US to switch from free military grants to loans for Ukraine & others

US to switch from free military grants to loans for Ukraine & others
The US will scrap many of its sizeable foreign military grants and replace them with loans, the White House’s top finance official has said. Ukraine, which received large shipments of American military equipment, is among the countries affected by the move.

"We do change a couple of the foreign military programs from direct grants to loans," said Mick Mulvaney, director of the White House Office of Management and Budget, as quoted by Reuters.

"Our argument was instead of ... giving somebody $100 million, we could give them a smaller number worth of loan guarantees and they could actually buy more stuff."

In the meantime, military aid to Israel and Egypt, two close Middle Eastern allies and the biggest recipients of US equipment, will remain in place, Mulvaney said.

Recently, President Donald Trump proposed that the US spend 29.1 percent, or $11.5 billion, less on the State Department and "other international programs" in the 2018 fiscal year compared to 2017. This includes military assistance programs, as it's the State Department that decides which countries receive the funding.

According to the Congressional Research Service, US military assistance to partner and allied countries amounted to $13.5 billion in 2015, or 28 percent of all US foreign aid spending that year. Most military grants through the Foreign Military Financing (FMF) scheme went to Israel, Egypt, Jordan, Pakistan and Iraq.

Also on Monday, the Wall Street Journal reported that scrapping foreign military grants is likely to affect Pakistan, Tunisia, Lebanon, Ukraine, Colombia, the Philippines and Vietnam. 

Since the start of the Ukrainian crisis in 2014, Kiev has received several batches of US “non-lethal” military equipment, including radio equipment, surveillance gear and dozens of ageing Humvee armored vehicles. In addition, Washington maintains a program to train Ukrainian troops fighting armed militias in the breakaway region of Donbass.

Russia has consistently said that training and equipping Ukraine’s forces fuels hostilities in the east of the country, hampering the peace process.

The US has maintained that sending arms to Kiev is necessary to deter what it calls “Russian aggression” and defend Ukraine’s “territorial integrity.” Moscow denies claims of involvement in the lingering conflict.

READ MORE: Trump’s budget cuts could ‘eviscerate’ USAID

US Congress officials now say a key concern is that eliminating the military grants would prompt partner countries to look to American rivals, such as Russia and China, the WSJ said. An internal State Department memo seen by the outlet describes possible ramifications of the cuts.

“Without such assistance, partners will likely either not develop/sustain those capabilities, or may turn to other countries (e.g., Russia, China) to assist them in developing them,” the memo said.

READ MORE: US will hold Russia accountable over Ukraine while searching for common ground – Pence

“Converting FMF grants to a loan support mechanism will not assist the vast majority of countries that receive this support, since they would not desire to take out, or would not qualify for an international loan,” it asserted.