us that, because that airbase backed up to the commercial international airport, they often feared, or were apprehensive that, because planes get into the same traffic patterns, there could be an accident. They obviously feared a conflagration, if there were an accident. These two airports are very close, are a part of Metropolitan Madrid.

We agreed to remove the planes from that airbase and appealed to the Spanish to permit some of these to remain available to us elsewhere in Spain, and they will operate out of the airbase in the North at Zaragoza.

Mr. FASCELL. Pursuant to treaty article 5, supplementary agreement 6, article 3 specifies consultations on the use of Spanish facilities in the event of an attack. I believe you covered that rather thoroughly. It seemed to me there was a difference of opinion in the way you cast that today in response to questions and the way it was responded to in the previous hearing, and I wanted to clarify that.

In the previous hearing, I got the idea that it was inherent and clearly understood that prior consultation was required. I got the impression today, in response to questions, that that was not necessarily so, that inherent in the agreement was the right to continue and that there were no restrictions in it. Neither of these positions needs to be exclusive and they could be compatible and probably are. Mr. MCCLOSKEY. They are two circumstances, I think, that distinguish, Mr. Chairman, one, that the United States under the treaty in normal circumstances has no obligation to consult with Spain for its movements out of those bases. The different circumstance would be if there were an attack against Spain and the United States wished to undertake an action in resistance to that attack. It then would be required to undertake consultation with Spain before launching a mission. That is the sense of the

Mr. FASCELL. OK. So we have two different probelms. One is the use of U.S. military forces already stationed in Spain in terms of the kind of actions that you described. The other is the use of the bases by U.S. military forces not stationed in Spain who might want to stop in transit.

Mr. MCCLOSKEY. Yes, and, of course, if this had been a mutual defense treaty, we would not have to make such a distinction, but, because it is not a mutual defense treaty, there are certain actions that the United States would otherwise undertake where it had a mutual defense treaty that require us to consult with Spain before doing so.

Mr. FASCELL. That clarifies it. I didn't want to leave any misunderstandings on the record, but we fully contemplate that the use of bases for U.S. military forces in transit would require consultation with Spain, even though the treaty is silent on the subject.

Mr. MCCLOSKEY. I am sorry. Maybe I-the way I heard you state that, it seems to me the answer is "no." That is not correct. Mr. FASCELL. Well

Mr. MCCLOSKEY. We have no obligation under the treaty except in time of attack for prior consultation with Spain on the use by American units of the bases.

Mr. FASCELL. No matter where the American units are stationed? All right. Thank you.

Pursuant to treaty article 5, article 1 of supplementary agreement 7, it is specified that the United States will "issue repayment guarantees

under the foreign military sales program" in the amount of $120 million annually for 5 years, and there I ask the question again; Does that mean no cash outlay? Is that correct?

Mr. MCCLOSKEY. That essentially is correct, sir. Spain will, like any other borrower, pay the going rate on this money each year, and that is why sometimes journalistically this issue gets abused, because it is put down as American aid, and it plainly and factually is not.

Mr. FASCELL. I understand that. The bill says that section 620 (m) is excepted as it applies to FMS sales to Spain. Now, if that is true, does it mean that what you are doing is keeping the flexibility to either lengthen the term or drop the interest rate on the credit. Is that correct?

Mr. MCCLOSKEY. Mr. Small is our legal adviser.

STATEMENT OF DAVID SMALL, LEGAL COUNSEL, DEPARTMENT OF STATE

Mr. SMALL. The reference there is, as I understand it, to the normal limitation under the act to-against assistance to developed countries. That is waivable by Presidential waiver. However, the question of whether a waiver would or would not be required is simply resolved by the bill saying that, in this case, we can give assistance this category of assistance to Spain regardless of its status as a developed country.

Mr. FASCELL. So it does not affect the question of either length of time for repayment or the interest rate?

Mr. SMALL. That is correct.

Mr. FASCELL. So then there is basically no cost.

Mr. SMALL. Correct.

Mr. FASCELL. Before we leave that $120 million, do we have any idea yet what we are talking about in terms of these credits? The kind of equipment and so forth?

Mr. MCCLOSKEY. We don't, sir, and we haven't undertaken consultation with Spain on it and won't until instruments of ratification

Mr. FASCELL. I don't know how 36(b) applies and it might not apply, but, since this is a total package, rather than getting underneath the $25 million requirements of 36(b), I think it would be useful, if and when that package is put together, to submit the whole package to Congress as a matter of information, even though technically you might not be required to do it because it comes in separate pieces under $25 million.

Mr. MCCLOSKEY. I am going to tell you, Mr. Chairman, I am prepared to move heaven and earth to get this treaty ratified.

Mr. FASCELL. I am talking about down the road.

Mr. MCCLOSKEY. We will do that.

Mr. FASCELL. How about the $75 million in grants for military equipment; do we have any idea yet what we are talking about? Mr. MCCLOSKEY. We do not. That is a grant program.

Mr. FASCELL. That is $15 million a year for 5 years, and the authorization for that is included in this authorization bill. It is not a separate authorization.

Mr. MCCLOSKEY. That is right, sir.

Mr. FASCELL. How about the $2 million for training?
Mr. MCCLOSKEY. That also would be-

Mr. FASCELL. Is that covered? Can somebody tell me while we are on it? We might as well do both together.

Mr. MCCLOSKEY. That also is in subsection 3. Yes. Subsection 3 of the bill.

Mr. FASCELL. In other words, that authorization is included here and won't be taken from the military training funds in the security assistance bill that we have already passed. This includes a separate authorization for that.

Now, article 3 of agreement 7 specifies that all the defense articles and services will be consistent with the original 1953 mutual defense assistance agreement. I don't know what that means frankly. Does someone want to tell me and then tell me why Spain is exempted? Mr. MCCLOSKEY. It is rather a standard reference in these agreements which call for provision of military equipment, and I can remember our lawyers insisting with me that this had to be in, in the drafting.

Mr FASCELL. Do you want to submit a statement on that to us later, unless you are prepared to answer it now?

Mr. MCCLOSKEY. We will submit a technical explanation.

Mr. FASCELL. OK. The question again then, so it will be specific is: Article 3 of agreement 7 specifies that all defense articles and services furnished Spain will be consistent with the original 1953 mutual defense assistance agreement. What are those conditions and why are purchases by Spain exempted from article 1, paragraph 3, of that Agreement?

Mr. MCCLOSKEY. Yes, sir.

[The information supplied for the record follows:]

PROVISIONS OF ARTICLE I OF THE MUTUAL DEFENSE ASSISTANCE AGREEMENT OF SEPTEMBER 26, 1953

(1) Each Government will make available to the other, and to such other governments as the Parties may in each case agree upon, equipment, materials, services or other assistance in such quantities and in accordance with such terms and conditions as may be agreed. The furnishing and use of such assistance shall be consistent with the Charter of the United Nations. Such assistance as may be made available by the Government of the United States pursuant to this Agreement will be furnished under the provisions and subject to all the terms, conditions and other provisions of the Mutual Defense Assistance Act of 1949 and the Mutual Security Act of 1951, acts amendatory or supplementary thereto and appropriation acts thereunder. The two Governments will, when it is considered necessary, negotiate detailed arrangements necessary to carry out the provisions of this paragraph.

(2) Both Governments will utilize this assistance exclusively for the promotion of international peace and security, in accordance with arrangements satisfactory to both Governments, and will not, without prior and mutual consent, devote such assistance to purposes other than those for which it was furnished.

(3) Arrangements will be entered into under which equipment and materials furnished pursuant to this Agreement, and no longer required for the purposes for which originally made available, will be offered for return to the country which furnished such equipment and materials.

(4) Without prior and mutual consent, neither Government shall transfer to any person outside that Government or to any other nation, title to or possession of any equipment, materials, property, information, or services received under this Agreement.

(5) The Government of Spain will take such security measures as may be agreed in each case between the two Governments in order to prevent the disclosure or compromise of classified military articles, services or information furnished pursuant to this Agreement.

(6) Each Government will take appropriate measures consistent with security to keep the public informed of operations under this Agreement.

(7) The two Governments will establish procedures whereby the Government of Spain will so deposit, segregate or assure title to all funds allocated to or derived from any program of assistance of the United States so that such funds shall not be subject to garnishment, attachment, seizure or other legal process by any person, entity or government when in the opinion of the United States any such legal process would interfere with the attainment of the objectives of the said program of assistance.

The 1953 agreement satisfies the conditions precedent established by the Foreign Assistance Act of 1961, as amended, for eligibility to receive defense articles and services on a grant basis under MAP. The terms and conditions contained in Article I are substantially identical to those in standard FMS contracts of sale governing articles and services furnished on a sales basis, with the exception of paragraph 3 relating to the return of articles when no longer needed for the purpose for which furnished, which for obvious reasons has no applicability to articles sold instead of granted and which is not required by the Arms Export Control Act, as amended. Reference to the 1953 agreement was made in Supplementary Agreement No. Seven in order to underscore the fact that nothing in that agreement No. Seven was intended to supersede the terms and conditions set forth in Article I of the 1953 agreement applicable to USG-origin defense articles and services. In order to avoid subsequent misunderstandings, it was necessary to make specific reference to the fact that the provisions of Article I, paragraph 3, of the 1953 agreement do not apply to articles or services sold under the Arms Export Control Act, as amended.

Mr. FASCELL. Now, we are going to pay $50 million toward modernizing the aircraft warning and control system. Is there a Spanish share of that, or is that the total cost?

Mr. MCCLOSKEY. No. There is a Spanish share. This was a program that began and is used by the two air forces, begun in 1970. The proportionate share at that time was rather heavily on the U.S. side. As a result of this negotiations, the sharing is to be on an equal basis. That does not require appropriated money out of the military assistance bill. That is an air force to air force exchange, not exchange. Forgive me. That is not the correct word. An air force to air force grant.

Mr. FASCELL. In other words

Mr. MCCLOSKEY. It comes out of the defense

Mr. FASCELL [continuing]. The defense budget. You don't need to have authorization or appropriation here?

Mr. MCCLOSKEY. That is correct.

Mr. FASCELL. Is there any subsidy in the sale of the five ships? Mr. MCCLOSKEY. I would like to ask Mr. Bergold to speak to that. I don't know the answer.

Mr. BERGOLD. I don't know the answer. We will have to submit that for the record.

Mr. FASCELL. Please do.

[The information supplied for the record follows:

SHIP SALES TO SPAIN

Ship sales to the Spanish will be made under the provision of the Foreign Military Sales Act. The four ocean-going minesweepers and minesweeper tender provided for sale to Spain in the Treaty have been decommissioned and are in the reserve fleet. The ships will be sold to the Spanish at their established disposal value which cannot be less than the scrap value of the ships. There is no USN subsidy.

Mr. FASCELL. I cannot begin to think of all the factors that might be involved, but we might as well cover them all, because sooner or later we are going to have to.

What implications should be read, if any, into article 9 of agreement 7 relating to defense production in Spain?

Mr. MCCLOSKEY. Well, early on in the negotiations, because Spain has proclaimed for itself a military modernization program to be carried out over a number of years, it asked whether the United States would consider a coproduction of military equipment scheme for Spain, and all this says is that we will give consideration to that. Nothing has been agreed to, and whether the Spanish take up this interest remains to be seen.

Mr. FASCELL. Coproduction means government to government? It does not mean a U.S. franchise for production of military equip

ment?

Mr. MCCLOSKEY. Could be either.

Mr. FASCELL. It could be either.

Agreement 7, article 10, talks about the purchase by the United States of 34 F-4C Phantom aircraft from Spain and a lease to Spain of 42 F-4E's, and then the annexes indicate we will pay $55 million for the planes and Spain will pay us $53 million for the lease.

It sounds like almost a washout transaction with a lot of legal and political and military implications which we might as well clear up on the record.

Mr. MCCLOSKEY. As part of the modernization program I referred to a minute ago, what Spain said it eventually wanted to obtain was the F-16 aircraft. When we explained to them that that can only be something rather far down the line, Spain then raised the question as to whether in the interim the United States would agree to provide F4E aircraft to replace the F4C's which were bought from us as a result of an earlier agreement.

Mr. FASCELL. So we take back the F4C's and we lease them the F4E's?

Mr. MCCLOSKEY. That is correct, sir.

Mr. FASCELL. And we pay $2 million net?

Mr. MCCLOSKEY. It would be a net cost to us of $2 million. I have to add that, if this is in fact carried out by the Spanish Government, because, since this negotiation was completed, they have undertaken a new study within their air force

Mr. FASCELL. As to whether they want to go to the F-16?

Mr. MCCLOSKEY. As to whether they want to go entirely down this road that they laid down in the negotiations or not.

Mr. FASCELL. What is the difference between the F-4C and the F-4E besides the number?

Mr. BERGOLD. I would have to just say that the F-4E is a newer aircraft, Mr. Chairman, with some more and some different electronics on it, and basically it is a question of age.

Mr. FASCELL. What about getting DOD to give us the details on that in the record and show us what we are talking about and how far up the line the E is from the C and what the actual difference is and so forth?

Mr. BERGOLD. Right.

[The information supplied for the record follows:]

COMPARISON OF F-4E AIRCRAFT WITH F-4C AIRCRAFT

The F-4E is a more modern aircraft than the F-4C, having an improved radar' internal 20mm gatling gun, improved airframe and improved engine. These more advanced systems give the F-4E better maneuverability and improved performance in the air defense and air-to-ground roles.