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                                                       Calendar No. 437
112th Congress                                                   Report
 2d Session                                                     112-179




                 June 27, 2012.--Ordered to be printed

          Mr. Kerry, from the Committee on Foreign Relations,
                        submitted the following


                         [To accompany S. 2165]

    The Committee on Foreign Relations, having had under 
consideration the bill, S. 2165, to enhance strategic 
cooperation between the United States and Israel, and for other 
purposes, reports favorably thereon, with an amendment in the 
nature of a substitute, and recommends that the bill, as 
amended, do pass.



  I. Purpose..........................................................1
 II. Committee Action.................................................1
III. Section-by-Section Analysis......................................1
 IV. Cost Estimate....................................................3
  V. Evaluation of Regulatory Impact..................................3
 VI. Changes in Existing Law..........................................3

                               I. Purpose

    The purposed of this bill is to enhance strategic 
cooperation between the United States and Israel.

                          II. Committee Action

    S. 2165 was introduced by Senators Boxer, Isakson, and 
Collins on March 6, 2012. At a committee business meeting on 
June 19, 2012, the committee considered S. 2165 with an 
amendment in the nature of a substitute. By voice vote, the 
committee ordered the legislation, with an amendment in the 
nature of a substitute, to be reported favorably.

                    III. Section-by-Section Analysis


    This Act may be cited as the ``United States-Israel 
Enhanced Security Cooperation Act of 2012.''


    This section provides several findings, including: that 
there is a special bond between the United States and Israel; 
that the Middle East is undergoing rapid change; that the 
Government of the Islamic Republic of Iran continues to foment 
instability in the region; that the Government of the Islamic 
Republic of Iran continues to enrich uranium in defiance of 
United Nations Security Council resolutions; that a nuclear-
weapons capable Iran would threaten vital United States 
interests; and that the authority to make available loan 
guarantees to Israel is currently set to expire on September 
30, 2012.


    This section states that it is U.S. policy, among other 
things, to: continue to reaffirm the commitment to Israel's 
security as a Jewish state; help Israel preserve its 
qualitative military edge; pursue avenues to expand military 
and civilian cooperation; assist in efforts to forge a 
negotiated settlement of the Israeli-Palestinian conflict that 
results in two states living side by side in peace and 
security; and encourage Israel's neighbors to recognize 
Israel's right to exist as a Jewish state.


    This section expresses the sense of Congress that the 
United States should take specified actions to assist in 
Israel's defense, among which are: providing the Government of 
Israel support necessary to enhance development and increase 
production of joint missile defense systems; providing the 
Government of Israel appropriate defense articles and defense 
services through appropriate mechanisms; examining ways to 
strengthen existing security initiatives and bilateral training 
exercises; and encouraging an expanded role for Israel with the 
North Atlantic Treaty Organization.


    This section would amend the Department of Defense 
Appropriations Act, 2005, to extend authority to transfer 
certain obsolete or surplus Department of Defense items to 
Israel. The section would also amend the Foreign Assistance Act 
of 1961 to provide extended authority to make additions to 
foreign-based defense stockpiles through 2014, and the 
Emergency Wartime Supplemental Appropriations Act, 2003, to 
extend specified loan guarantee authority to Israel. As noted 
in section 2 of the bill, the authority provided by the 
Emergency Wartime Supplemental Appropriations Act, 2003, as 
amended, would otherwise expire on September 30, 2012.


    This section requires several reports on previously enacted 
provisions of law, and otherwise. The first is a report on the 
status of Israel's qualitative military edge. The second is a 
report on actions that could improve the process related to 
Israel's purchase of F-35 aircraft. The third is a report on 
efforts to expand cooperation between the United States and 
Israel in homeland security, counter-terrorism, maritime 
security, energy, cyber-security, and other related areas. The 
fourth is a report on actions to integrate Israel into the 
defense of the Eastern Mediterranean.
    Section 201 of the Naval Vessel Transfer Act of 2008 
(Public Law 110-429) requires a quadrennial report on an 
empirical and qualitative assessment, and on an ongoing basis, 
of the extent to which Israel possesses a qualitative military 
edge over military threats to Israel. The initial required 
report was submitted on October 6, 2009. Pursuant to 201(c)(2) 
of that act, the President is required to submit an updated 
report no later than October 6, 2013. If the report required by 
section 6 of S. 2165 is submitted within one year of that date, 
then the committee intends that such report would also satisfy 
the requirement of section 201(c)(2) of the Naval Vessel 
Transfer Act of 2008. The committee notes that the 
determination required by section 36(h) of the Arms Export 
Control Act (22 U.S.C. 2776(h)) in connection with individual 
sales or licenses to the region provides a valuable assurance, 
but the committee expects that the report required by section 
6(a) of the bill will consider the overall implications for 
Israel's qualitative military edge of the total of all 
equipment acquisitions in recent years by countries in its 


    This section defines (1) ``appropriate congressional 
committees'' and (2) ``qualitative military edge.''

                           IV. Cost Estimate

    Rule XXVI, paragraph 11(a) of the Standing Rules of the 
Senate requires that committee reports on bills or joint 
resolutions contain a cost estimate for such legislation. To 
date, the committee has not received the Congressional Budget 
Office cost estimate for S. 2165.

                   V. Evaluation of Regulatory Impact

    Pursuant to Rule XXVI, paragraph 11(b) of the Standing 
Rules of the Senate, the committee has determined that there is 
no regulatory impact as a result of this legislation.

                      VI. Changes in Existing Law

    In compliance with Rule XXVI, paragraph 12 of the Standing 
Rules of the Senate, changes in existing law made by the bill, 
as reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new matter is printed in 
italic, existing law in which no change is proposed is shown in 


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Chapter 2--Military Assistance

           *       *       *       *       *       *       *

    Sec. 514. Stockpiling of Defense Articles for Foreign 
Countries.--(a) No defense article in the inventory of the 
Department of Defense which is set aside, reserved, or in any 
way earmarked or intended for future use by any foreign country 
may be made available to or for use by any foreign country 
unless such transfer is authorized under this Act or the Arms 
Export Control Act, or any subsequent corresponding 
legislation, and the value of such transfer is charged against 
funds authorized under such legislation or against the 
limitations specified in such legislation, as appropriate, for 
the fiscal period in which such defense article is transferred. 
For purposes of this subsection, ``value'' means the 
acquisition cost plus crating, packing, handling, and 
transportation costs incurred in carrying out this section.
    (b)(1) The value of defense articles to be set aside, 
earmarked, reserved, or intended for use as war reserve stocks 
for allied or other foreign countries (other than for purposes 
of the North Atlantic Treaty Organization or in the 
implementation of agreements with Israel) in stockpiles located 
in foreign countries may not exceed in any fiscal year an 
amount that is specified in security assistance authorizing 
legislation for that fiscal year.
    (2)(A) The value of such additions to stockpiles of defense 
articles in foreign countries shall not exceed $200,000,000 for 
each of [fiscal years 2011 and 2012] fiscal years 2013 and 

           *       *       *       *       *       *       *


           *       *       *       *       *       *       *

                Chapter 2--Bilateral Economic Assistance


           *       *       *       *       *       *       *


    Sec. 12001. (a)(1) Notwithstanding section 514 of the 
Foreign Assistance Act of 1961 (22 U.S.C. 2321h), the President 
may transfer to Israel, in exchange for concessions to be 
negotiated by the Secretary of Defense, with the concurrence of 
the Secretary of State, any or all of the items described in 
paragraph (2).

           *       *       *       *       *       *       *

    (d) No transfer may be made under the authority of this 
section [more than 8 years after] more than 10 years after the 
date of the enactment of this Act.

           *       *       *       *       *       *       *


           *       *       *       *       *       *       *

Chapter 5--Other Bilateral Economic Assistance

           *       *       *       *       *       *       *

                       LOAN GUARANTEES TO ISRAEL

    During the period beginning March 1, 2003, and ending 
September 30, 2007, loan guarantees may be made available to 
Israel, guaranteeing 100 percent of the principal and interest 
on such loans, the principal amount, any part of which is to be 
guaranteed, not to exceed $9,000,000,000, of which up to 
$3,000,000,000 may be issued prior to October 1, 2003, or 
thereafter and of which $3,000,000,000 may be issued subsequent 
to [September 30, 2011:] September 30, 2015: Provided, That 
such guarantees shall constitute obligations, in accordance 
with the terms of such guarantees, of the United States and the 
full faith and credit of the United States is hereby pledged 
for the full payment and performance of such obligations: 
Provided further, That if less than the full amount of 
guarantees authorized to be made available is issued prior to 
[September 30, 2011,] September 30, 2015, the authority to 
issue the balance of such guarantees shall extend to the 
subsequent fiscal year: Provided further, That guarantees may 
be issued under this section only to support activities in the 
geographic areas which were subject to the administration of 
the Government of Israel before June 5, 1967: Provided further, 
That the amount of guarantees that may be issued shall be 
reduced by an amount equal to the amount extended or estimated 
to have been extended by the Government of Israel during the 
period from March 1, 2003, to the date of issue of the 
guarantee, for activities which the President determines are 
inconsistent with the objectives and understandings reached 
between the United States and the Government of Israel 
regarding the implementation of the loan guarantee program: 
Provided further, That the President shall submit a report to 
Congress no later than September 30 of each fiscal year during 
the pendency of the program specifying the amount calculated 
under the preceding proviso and that will be deducted from the 
amount of guarantees authorized to be issued in the next fiscal 
year: Provided further, That the interest rate for loans 
guaranteed under this heading may include a reasonable fee to 
cover the costs and fees incurred by the borrower in connection 
with this program or financing under this heading in the event 
the borrower elects not to finance such costs or fees out of 
loan principal: Provided further, That no appropriations under 
this heading are available for the subsidy costs for these loan 
guarantees: Provided further, That the Government of Israel 
will pay the cost, as defined in section 502 of the Federal 
Credit Reform Act of 1990, as amended, including any non-
payment exposure risk, associated with the loan guarantees 
issued in any fiscal year, on a pro rata basis as each 
guarantee is issued during that year: Provided further, That 
all fees (as defined in section 601(e) of Public Law 102-391) 
associated with the loan guarantees shall be paid by the 
Government of Israel to the Government of the United States: 
Provided further, That funds made available for assistance to 
Israel under chapter 4 of part II of the Foreign Assistance Act 
of 1961, as amended, may be utilized by the Government of 
Israel to pay such fees to the United States Government: 
Provided further, That the President shall determine the terms 
and conditions for issuing guarantees, taking into 
consideration the budgetary and economic reforms undertaken by 
Israel: Provided further, That if the President determines that 
these terms and conditions have been breached, the President 
may suspend or terminate the provision of all or part of the 
loan guarantees not yet issued under this heading.

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