U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request
Released: 2010-06-15T00:00:00

Introduction

This report is an overview of U.S. foreign assistance to the Middle East. It includes a brief historical review of foreign aid levels, a description of specific country programs, and an analysis of current foreign aid issues. Congress both authorizes and appropriates foreign assistance and conducts oversight on executive agencies' management of aid programs. As the largest regional recipient of U.S. economic and military aid, the Middle East is perennially a major focus of interest as Congress exercises these responsibilities.

In the Middle East, the United States has a number of strategic interests, ranging from support for the state of Israel and Israel's peaceful relations with its Arab neighbors, to the protection of vital petroleum supplies and the fight against international terrorism. U.S. assistance continues to support the 1979 peace treaty between Israel and Egypt and the continued stability of the Kingdom of Jordan, which signed its own peace treaty with Israel in 1994. U.S. funding also has focused on strengthening Palestinian governance and civil society, and aid officials have worked to ensure that U.S. aid to the West Bank is not diverted to terrorist groups, such as Hamas, which controls the Gaza Strip. Since the attacks of September 11, 2001, the United States has established region-wide aid programs that increase the focus on democracy promotion and encourage socio-economic reform in an attempt to undercut the forces of radicalism in some Arab countries.

Foreign Aid to Support Key U.S. Interests

Despite changing geopolitical conditions, U.S. foreign aid to the Middle East has historically been a function of U.S. national security interests in the region. The United States has pursued a foreign policy that seeks stability in a region with abundant energy reserves but volatile interstate relationships. Policymakers have often employed foreign aid to achieve this objective. Foreign aid has been used as leverage to encourage peace between Israel and her Arab neighbors, while strengthening bilateral relationships between the United States and Israel and between the United States and moderate Arab governments. Foreign aid has worked to cement close military cooperation between the United States and governments in the region, discouraging local states from engaging in uncontrollable arms races. Economic aid also has had an underlying strategic rationale, as U.S. funds have been employed to promote development in an attempt to undercut radicalism in partner countries.

The degree to which foreign assistance has contributed to the achievement of U.S. objectives in the Middle East is difficult to measure, but the consensus among most analysts seems to be that U.S. economic and security aid has contributed significantly to Israel's security, Egypt's stability, and Jordan's friendship with the United States. The promise of U.S. assistance to Israel and Egypt during peace negotiations in the late 1970s helped to enable both countries to take the risks needed for peace, and may have helped convince both countries that the United States was committed to supporting their peace efforts. Excluding Iraq, Israel and Egypt are the largest two recipients of U.S. aid respectively.

There is debate over using foreign aid more aggressively to pursue various objectives in the Middle East. Some critics of U.S. policy would like to see additional conditions placed on U.S. aid to Egypt, for example, to achieve greater respect for democracy and human rights in that country. Others favor using the aid program more assertively as leverage to restart the Middle East peace process. Some might urge that aid should be conditioned on demonstrable progress in extending full political and economic rights to women and religious minorities. Others, however, assert that the overt use of aid—or the threat of aid reductions—to promote democracy and reform in the Middle East region could lead to a backlash against the United States, as well as to democratic reformers in those countries.

Critics of U.S. aid policy, particularly some in the Middle East, have argued that U.S. foreign aid exacerbates tensions in the region. Many Arab commentators insist that U.S. assistance to Israel indirectly causes suffering to Palestinians by supporting Israeli arms purchases. Another common argument asserts that U.S. foreign aid bolsters autocratic regimes with similar strategic interests to the United States. Some observers have called U.S. aid policy "contradictory," accusing the United States of bolstering its ties with autocratic regimes through military assistance, while advocating liberalization in the region with less funds dedicated to reform and development aid. As noted above, however, other analysts believe aid has helped protect Israel's security and stabilize the region.

Country Summaries

The following section provides funding details on the largest regular aid recipients in the Middle East: Israel, Egypt, Jordan, the Palestinians, and Lebanon. Each country section features a table with a more elaborate breakdown of aid by account over the last five fiscal years. For information on U.S. assistance for Iraqi reconstruction, see CRS Report RL31833, Iraq: Reconstruction Assistance , by [author name scrubbed] and CRS Report RL31339, Iraq: Post-Saddam Governance and Security , by [author name scrubbed].

Israel3

Overview

Since 1976, Israel has been the largest annual recipient of U.S. foreign assistance and is the largest cumulative recipient since World War II. Strong congressional support for Israel has resulted in Israel's receiving benefits that may not be available to other countries. For example, Israel can use U.S. military assistance for research and development in the United States and for military purchases in Israel. In addition, all U.S. foreign assistance earmarked for Israel is delivered in the first 30 days of the fiscal year. Other recipients normally receive their aid in staggered installments at varying times. According to the Obama Administration's 2011 Congressional Budget Justification (CBJ) for Foreign Operations, "U.S. assistance is also aimed at ensuring for Israel the security it requires to make concessions necessary for comprehensive regional peace."

In August 2007, the Bush Administration announced that it would increase U.S. military assistance to Israel by $6 billion over the next decade. The agreement calls for incremental annual increases in FMF to Israel, reaching $3.1 billion a year by FY2018. Military analysts speculate that the increase in U.S. assistance will facilitate potential Israeli purchases of the most sophisticated U.S. equipment, including a possible sale of the F-35 Joint Strike Fighter (JSF). Under the terms of the agreement, Israel will still be able to spend 26.3% of U.S. assistance on Israeli-manufactured equipment.

Military Assistance

Congress has taken measures to strengthen Israel's security and maintain its technological advantage over neighboring militaries. Annual Foreign Military Financing (FMF) grants to Israel represent about 21%-22% of the Israeli defense budget. Israel also is eligible to receive Excess Defense Articles under section 516 of the Foreign Assistance Act. For FY2011, the Administration has requested $3 billion in FMF for Israel.

Since FY1988, Congress has allowed Israel to use approximately a quarter of its FMF funds as cash grant to pay for Israeli defense purchases in Israel. Since 1990, Congress has provided for Israel to receive its FMF aid in a lump sum during the first month of the fiscal year, which allows Israel to invest the funds in U.S. Treasury notes and earn interest.

Egypt6

Overview

Since 1979, Egypt has been the second largest recipient of U.S. foreign assistance, receiving an annual average of close to $2 billion in economic and military aid. In the past, Congress has earmarked aid to Egypt in annual foreign operations legislation with an accompanying statement calling on Egypt to undertake further economic reforms in addition to reforms taken in previous years. In July 2007, as a part of a larger arms package to the region, the United States announced that it would provide Egypt with $13 billion in military aid over a ten-year period. Since Egypt has already been receiving approximately $1.3 billion a year in military assistance, the announcement represented no major change in U.S. assistance policy toward Egypt.

Economic Assistance

The United States has significantly reduced economic aid to Egypt over the last decade. There are several reasons for the reduction in U.S. assistance. Overall, U.S. economic aid to Egypt has been trending downward due to a 10-year agreement reached in the late 1990s known as the "Glide Path Agreement." In January 1998, Israeli officials negotiated with the United States to reduce economic aid and increase military aid over a 10-year period. A 3 to 2 ratio similar to total U.S. aid to Israel and Egypt was applied to the reduction in economic aid ($60 million reduction for Israel and $40 million reduction for Egypt), but Egypt did not receive an increase in military assistance. Thus, the United States reduced ESF aid to Egypt from $815 million in FY1998 to $411 million in FY2008. For FY2011, the Administration is requesting $250 million in ESF for Egypt, the same amount it has received since FY2009.

The Endowment

With the expiration of the Glide Path agreement, the continued expansion of Egypt's economy, a growing desire for more U.S.-Egyptian trade, and a reluctance by Egypt to accept "conditions" for U.S. aid, U.S. and Egyptian officials have expressed a desire to "graduate" Egypt from U.S. bilateral economic assistance. However, neither the United States nor Egypt seem to agree on how aid should be reduced over the coming decade. Egypt would like to establish an endowment to jointly fund development projects. The Mubarak government argues that based on current aid levels, Egyptian debt repayments to the United States exceed U.S. foreign assistance. Some analysts believe that the Egyptian government is seeking an endowment in order to shield aid to Egypt from potential conditions mandated by Congress. For several years, there was limited U.S. interest in pursuing an aid endowment. However, S. 1434 , the Senate version of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2010, included a provision that would provide up to $200 million for an endowment to "further the shared interests of the United States and Egypt."

After several failed attempts to form a new Egypt aid mechanism, Congress passed into law a new provision in P.L. 111-117 (section 7042) that called for the possible establishment of an endowment to "further the shared interests" of the United States and Egypt. Congress specified that up to $50 million in economic aid may be set aside for an endowment, though lawmakers noted the process is in its early stages. Appropriators stated that "the conferees recognize that discussions and negotiations on such an endowment will take time, and direct the Secretary of State to consult with the Committees on these efforts. Consultation should include explanation of the specific definition of shared interests, and how such interests would be furthered through an endowment. The conferees note that such funds are subject to the regular notification procedures of the Committees on Appropriations." The Obama Administration's 2011 CBJ for Foreign Operations states that "the U.S. Government is considering a proposal for a bilateral endowment and we are working with the interagency, in consultation with Congress, to develop a vision for it. Discussion will continue with the Government of Egypt to deliver U.S. foreign assistance in ways that reflect both countries' interests."

As of mid 2010, the U.S. and Egyptian governments have yet to reach an agreement on the contours of an endowment. According to both sides' proposals, which were published in the media in the spring of 2010, the Egyptian government seeks a "phasing out mechanism [of U.S. assistance] that would be: gradual, over time, predictable, not related to conditionalities." On the other hand, the U.S. State Department is seeking to "start slowly to test the endowment's success, and to avoid redirecting significant amounts of ESF funding away from current development programs that further U.S. objectives in Egypt, including democracy programs." There seems to be agreement on both sides that the education and science and technology sectors could be potential areas of cooperation for endowment funding. However, observers note that the seed funding for any U.S.-Egyptian endowment would have to be significant, possibly over at least $1 billion, in order to generate enough interest revenue to fund daily operations and programming. The $50 million in FY2010 ESF set aside for the endowment is available for obligation through FY2011.

Military Assistance

The Administration has requested $1.3 billion in FMF for Egypt in FY2011—the same amount it received in FY2010. FMF aid to Egypt is divided into three general components: (1) acquisitions, (2) upgrades to existing equipment, and (3) follow-on support/maintenance contracts. According to U.S. and Egyptian defense officials, approximately 30% of annual FMF aid to Egypt is spent on new weapons systems, as Egypt's defense modernization plan is designed to gradually replace most of Egypt's older Soviet weaponry with U.S. equipment. That figure is expected to decline over the long term due to the rising costs associated with follow-on maintenance contracts. Egyptian military officials have repeatedly sought additional FMF funds to offset the escalating costs of follow-on support. Egypt also receives Excess Defense Articles (EDA) worth hundreds of millions of dollars annually from the Pentagon. Egyptian officers also participate in the IMET program ($1.4 million requested for FY2010) in order to facilitate U.S.-Egyptian military cooperation over the long term.

Jordan15

Overview

The United States has provided economic and military aid, respectively, to Jordan since 1951 and 1957. Total U.S. aid to Jordan through FY2010 amounted to approximately $11.38 billion. Levels of aid have fluctuated, increasing in response to threats faced by Jordan and decreasing during periods of political differences or worldwide curbs on aid funding.

On September 22, 2008, the U.S. and Jordanian governments reached an agreement whereby the United States will provide a total of $660 million in annual foreign assistance to Jordan over a 5-year period. Under the terms their non-binding Memorandum of Understanding (MOU), this first-of-its-kind deal commits the United States, subject to future Congressional appropriation and availability of funds, to providing $360 million per year in Economic Support Funds (ESF) and $300 million per year in Foreign Military Financing (FMF).

The Administration's FY2011 request to Congress is $682.7 million for U.S. aid to Jordan. This includes $360 in economic aid and $300 million in military assistance. In addition to funds specifically earmarked for Jordan, previous emergency supplemental bills have contained funds to reimburse Pakistan, Jordan, and other key cooperation states for logistical expenses in support of U.S. military operations in Iraq and Afghanistan.

H.R. 4899 , the FY2010 Supplemental Appropriations bill, provides an additional $100 million in ESF and $50 million in FMF to Jordan, bringing total FY2010 aid to an estimated $842 million.

Economic Assistance

The United States provides economic aid to Jordan as both a cash transfer and for USAID programs in Jordan. The Jordanian government uses cash transfers to service its foreign debt (approximately $6.7 billion). Approximately 45% of Jordan's ESF allotment each year goes toward the cash transfer. USAID programs in Jordan focus on a variety of sectors including democracy assistance, water preservation, and education. In the water sector, the bulk of U.S. economic assistance is devoted to optimizing the management of scarce water resources, as Jordan is one of the most water-deprived countries in the world. USAID is currently subsidizing several waste treatment and water distribution projects in the Jordanian cities of Amman, Aqaba, and Irbid.

Military Assistance

U.S. military assistance is primarily directed toward upgrading Jordan's air force, as recent purchases include upgrades to U.S.-made F-16 fighters, air-to-air missiles, and radar systems. FMF grants also provide financing for Jordan's purchase of U.S. Blackhawk helicopters in order to enhance Jordan's border monitoring and counter-terror capability. In addition, according to the Obama Administration's 2011 CBJ for Foreign Operations, "FMF will continue to develop counterterrorism capabilities by expanding, training, and equipping small, elite units such as the Special Operations Aviation Brigade and Jordan Special Operations Command."

Palestinians—West Bank/Gaza17

Overview

Since the signing of the Oslo Accord in 1993, the U.S. government has committed more than $3.8 billion in bilateral economic assistance to the Palestinians, of which more than $2.3 billion has been provided since FY2004. According to annual foreign operations legislation, congressionally approved funds for the West Bank and Gaza Strip cannot be used for the Palestinian Authority (PA), unless the President submits a waiver to Congress citing that it is in the interest of national security. Should the Hamas "government" in Gaza form a unity government with the Palestinian Authority in the West Bank, a provision in the FY2010 Consolidated Appropriations Act ( P.L. 111-117 ) would allow the U.S. government to provide assistance to a power-sharing PA government of which Hamas is a member if the President certifies that such a government, including all of its ministers, acknowledges Israel's right to exist and commits and adheres to previous international agreements, including the 2003 Roadmap.

Since the death of Yasser Arafat in November 2004, U.S. assistance to the Palestinians has averaged about $388 million a year. During the 1990s, U.S. foreign aid to the Palestinians averaged approximately $75 million per year. Most U.S. assistance to the Palestinians is provided through USAID's West Bank and Gaza program. USAID allocates funds for projects in sectors such as humanitarian assistance, economic development, democratic reform, improving water access and other infrastructure, health care, education, and vocational training (currently most, if not all, funds for the Gaza Strip are dedicated to humanitarian assistance and economic recovery needs). By law, U.S. assistance to the West Bank and Gaza Strip, as well as for all other aid recipients, must be vetted and audited to ensure that no U.S. funds are provided to or through any individual, private or government entity, or educational institution that advocates, plans, sponsors, engages in, or has engaged in, terrorist activity. Lawmakers usually include funds in annual foreign operations legislation providing for audits and inspections of USAID projects in the West Bank and Gaza Strip.

U.S. assistance also reaches Palestinians through contributions to the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), which provides humanitarian relief and basic services to Palestinian refugees living in the West Bank, Gaza Strip, Jordan, Syria, and Lebanon.

U.S. Contributions to UNRWA

The United Nations Relief and Works Agency (UNRWA) provides food, shelter, medical care, and education for many of the three million Palestinian refugees from the 1948-1949 Arab-Israeli war. U.S. contributions to UNRWA come from the general Migration and Refugee Assistance (MRA) account and also through the Emergency Refugee and Migration Assistance (ERMA) account. The U.S. contribution to UNRWA usually covers 20 to 25% of the UNRWA total budget. The United States is the largest bilateral donor to the UNRWA and second only to the European Commission as a contributor. U.S. support for UNRWA is not treated as bilateral economic aid to the Palestinians.

With Hamas in control of the entire Gaza Strip, some lawmakers are concerned that U.S. contributions to UNRWA could inadvertently be used to support Hamas activities in Gaza. A May 2009 Government Accountability Office (GAO) report has provided details on how effectively (1) USAID vets its contractors for its West Bank and Gaza program and (2) the State Department monitors UNRWA's compliance with its requirements (under the 1961 Foreign Assistance Act (P.L.87-195), as amended) that it "take all possible measures" to avoid furnishing assistance to Palestinian terrorists.

In June 2010, the Obama Administration announced that it would provide an additional $400 million in economic aid to Palestinians in the West Bank and Gaza Strip, though only about $70 million represented a new U.S. commitment. According to the U.S. State Department, U.S. funds will be disbursed as follows:

$240 million investment by the Overseas Private Investment Corporation (OPIC) in the AMAL mortgage finance program in the West Bank. $75 million in funding through USAID for infrastructure development in the West Bank and Gaza. $10 million in USAID-funded activities aimed at enhancing the private sector. $40 million to support UNRWA's Emergency Appeal for Gaza and the West Bank. $14.5 million in USAID projects for school rehabilitation, small-scale agriculture, the repair of a hospital facility and other community infrastructure in Gaza. $10 million for the construction of five new UNRWA schools in Gaza. $5 million to complete nine USAID-funded projects to repair water distribution and wastewater collection systems in Gaza.

Lebanon

In recent years, U.S. assistance to Lebanon has increased nearly six-fold due to a strong U.S. commitment to support Lebanon's internal security and economy in the wake of multiple crises between 2005 and 2009. Syria's 2005 withdrawal from Lebanon and the election of the March 14 th coalition opened the door for an expanded U.S. role in Lebanon. Subsequent domestic and regional events, such as the 2006 Hezbollah-Israel war, Lebanese military operations against militants in Palestinian refugee camps (2007), and Hezbollah activities against the government (2008), all reinforced the need for expanded U.S. support.

U.S. economic assistance is used both to strengthen USAID democracy and development programming and to reduce Lebanon's external debt. Congress also has sought to ensure that U.S. aid supports educational scholarships for students in Lebanon with high financial need.

U.S. military aid is used to train and equip the Lebanese Armed Forces (LAF) and the Internal Security Forces (ISF). In annual foreign operations legislation, Congress has sought to ensure that the State Department establish vetting procedures to determine eligibility to participate in U.S. training and assistance programs in order to ensure that U.S. aid does not benefit Hezbollah fighters.

For FY2011, the Obama Administration is seeking $246.3 million in total aid for Lebanon. According to the U.S. State Department, the FY2011 request, among other things, "will build critical institutions, particularly Lebanon's security services - the Lebanese Armed Forces (LAF) and Internal Security Forces (ISF) - to address border security, counter negative extremist elements, and curb the influence of Syria and Iran."

In addition to bilateral assistance, U.S. aid also supports the United Nations peacekeeping mission in southern Lebanon, known as the UN Interim Force in Lebanon or UNIFIL. Lebanon also is a recipient of Department of Defense Global Train and Equip funds, authorized by Section 1206 of the National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109-163 ). Since its inception in FY2006, DoD has provided $61 million to Lebanon for counterterrorism assistance.

Other Recipients and Programs

Excluding the region's top recipients of U.S. assistance (such as Israel, Egypt, and Jordan), the rest of the Middle East receives only a small portion of the total bilateral assistance to the region. The following table provides aid figures for individual countries not listed in the "country summaries" section.

Foreign Aid Issues

Promoting Democracy and Reform

Overview

Since the terrorist attacks of 9/11 and the U.S. invasion of Iraq in 2003, the degree to which the United States promotes democracy, human rights, and reform across the Middle East has been the subject of vigorous debate. Some experts argue that the United States should advocate strongly for democracy in the Arab world and beyond (such as in Iran) as a counterweight to anti-American extremism and acts of terrorism. Democracy advocates assert that the lack of good governance in the region is the reason why most Arab countries score low on various socio-economic development indicators. They suggest that the key to the region's stability and prosperity, a key U.S. national security interest, is democratization, even if it entails the empowerment of certain Islamist movements that oppose peace with Israel and security cooperation with the United States.

On the other hand, foreign policy "realists" insist that the pursuit of U.S. strategic interests should be paramount in dealing with the region's authoritarian governments. Although most realists would likely encourage the United States to incorporate a reform strategy into its overall policy for the region, in their view, it should not supersede more vital U.S. goals, such as resolving the Arab-Israeli conflict. As the United States scales back its involvement in Iraq, some experts charge that, short of a policy of regime change, the U.S. government has limited ability to dramatically restructure a foreign nation's political system, particularly in the Middle East.

Overall, many experts have charged that the U.S. commitment to promoting democracy in the Arab world and in Muslim-majority countries has waned and realism has replaced idealism in U.S. foreign policy. Since the 2006 victory of Hamas in Palestinian Authority elections, the 2006 War in Lebanon, and public revelations of Iran's expanding nuclear program, the United States appears to have less aggressively pursued political reform as a counterweight to Islamist-inspired radicalism. Regional security issues are seen as having returned to the forefront of U.S. policy, as U.S. officials have concentrated more on revitalizing the peace process, stabilizing Iraq, winning the war in Afghanistan and Pakistan, and preventing Iran from developing nuclear weapons.

Critics charge that the Obama Administration has downplayed the role of democracy promotion in U.S. foreign policy, while Administration officials suggest that President Obama has attempted to strike a balance between the realist and idealist camps. Some observers believe that the Administration has attempted to repair U.S.-Arab bilateral relations in the wake of the previous Administration's "freedom agenda." In his June 2009 Cairo speech, President Obama remarked, "I know—I know there has been controversy about the promotion of democracy in recent years, and much of this controversy is connected to the war in Iraq. So let me be clear: No system of government can or should be imposed by one nation by any other."

Events on the ground, particularly in Egypt where a possible succession to President Mubarak may occur in the near future, will continue to test the United States' commitment to promoting democracy in the region. Iran, where reformists continue to struggle against an alliance of clerical and military elites, is another country targeted for U.S. support.

U.S. Programs26

U.S. officials promote reform both publically through their rhetoric and behind-the-scenes through quiet diplomacy. U.S. financial support to foster reform in the Middle East is a third component of the overall democracy and development approach. Since funding levels are quantifiable, reform programs are often seen as a barometer for an Administration's commitment to the issue. During the Bush Administration, officials created new regional programs and expanded existing ones to focus U.S. efforts, among other things, on political reform, education, and women's rights. The Obama Administration has retained aid programs, such as the Middle East Partnership Initiative (see section below) intact, while making certain adjustments in how assistance is delivered, such as channeling some democracy funding away from bilateral programs and into regional accounts where U.S. support is less overt and therefore a target for critics.

There is no single U.S. government agency or office responsible for coordinating democracy promotion in the Middle East. Instead, several agencies and initiatives both at the bilateral and multilateral levels focus on reform. They include the following:

The Middle East Partnership Initiative (MEPI)

MEPI is an office within the Bureau for Near Eastern Affairs at the U.S. State Department that supports political reform, women's and youth empowerment, quality education, and developing economic opportunity in the Arab world. Since its inception in 2002, Congress has provided MEPI with over $582 million in Economic Support Funds, although the program rarely receives its full Administration request from Congress. In general, while the program has been praised for helping to elevate democracy promotion in the Arab world to a somewhat higher priority within the U.S. foreign policy bureaucracy, critics occasionally question its impact and whether the program is designed to stabilize or destabilize autocratic regimes in the Arab world. Others assert that its work duplicates much of USAID's programming in the Middle East region.

One of MEPI's major contributions to U.S. democracy promotion in the Arab world has been to directly fund indigenous Arab non-governmental organizations (NGOs) throughout the Middle East and North Africa in order to amplify their reform agenda in their home countries. In general, Arab regimes severely restrict local NGOs from receiving external support, and sometimes MEPI-funded activities have been obstructed by host governments.

In 2004, MEPI began issuing small grants directly to NGOs in the Middle East in order to support political activists and human rights organizations. Congressional action played a large role in facilitating MEPI's small grants program in Egypt. The FY2005 Consolidated Appropriations Act ( P.L. 108-447 ) stipulated that U.S. funds for democracy and governance activities in Egypt were no longer subject to the prior approval of the Egyptian government. Now, U.S. government agencies can directly fund NGOs in Egypt. Consequently, MEPI grants were awarded to some NGOs to help train election monitors for the 2005 presidential and parliamentary elections in Egypt. MEPI also supported election monitoring efforts for the 2005 elections in Lebanon as well as elections in Yemen, Morocco, and Kuwait. In the past, MEPI has provided grants to fund political activities in Iran and Syria.

Recent examples of MEPI-funded programs include:

Saudi Arabia —In April 2009, MEPI began funding a pilot program on women's social entrepreneurship in Jeddah, Saudi Arabia culminating in a conference in March 2010 called the U.S.-Saudi Women's Forum on Social Entrepreneurship. The program's mission is to teach college-age women in Saudi Arabia how to build their own businesses and leadership skills. In February 2010, Secretary of State Hillary Rodham Clinton spoke at the elite Saudi women's Dar al Hekma College in Jeddah, one of the partnering organizations for the MEPI program. Israel —In conjunction with the New Israel Fund, MEPI funds the Min Ajlina ("For Us") Bedouin Women's Empowerment Project in Israel's Negev region. The goal of the project is to strengthen Bedouin women as leaders in order to advance the status and lives of Bedouin women in the Negev. Egypt —In 2009, MEPI supported the Egyptian Association for Dissemination and Development of Legal Awareness (EADDLA) to train young representatives of Egyptian political parties in political party organization, election organizing and monitoring, campaigning, and holding elections in democratic systems.

The Millennium Challenge Account28

The Millennium Challenge Account (MCA) is based on the premise that economic development succeeds best where it is linked to free market economic and democratic principles and policies, and where governments are committed to implementing reform measures in order to achieve such goals. MCA funds are available on a competitive basis to a few countries which have demonstrated a commitment to sound development policies and where U.S. support is believed to have the best opportunities for achieving the intended results. These "best-performers" would be selected based on their records in three areas—ruling justly, investing in people, and pursuing sound economic policies.

Morocco —Morocco was named eligible for Millennium Challenge Compact assistance on November 8, 2005. In 2007, Morocco signed a five-year $697.5 million agreement with the Millennium Challenge Corporation (MCC). At the time, this was the largest compact agreement the MCC had ever awarded since its establishment in 2004. According to the MCC's 2008 scorecard for Morocco, the government scores below the median in almost all areas related to political reform but performs better in fields related to economic freedom and investments in people.

The Compact agreement has multiple components, all aimed at increasing private sector growth. These include efforts to increase fruit tree productivity ($300.9 million), modernize the small-scale fisheries industry ($116.2 million), and support artisan crafts ($111.9 million). In addition, the Compact will fund financial services to micro-enterprises ($46.2 million) and will provide business training and technical assistance aimed at young, unemployed graduates ($33.9 million).

Jordan —In FY2006, Jordan was listed by the Millennium Challenge Corporation (MCC) as a threshold country in the lower middle-income bracket. On September 12, 2006, the MCC's Board of Directors approved up to $25 million in Threshold Program assistance for Jordan. Even prior to the selection, the possible choice of Jordan had come under severe criticism. Freedom House, the organization whose annual Index of Freedom is drawn upon for two of the "Ruling Justly" indicators, had urged the MCC Board to bypass countries that had low scores on political rights and civil liberties. It argued that countries like Jordan that fall below 4 out of a possible 7 on its index should be automatically disqualified. Jordan, however, did well on three of the six other indicators in this category. Several development analysts further argued that Jordan should not be selected, because the MCA is not an appropriate funding source. They assert that Jordan already is one of the largest recipients of U.S. aid, has access to private sector capital, and is not a democracy. In selecting Jordan, the MCC Board appears not to have been swayed by these arguments.

Jordan's Threshold assistance is being used to improve water access and quality. USAID is the main U.S. government agency charged with implementing the Jordan Threshold Program. According to the last update, MCC aims to sign a Compact agreement in FY2010.

Near East Regional Democracy (NERD)

The Near East Regional Democracy fund is considered by many observers to be the Obama Administration's successor to previous Bush Administration programs to fund democracy in Iran. However, unlike earlier appropriations, the NERD account does not specifically single out Iran for reform programming. In conference report language accompanying P.L. 111-117 , the FY2010 Consolidated Appropriations Act, lawmakers specified that $10 million in NERD funding be used "for programs and activities to expand unmonitored, uncensored access to the Internet for large numbers of users living in closed societies that have acutely hostile Internet environments, including in the People's Republic of China and Iran." NERD is managed by the Office of Iranian Affairs inside the Bureau of Near Eastern Affairs at the State Department. According to the FY2011 CBJ, the State Department intends to use NERD funding to "emphasize programs that strengthen local organizations' ability to promote fair electoral processes and legal frameworks for elections. Additionally, the United States will support projects that provide online access to independent information about domestic and international electoral issues, including uncensored information about political competition, in an effort to increase civic participation."

Foundation for the Future

The Foundation for the Future (FFF) is a multilateral grant-making organization designed to fund Arab Civil Society Organizations (CSOs) in the Broader Middle East and North Africa (BMENA) region. The FFF was born out of the Bush Administration's Broader Middle East and North Africa Initiative (BMENA), a 2004 multilateral development and reform plan aimed at fostering economic and political liberalization in a wide geographic area of Arab and non-Arab Muslim countries. The FFF itself was launched in 2005. It is based in Amman, Jordan with a satellite office in Washington, D.C.

At the second Forum for the Future in Bahrain in 2005, the United States pledged $35 million to help establish the FFF. In 2007, the State Department obligated $21.3 million from the MEPI program (see above) to help seed the FFF's endowment.

Restrictions on Aid to the Palestinians33

Annual Foreign Operations Appropriations measures include several limitations on funding for Palestinian organizations and institutions including the following provisions:

Limitation on Assistance to the Palestinian Authority. Bans direct U.S. assistance to the Palestinian Authority (PA) unless the President submits a waiver to Congress citing that such assistance is in the interest of national security. The waiver can be for up to one year, and must be accompanied by a report to the appropriate congressional committees on PA actions to stop terrorism. Limitation on Assistance for the PLO for the West Bank and Gaza . Bans aid to the Palestinian Liberation Organization (PLO) for the West Bank and Gaza. No U.S. aid has ever been provided to the PLO. This provision states that no funds may be provided to the Palestine Liberation Organization for the West Bank and Gaza unless the President has waived Section 307 of the Foreign Assistance Act of 1961, as amended. Restrictions Concerning the Palestinian Authority. Bans using U.S. funds for a new office in Jerusalem for the purpose of conducting diplomatic business with the "Palestinian Authority over Gaza and Jericho." Prohibition on Assistance to the Palestinian Broadcasting Corporation. Bans U.S. assistance to the Palestinian Broadcasting Corporation (PBC). Israel accuses the PBC of inciting violence against Israelis. Auditing USAID ' s West Bank and Gaza Program. Calls for annual audits of all U.S. assistance to the West Bank and Gaza Strip in order to ensure that funds are not being diverted to terrorist groups. This provision also states that the Secretary of State shall certify to Congress that the Comptroller General of the United States has access to financial data on the Economic Support Funds (ESF) for the West Bank and Gaza. And, the Secretary of State "shall take all appropriate steps" to ensure that no U.S. assistance is provided to any person or group engaged in terrorism. The Section states that the USAID Administrator should ensure that all contractors and sub-contractors are audited annually, and sets aside ESF funds for the USAID Inspector General to conduct audits. Palestinian Statehood. Bans U.S. assistance to a future Palestinian state unless the Secretary of State certifies, among other things, that the leadership of the new state has been democratically elected, is committed to peaceful coexistence with Israel, and is taking appropriate measure to combat terrorism. The President can waive the certification if he determines that it is important to U.S. national security interests.

U.S. Support for Arab-Israeli Cooperation

For decades, Congress has appropriated funds to support programs encouraging Arab-Israeli cooperation. The following is a list of several active programs funded in the annual foreign operations appropriations bill:

Middle East Regional Cooperation (MERC)—The Middle East Regional Cooperation (MERC) program promotes normalized relations and science and technology in the Middle East by supporting joint projects, such as those addressing water issues, of Arab and Israeli scientists. MERC is a long-standing program initiated by Congress in 1979 after the Camp David Accords and subsequently expanded beyond Israeli-Egyptian cooperation to include participation from Morocco, Jordan, Tunisia, Lebanon, and the West Bank and Gaza. In FY2010, MERC is receiving $4 million in Economic Support Funds (ESF). The FY2011 request is for $1.5 million. USAID's Middle East Regional Program (OMEP)—The Office of Middle East Programs is funded through appropriations from both the Development Assistance account (DA) and ESF. On average, this office obligates between $2 to $4 million annually to "carry out activities to support trans-boundary cooperation over water and improve water management and water-use efficiency." Middle East Multilaterals (MEM)—MEM was established after the 1991 Madrid Peace Conference as part of the multilateral track of the peace process. MEM provides funding and support for cooperative projects that support important aspects of a comprehensive peace, such as water management and environmental activities. It is receiving $1 million in FY2010 ESF. MEM grants help support the work of the Middle East Desalination Center located in Oman.

Historical Background

U.S. Assistance to the Middle East Since 1950

1950-1970

Even when adjusted for inflation, annual U.S. assistance to the Middle East in the decades following World War II was only a small fraction of current aid flows to the region. Under vastly different geopolitical circumstances, U.S. policy was geared toward supporting the development of oil-producing countries, maintaining a neutral stance in the Arab-Israeli conflict while supporting Israel's security, and preventing Soviet influence from gaining a foothold in Iran and Turkey. U.S. policymakers used foreign aid in the 1950s and 1960s to support these objectives.

U.S. aid to Israel was far less in the 1950s and 1960s than in later years. Although the United States provided moderate amounts of economic aid (mostly loans) to Israel, at the time, Israel's main patron was France, which supported Israel by providing it with advanced military equipment and technology. In 1962, Israel purchased its first advanced weapons system from the United States (Hawk antiaircraft missiles). In 1968, a year after Israel's victory in the Six Day War, the Johnson Administration, with strong support from Congress, approved the sale of Phantom fighters to Israel, establishing the precedent for U.S. support for Israel's qualitative military edge over its neighbors.

Between 1950 and 1967, the United States courted Egypt using foreign aid as a bargaining chip. Cold War competition for Egypt was fierce during this time period, as Egypt received a steady stream of surplus U.S. wheat shipments under the Food for Peace Program (P.L. 480). Despite these measures, offers of additional economic aid failed to convince Egypt to abandon a parallel relationship with the Soviet Union, as Egypt pursued a strict Arab nationalist and neutral policy that shunned close alliances with Western powers and cooperation and peace with Israel. Internationally, after 1955, Egypt obtained military aid mainly from the Soviet Union.

Beginning in 1965, foreign assistance levels to the region began to decline considerably, culminating in an almost 80% drop in economic aid to the Middle East by 1970. A host of factors, most notably the June 1967 War and the rising cost of the war in Vietnam, led Congress to cut funding for a number of countries. Egypt, which had already seen its annual aid reduced, lost food aid entirely after it severed relations with the United States during the 1967 War. Jordan and other Arab states also saw their aid reduced. By 1970, annual appropriations to Iran were close to being phased out, as many policymakers considered Iran to be a middle-income state that was economically self-sufficient.

1971-2001

The decade of the 1970s witnessed a dramatic increase in U.S. foreign assistance to the Middle East. After the U.S. withdrawal from South Vietnam, the Middle East as a whole began to receive more U.S. foreign aid than any other region of the world, a trend that has continued to today. U.S. foreign aid programs became more comprehensive in nature driven by large assistance packages to Israel and later to Egypt and other Arab governments.

Large-scale U.S. assistance for Israel increased considerably after a series of Arab-Israeli wars created a sense among many Americans that Israel was continually under siege. Consequently, Congress, supported by broad U.S. public opinion, committed to strengthening Israel's military and economy through large increases in foreign aid. In 1971, the United States provided Israel with military loans of $545 million, up from $30 million in 1970. Also in 1971, Congress first designated a specific amount of aid for Israel (an "earmark"). Economic assistance changed from project aid, such as support for agricultural development work, to the Commodity Import Program (CIP) for the purchase of U.S. goods. In effect, the United States stepped in to fill the role that France had relinquished after French President Charles De Gaulle refused to supply Israel with military hardware to protest its preemptive launch of the June 1967 War. Israel became the largest recipient of U.S. foreign assistance in 1976. From 1971 to the present, U.S. aid to Israel has averaged over $2 billion per year, two-thirds of which has been military assistance.

Just as Israel's long-standing relationship with the United States was in its incipient stages, Egypt, its economy in desperate need of investment and capital after two wars, began to look to the United States to help stimulate economic growth. Egypt's new leader, Anwar Sadat, who had been eager to rid Egypt of excessive Soviet influence and embark on a program of economic liberalization, improved U.S.-Egyptian relations in the mid 1970s, leading to a resumption in economic aid in 1975, and the signing of two disengagement agreements with Israel concerning the Sinai desert. To a lesser extent, the United States significantly increased its economic and military aid to Jordan after the 1970-1971 civil war, in which the Jordanian Armed Forces expelled Palestinian guerrillas from Jordan where they had seriously threatened stability.

The 1979 peace treaty between Israel and Egypt ushered in the current era of U.S. financial support for peace between Israel and her Arab neighbors. In exchange for a complete cessation of hostilities and Israel's return of the Sinai Peninsula, the United States provided a total of $7.3 billion to both parties in 1979. The "Special International Security Assistance Act of 1979" ( P.L. 96-35 ) provided both military and economic grants to Israel and Egypt at a ratio of 3 to 2, respectively. From the Egyptian standpoint, U.S. funds helped to subsidize its defense budget and upgrade its aging Soviet hardware. Egypt became the second largest recipient of U.S. aid after 1979.

Since the Camp David Accords, U.S. assistance levels have remained relatively consistent, and the United States has continued to support the peace process and the strengthening of Israel. Israel and Egypt have been the top two regional recipients of U.S. aid for more than two decades, while Jordan became a leading recipient in the 1990s. Notable events involving significant transfers of U.S. aid since the 1979 Camp David Accords include the following:

In 1985, Congress approved a $2.25 billion supplemental funding package for Israel, Egypt, and Jordan to help stabilize their deteriorating economies. In 1991, Egyptian support for the U.S.-led international coalition against Iraq's invasion of Kuwait led Congress to authorize the cancellation of Egypt's $6.7 billion military debt. Congress also provided Israel $650 million in emergency ESF grants to pay for damage and other costs from the war. In addition, Israel was given Patriot missiles during the Persian Gulf war. Aid to Jordan was reduced significantly (nearly a 75% overall decrease) after the late King Hussein was unwilling to join the allied coalition against Iraq. In October 1992, Congress approved $10 billion in loan guarantees for Israel to help it absorb a massive influx of Jews from the former Soviet Union. The approval of the loan guarantees was delayed due to disagreements between the George H.W. Bush Administration and Israel over use of U.S. funds in the West Bank and Gaza Strip. Of the $10 billion authorized, the United States deducted $774 million as a penalty for Israeli settlement construction in the West Bank and Gaza Strip, leaving $9.226 billion available to cover Israeli loans. In September 1993, after Israel and the Palestinian Liberation Organization (PLO) accorded mutual recognition of each other in a step intended to lead to a future peace agreement, the United States offered $500 million ($125 million in loans or loan guarantees and $375 million in grants) over five years for economic development of the Palestinian entity. In 1994, in recognition of Jordan's signing a peace treaty with Israel, President Clinton asked Congress to pass legislation to forgive Jordan's $702.3 million debt to the United States (approximately 10% of Jordan's worldwide debt). Congress appropriated a total of $401 million in subsidies, which under pertinent budgetary procedures were sufficient to forgive the entire $702.3 million owed to the United States at the time. In November 1999, Congress approved $400 million in grants for the Palestinians, $300 million for Jordan, and $1.2 billion for the Israelis in 2000 to fund the implementation of the Wye River Agreement.

Appendix. Glossary