economies from statist, autarkic constraints in favor of private initiative, markets, and economic liberty. Increasingly successful Asian countries are recognizing both the benefits and responsibilities of the international economic system, but they are worried that the developed "club" will close the doors of opportunity just as they enter. Nor can we take for granted cooperation among developed economies. The interdependence of markets--finance, production, trade--requires greater attention to policy coordination at both the macroeconomic and micro levels. Given the range of development challenges, the domestic political implications of economic performance, and the related political benefits of global adherence to a market system, both Europe and the United States need to strengthen the capabilities of international economic institutions and arrangements. Fourth, to an increasing degree, our publics view their security as dependent on our management of dangers that we have not traditionally viewed as priority matters among nation states. Transnational threats posed by narcotics, terrorism, environmental dangers, immigration, and disease continually score high in public polls that rank topics of concern. But governments are just beginning to learn how to create international regimes to address these problems, which derive primarily from the actions of individuals and groups outside the realm of official governmental relations. We have to learn how to integrate these issues into regular statecraft. In addition, we need to calculate carefully what features will make new regimes most effective in addressing these problems while considering the effects in other areas. For example, voting arrangements and veto rights, decision principles, reliance on private sector involvement and market-based solutions, and arrangements for regulating tradeoffs have become important elements of the relatively well-developed structure of international economic institutions; similar decisions will need to be made as we consider devising new collective efforts to cope with the transnational issues.
Practical Steps To Be Taken
Finally, I will turn to my third question: What practical steps should the European Community and the United States take to address the new challenges of the post-Cold War age? I'd like to offer a personal list of 10 suggestions. First, we should further institutionalize the US-EC relationship by negotiating a framework agreement; at some future point, it might even evolve into a treaty. This idea builds on President Bush's call in May 1989 for "new mechanisms for consultation and cooperation on political and global issues" and from Secretary Baker's proposal in his December 1989 Berlin speech. The agreement would reflect the shared ideas and values that we would plan to apply in addressing the new challenges. The intent would be to encourage the development of common, or at least complementary, approaches. To support this aim, the agreement could establish regular consultation procedures at various levels to enhance the practice and expectation of joint action--or at least avoid presenting either side with non-negotiable or surprise positions. Second, we should give content to this form of association by working together on the problems of regional conflict and proliferation. This effort is already proceeding. For example, the United States and the EC are already examining needs and means to alleviate economic dislocations of the Iraqi embargo. We have also begun cabinet and subcabinet discussions on other regional problems. If we are to avoid an itinerant European policy, this close working relationship will become increasingly important as the European Political Cooperation (EPC) mechanism assumes a greater role. We should develop our cooperation in a fashion that encourages a reinforcing network of other multilateral efforts directed at similar objectives--such as the Missile Technology Control Regime, which was created by the G-7 and which is now expanding its membership. Third, we can employ the consultative arrangements of a framework agreement to address the transnational agenda. The new regimes that we develop, whether formal or informal, should reflect our shared values. They will also require decisionmaking systems that protect our interests. From the vantage point of the EC, cooperation in these areas may prod the [European] Commission and Council [of Europe] to reconcile their respective roles on matters of so-called mixed competency. Fourth, we should recognize that there is likely to be an overlap between NATO and EC processes in the future that we need to manage flexibly and pragmatically. NATO is the vehicle for the US defense and security presence in Europe. It is also a brilliantly successful expression of how democratic nations sharing common values can work together to maintain their security. I hope that Europeans will want to maintain this tie. It serves as a stabilizing force and insurance against any threat to 16 like-minded democracies. In addition, NATO has the potential to be a forum for organizing the West to cope with regional conflicts, such as those in the Middle East, that also threaten our security. And from the perspective of this side of the Atlantic, the United States has good reason to be interested in the security of Europe: Europe's conflicts not only swept us into one cold and two hot wars this century, but also reached our shores in earlier centuries, for example during the Seven Years War and the Napoleonic Wars. There are several ways that both the European pillar of NATO and NATO itself can adjust to new missions and times while ensuring European stability and the common defense. For example, NATO discussions leading to cooperative operations among the United States and other member states with the Western European Union (WEU) could supply a valuable mechanism for tackling regional security problems. We used this combination in the Persian Gulf in 1987 and are employing it with Iraq today. Fifth, we share a common interest in the future shape of the CSCE [Conference on Security and Cooperation in Europe]. CSCE may prove to be a valuable process for supporting the efforts of the nations of Central and Eastern Europe, including the Soviet Union, to build local institutions based on democratic and free-market values. It might also further develop means to build confidence against security threats. But it will be up to the EC, the United States, and a few others to ensure that new CSCE institutions and processes complement the institutions we constructed in the post- war era, instead of seeking to supplant them with hopeful but untested concepts. Sixth, the United States and the EC can create new ways to encourage others to embrace democracy and development based on market principles. The Group of 24 for Central and Eastern Europe offers a good example. That's why we hope to work with the EC to form an analogous group to help Central America. We will need to coordinate our economic and political institution-building approaches toward the Soviet Union as well. Seventh, we face the near-term task of snatching a market- opening Uruguay Round from the jaws of protectionist interests. It is selfish and ultimately destructive for agricultural, textile, and other lobbies to threaten GATT at the exact time struggling developing nations are turning to the rules of economic liberty. This, too, is a first test of the post-Cold War order. Eighth, the United States and the EC need to consider what new or changed economic regimes will be necessary to manage our increasing interdependence. The Group of Seven's macroeconomic coordination is still nascent, and must adapt to possible Community moves toward monetary union. On the microeconomic front, we need to continue to prevent the single market program from creating new barriers to outsiders. And, over time, we may wish to expand our OECD discussion of structural microeconomic barriers, as the United States has begun to do with Japan. Ninth, the events of the past month have reemphasized that both of us need to be alert to Turkey's place and prospects. As a NATO ally, Turkey offers a valuable foundation for our mutual security in a dangerous part of the world. While recognizing that the EC must make its own determinations about future members, I hope that together we can help draw Turkey closer to us politically and economically. Tenth, North America and the EC need to welcome Japan as a colleague in this new alliance of values. It will take all three of us, plus the Soviet Union and others, to meet the new challenges of the post-Cold War order. Together, we can extend our effectiveness considerably. I recognize, of course, that many Europeans, as well as Americans, are suspicious of Japan's willingness to take on this responsibility. But I also know that Japanese leaders will never be able to move their public to accept their appropriate global duty if we do not include them.
In this same month, in this city, 204 years ago, delegates from a number of states met to discuss their commercial relations. The quality of their discourse, led by Alexander Hamilton, was notable, but the delegates decided there were too few of them to proceed productively. As a result, that initial Annapolis Convention urged the 13 states to send commissioners to a new convention to be held in Philadelphia in May 1787. Its purpose would be even broader: to discuss all matters necessary "to render the constitution of the Federal Government adequate to the exigencies of the Union." That early Annapolis meeting is a good precedent for this conference of representatives of 13 states, as we consider the challenges of building a new order for a new age. We need to unite Europe and the United States in a common approach to the challenges of our generation. Europe and America are the trustees of the values and ideas that enlightened those delegates two centuries ago, and it's those principles that offer the best blueprint for the new international architecture. (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

Enterprise for the Americas Initiative

Date: Sep 24, 19909/24/90 Category: Fact Sheets Region: South America, Central America, Caribbean, North America Subject: Trade/Economics
On June 27, 1990, President Bush announced the Enterprise for the Americas Initiative--a major new initiative to help forge a genuine partnership of free market reform to promote economic growth and political stability in Latin America and the Caribbean. At that time he noted that "prosperity in our hemisphere depends on trade, not aid" and that "the future of Latin America lies with free government and free markets." Over the past decade, countries in Latin America and the Caribbean have confronted an economic crisis which also has affected the United States. As many of these countries have cut imports, postponed investment, and struggled to service foreign debt, the United States has lost trade, markets, and opportunities for investment. A new generation of democratically elected leaders in the region has made progress in coping with this crisis. Their countries are beginning to move away from excessive government control and toward greater reliance on free market forces. The Enterprise for the Americas Initiative would support the efforts of these leaders, increasing the prospects for prosperity throughout the hemisphere.
The Initiative's Three Pillars
The initiative rests on three pillars through which the United States can support economic reform and sustained growth: -- Expanding trade by working with the countries of the region through the Uruguay Round of the General Agreement on Tariffs and Trade and by entering into free trade agreements with the ultimate goal of a hemisphere-wide free trade system; -- Promoting investment in the region and helping countries compete for capital by reforming policies that have discouraged private investment; -- Building on successful US efforts to ease debt burdens and to increase incentives for reform by offering additional debt measures. As part of this approach, the US would support natural resources management as a key element of protecting the environment and building a strong future for the hemisphere.
Legislative Proposal
On September 14, 1990, President Bush sent to Congress a legislative proposal to implement the investment, debt, and environmental parts of the initiative. Investment. The proposal provides for US contributions to the Enterprise for the Americas Fund, a multilateral fund to be established at the Inter-American Development Bank (IDB). The President will seek authorization for $100 million a year over 5 years for the fund, and the Secretary of the Treasury will seek contributions from other countries. Disbursement of fund grants would encourage market-oriented investment policy initiatives and reforms and finance technical assistance for privatization efforts, business infrastructure, and worker-training and education programs. The fund would complement country reforms undertaken as part of a new IDB lending program for nations that take significant steps to remove barriers to international investment. Debt and Environment. The legislation would establish the Enterprise for the Americas Facility to administer debt reduction for countries meeting investment reform and other policy conditions. Latin American and Caribbean countries can qualify under the facility if they: -- Have in effect an International Monetary Fund program or the equivalent; -- As appropriate, have World Bank structured or sectoral adjustment loan; -- Have undertaken major investment reforms in conjunction with an IDB loan or are implementing more liberal investment rules; -- As appropriate, have negotiated satisfactory financing programs with commercial banks. The Secretary of the Treasury would lead a US government interagency process that would determine country eligibility based on these criteria. This interagency process would make decisions on the extent of debt reduction on Agency for International Development and PL 480 (concessional) obligations of eligible countries. It also would determine debt reductions, sales, or cancellations of Eximbank and Commodity Credit Corporation obligations. These would be made solely to facilitate debt-for- equity or debt-for-nature swaps. The US would seek an environmental agreement with each eligible country that would allow it to make interest payments in local currency on new obligations resulting from debt reduction. These interest payments would be deposited in an Environmental Fund that would be jointly programmed by the United States and the debtor government to provide grants for environmental projects.
Key Components of Proposed Legislation
-- Creation of the Enterprise for the Americas Investment Fund to be administered by the Inter-American Development Bank (IDB). -- Creation of the Enterprise for the Americas Facility within the Treasury Department to support debt reduction operations for eligible nations. -- Reduction of Agency for International Development and "Food for Peace" (PL 480) debts. -- Use of interest payments on reduced concessional obligations to support environmental programs in the debtor country. -- The sale, reduction, or cancellation of Export-Import Bank loans and Commodity Credit Corporation assets to facilitate debt- for-equity or debt-for-nature swaps. (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

US-Mexico Relations

Date: Sep 24, 19909/24/90 Category: Fact Sheets Region: North America Country: Mexico Subject: Trade/Economics, Democratization 35=one2>Chart: US-Mexico Trade [TEXT] The scope of US-Mexican relations goes far beyond official contact between the two national capitals. It entails extensive commercial, cultural, and educational links. Current foreign policy objectives include: -- A stronger trade partnership based on further relaxation of trade barriers on both sides. A strong Mexican economy is a basic US interest. -- Responsible and prudent action toward payment of Mexico's international debt, about $30 billion of which is owed to US financial institutions. -- Control of illegal emigration to the United States, while facilitating the flow of documented workers and preventing the abuse of those who do cross illegally. -- An increase in investment opportunities for both countries. -- A reduction in the flow of illegal narcotics to the United States by engaging in bilateral efforts to curb supply and demand. Most aspects of the US-Mexican economic relationship can be traced to two factors--a long common border and the relative size of the two economies (US gross national product is about 25 times larger than that of Mexico). Despite divergent economic interests, the two countries have close economic ties, particularly in trade, debt, and investment. This economic relationship is important to the stability and growth of both countries.
With a 1988 total of $44 billion in two-way trade, Mexico was the United States' third largest trading partner after Canada and Japan. Two-thirds of Mexican exports and imports are with its northern neighbor. Mexico also was the third largest export market for US products and the fifth largest supplier of US imports. Chief US exports to Mexico are motor vehicle parts, office equipment, and agricultural products. Imports from Mexico include crude oil (to help fill the US Strategic Petroleum Reserve), cars, piston engines, and coffee. The United States has had a trade deficit with Mexico since 1982, although the gap narrowed last year to $2 billion out of total bilateral merchandise trade of $52 billion. Under an umbrella Framework of Understanding on Trade and Investment reached in 1987, the United States and Mexico have concluded separate accords on trade in textiles, steel, beer and wine, and, outside the framework, on civil aviation. The two countries are exploring ways of broadening and deepening their trade relationship. In June 1990, Presidents Bush and Salinas endorsed the goal of a comprehensive free trade agreement between the United States and Mexico. The Presidents directed their trade ministers to undertake the necessary consultations and preparations to initiate negotiations and to report back to them before the next Bush-Salinas meeting in December 1990. Both countries understand that any possible free trade agreement must not undermine the international trading system or the principles of the General Agreement on Tariffs and Trade (GATT). Mexico became a member of the GATT in 1986.
Mexico has the second largest external debt in the developing world, but that burden has diminished during the past several years. Compared with a peak debt of $107 billion at the end of 1987, Mexico's external debt now is about $80 billion because of an historic agreement with more than 450 foreign commercial bank creditors. In February 1990, after 8 months of intense negotiations, the banks agreed to receive Mexican government bonds in return for reducing Mexican debt principle and interest. The settlement has helped Mexico's effort to attract more domestic and foreign private investment. The United States played an important role in the debt agreement. The Brady plan, announced in early March 1989 by US Treasury Secretary Nicholas Brady, provided the necessary framework and financial support for the original debt package in July 1989. The Mexican bonds are backed by $3.5 billion that have been used to buy US Treasury zero-coupon bonds and by an additional $3.5 billion held as a guarantee of 18 months of interest payments by Mexico. The United States recently has proposed that the Inter- American Development Bank (IDB) add its resources to those of the International Monetary Fund and the World Bank to support further commercial bank debt reduction in Mexico and other Latin American countries.
The United States has an important investment stake in Mexico. By the end of 1988, US direct investment there totaled $5.5 billion, most of it ($4.6 billion) in a wide variety of manufacturing industries. Significant US investment is in the Mexican maquiladora plants, which assemble goods along the US border for export, mostly to the United States. The Salinas administration is encouraging greater private investment, both domestic and foreign, in the Mexican economy. It is counting heavily on foreign capital to finance much-needed infrastructure projects, such as roads, ports, and irrigation and electricity facilities. The government also is privatizing some state-owned enterprises. Recently, the lower house of the Mexican congress passed a bill that would allow foreigners to own up to 30% equity in 18 commercial banks that are to be privatized. The Mexican government has designated infrastructure projects, tourism, and privatization of certain government-run industries as areas open to foreign investors participating in debt-for-equity swaps (where the Mexican government and its lenders transfer Mexican external debt to investors in return for equity in Mexican investment projects). The United States fully supports the efforts of the Salinas administration to encourage foreign investment and the return of Mexican flight capital. In addition, President Bush has proposed the creation of a new investment fund, administered by the IDB, that could provide up to $300 million a year in grants in response to market-oriented investment reforms in Latin America. The United States intends to contribute $100 million to the fund, some of which could go to Mexico.
Because Mexico is the largest source of undocumented aliens in the United States, immigration is a major issue. In November 1986, the United States enacted the Immigration Reform and Control Act, and in 1987 the Mexican and the US governments established two joint working groups to reduce violence against undocumented aliens.
The United States and Mexico have worked closely to combat narcotics trafficking. The United States wants to resolve the problem of narcotics traffic from Mexico by working with Mexican authorities to curb supply. At the same time, the United States is working with state and local officials to reduce US demand for drugs. Although both governments have allocated additional resources, traffickers have compensated by increasing production and using sophisticated countermeasures to frustrate eradication and interdiction efforts. US law requires that countries be certified as cooperating with the United States before they can benefit from certain assistance programs and tariff benefits. Mexican officials say that about 60% of their attorney general's budget and 25% of their army's personnel are deployed in the war against drugs. The attorney general's budget in 1989 exceeded $26 million, up from $19.5 million in 1987.
Other Issues
The United States and Mexico share other political interests.: -- Strengthening democratic institutions in the hemisphere, which includes finding a peaceful solution in El Salvador and consolidating the Nicaraguan government to create conditions for a stable, peaceful, and demilitarized region; and -- Continuing to exchange views as Cuba becomes increasingly isolated internationally by changes in Central and Eastern Europe and in the Soviet Union and by internal problems such as human rights. (###)
US Department of State Dispatch, Vol 1, No 4, September 24, 1990 Title:

Third World Debt

Date: Sep 24, 19909/24/90 Category: Fact Sheets Subject: Trade/Economics 35=one3>Chart: Third World Debt by Region, 1988
Many Third World countries saw their ability to pay foreign debt deteriorate between 1980 and 1982. The United States and other creditors responded by developing a flexible, case-by-case approach toward Third World debtors. It has encouraged debtors to undertake economic reforms and persuaded banks, governments, and international financial institutions to support such efforts. In 1985, the United States introduced a program to improve and sustain growth in debtor countries (the Baker plan). In March 1989, US Treasury Secretary Nicholas Brady outlined proposals for strengthening the international debt strategy.
Scope of Problem
Total Third World debt was about $1.2 trillion at the end of 1989. Brazil owed $113 billion, followed by Mexico ($103 billion) and Argentina ($62 billion). Others include Indonesia ($53 billion), Egypt ($50 billion), Poland ($42 billion), Nigeria ($31 billion), and the Philippines ($29 billion).
Origins of the Crisis
Several factors caused the debt crisis of the early 1980s, especially inappropriate domestic policies in many debtor countries that resulted in overvalued exchange rates, large budget deficits, investment in inefficient public enterprises, and restrictions on trade and investment. Many countries used substantial borrowing to fuel consumption rather than build infrastructure or productive enterprises. External shocks, such as the 1979 oil price jump, a sharp increase in international interest rates, and recession in the developed countries, also hurt Third World economies. In addition, many borrowers relied on short-term, variable-rate loans that made them vulnerable to rising interest rates.
US Policy
In 1982, the United States and other creditors developed rescue packages to deal with the immediate cash-flow problems of major debtors. This approach succeeded in averting default by major debtor countries and in keeping the international financial system intact. By mid-1985, however, commercial lending to developing countries had declined sharply. Debtor governments were concerned about inadequate economic growth. In October 1985, the United States proposed the Program for Sustained Growth (Baker plan). Building on the earlier debt strategy, it was a broad, long-term strategy to restore creditworthiness of debtor countries by promoting sustainable growth. The program's main element was the pursuit of comprehensive economic policies leading to structural reform and growth in the debtor countries. A second element involved new commercial bank lending. A third element comprised credits from international financial institutions that were linked more closely to reforms. Economic reforms would permit market forces and private enterprises to play a larger role in the economy, encourage greater domestic savings and investment, reduce budget deficits, and liberalize trade and financial systems. In April 1987, the United States encouraged the development of various market-driven financial instruments to help meet the diverse interests of debtor countries and banks in devising new financing packages.
Progress Under the Baker Plan
The Baker plan helped developing countries recognize that long- term growth requires a strong commitment to market-oriented policies. In addition, US banks reduced their Third World debt risk by adding to bank capital and selling or swapping some debt. An array of voluntary debt reduction mechanisms sprang up. The 1988 Toronto economic summit expanded Paris Club (official bilateral creditors) debt relief for poorer African countries that were undertaking adjustment programs.
Brady Proposals
Despite the progress made under the Baker plan, low investment and capital flight continued to weaken future economic prospects, while commercial banks declined to provide new loans in a timely fashion. Many debtor countries applied economic reforms inconsistently, and they failed to achieve adequate growth on a sustained basis. In March 1989, Secretary Brady outlined a series of proposals to strengthen the debt strategy. His proposals build upon the Baker strategy but recognize the role of voluntary debt and debt service reduction as an adjunct to new commercial bank lending. The Brady approach also places more emphasis on new domestic and foreign investment and the return of domestic capital that has left debtor countries.
Progress Under Brady Proposals
Secretary Brady's proposals have received worldwide support. The International Monetary Fund and World Bank play a central role in the strengthened debt strategy by encouraging debtor policy reforms and catalyzing financial support. Japan pledged $10 billion to support the strategy. In addition, creditor governments have made substantial contributions through Paris Club rescheduling of official bilateral debt, both interest and principal. In 1989, the United States announced a program to forgive up to $1 billion in economic assistance loans to sub-Saharan African countries that are pursuing reforms. To date, Mexico, Costa Rica, the Philippines, Venezuela, Morocco, and Chile have negotiated agreements under the Brady proposals. Others, including Bolivia, Nigeria, Ecuador, and Uruguay, are undertaking reform efforts to obtain support under the strengthened debt strategy. (###)