US Offers New Options for Payment of Weapon Sale

Foreign Affairs

Washington: The United States is developing new options for arms customers as a way to ensure allies and partners don’t drop planned procurement as the world economy remains in shock from the impact of COVID 19.

Among the options, according to outgoing Defence Security Cooperation Agency (DSCA) head Lt. Gen. Charles Hooper, are allowing foreign countries to finance arms procurement through US bank loans and altering existing payment schedules to stretch the costs over time.

“The bottom line here is, we are willing to work with our allies and partners, when they raise the challenges that they have, to find ways for them to continue to buy American and to ensure that they can pay for the equipment along a payment schedule that reflects their own economic conditions,” Hooper said.

However, Hooper declined to say which countries have already approached his agency about economic impact from the disease, but said that there are “certainly” customer nations that have reached out.

“There are partners that, we’re already seeing that they are having challenges. So we’re standing ready to work with them. As soon as we can gain an appreciation and the understanding of the challenges, we can find ways to help them,” Hooper said.

Hooper is succeeded by Heidi Grant, the head of the Defence Security Technology Administration, a move that marks the first time a civilian has led the office since a previous agency was recognized into the current DSCA structure in 1998.

Grant will have to hit the ground running, given the potential impact from COVID on the world economies. The good news, Hooper said, is that by March, DSCA had concluded that the global economy would be hurt by the disease and set up an inter-agency working group, called the Operations Planning Group, to study program-level impacts from global trends and develop solutions.

The first step Hooper’s team took was to revise the collection process of foreign payment in order to make them “a bit more flexible, to accommodate those partners that may be having some economic difficulties or may have reprioritised their budgets towards for example, economic recovery and away from defence.”

Those options include delaying payments on planned procurement to future years, creating new payment plans for ongoing procurement efforts, and returning funds currently on deposit with the United States to the customer nations as well as new financing strategies.

“One of the things we did is we are allowing our partners to draw on standby letters of credit from foreign banks operating in the United States, according to US banking rules,” Hooper explained. “That offers a nation an opportunity to draw, for example, in that case, a standby letter of credit on one of their banks that operates in the United States, under United States banking rules, which ensures that there’s no fiduciary risk to the United States.”

“There are a number of economic factors globally, that we anticipate will likely have an impact on country’s abilities to move forward,” Hooper said. “Obviously, energy prices are lower, and those countries all over the world that specialise in energy are going to see a fall in revenue. We see countries that, as a result of the pandemic, are having to shift funds from their defence budgets to more domestic missions like economic recovery and other things.”

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