WASHINGTON ― Several top appropriators are pushing to offer loans to Taiwan to finance as much as $10 billion in military aid authorized in the annual defense bill as a way to alleviate budget pressure on the State Department, which oversees the Foreign Military Financing program.

The position is part of a behind-the-scenes clash over how the emerging spending bill for 2023 will approach military aid for Taiwan as Washington and Taipei seek to deter a possible invasion or blockade by China in the coming years. Lead appropriators want to offer loans, while lawmakers on the foreign relations committees want to give the money to Taiwan outright through grants.

Taiwan itself is pushing for Foreign Military Financing grants, not loans.

“We thank the U.S. Congress for its bipartisan support for Taiwan’s security,” Andrew Huang, a spokesman for Taiwan’s diplomatic office in Washington, told Defense News. “We urgently need the help and hope that assistance will be allocated as grants. We will maintain close communication and coordination with Congress and the executive branch to ensure that Taiwan’s defense needs are immediately met.”

The fiscal 2023 National Defense Authorization Act, which the House passed 350-80 last week, includes $2 billion in Foreign Military Financing per year for Taiwan over five years, and another $1 billion annually in equipment from U.S. military stockpiles. The Senate is expected to vote on the bill as soon as today.

Foreign Military Financing allows other countries to purchase U.S. military equipment using grants or loans, and the Taiwan authorization in the NDAA allows the U.S. to use either mechanism to provide the equipment to Taipei. The bill stipulates Taiwan must pay back any loans within 12 years.

Congressional appropriators are still drafting the FY23 government spending bill, which would fund the Taiwan military aid authorization in the NDAA. They expect to vote on a final omnibus funding bill next week.

Loans or grants?

Sen. Lindsey Graham of South Carolina, the top Republican on the State Department funding panel, told Defense News that using loans for Taiwan FMF would “go further” than grants.

“You’ve got all kinds of needs. You’ve got a famine all over the world. You’ve got food shortages. I want to be helpful to Taiwan, but probably the better approach is loans,” he said.

Graham co-sponsored the Taiwan Policy Act, the initial legislation that contained the Taiwan security aid provisions, alongside the top Democrat and Republican on the Senate Foreign Relations Committee: Bob Menendez of New Jersey and James Risch of Idaho.

Graham and his fellow appropriators are proposing loans of up to $2 billion, a match with the amount in the defense policy bill, for which they would appropriate $80 million in the emerging FY23 omnibus to administer those loans.

This pits him against fellow Taiwan Policy Act co-sponsors Menendez and Risch, who are pushing appropriators to allocate as much as $500 million in grants for Taiwan FMF.

As Congress negotiated a final spending bill, Menendez and Risch took their case directly to House Speaker Nancy Pelosi of California, House Minority Leader Kevin McCarthy of California, Senate Majority Leader Chuck Schumer of New York and Senate Minority Leader Mitch McConnell of Kentucky in a Dec. 15 letter obtained by Defense News. The letter asks the four leaders to appropriate the Taiwan FMF as grants instead of loans in the final spending bill.

The letter was also signed by the House Foreign Affairs Committee’s top Democrat and Republican — Gregory Meeks of New York and Mike McCaul of Texas. It also requests “$1 billion in emergency appropriations to replenish capabilities provided to Taiwan” under presidential drawdown authority, which allows the White House to transfer weapons to other countries from U.S. stockpiles.

The letter seeks another $500 million in FMF for Ukraine to ward off Russia’s invasion and another $250 million to support countries that have also aided Kyiv.

Appropriators for their part argue the administration has the legal authority to provide grants, but without specific appropriations to increase the State Department budget, it would have to reprogram funding from other accounts. Their concern is that the State Department’s budget cannot absorb a large amount for Taiwan grants without competing with, or potentially compromising, other budget priorities, such as Ukraine-related humanitarian relief.

“There is a lot of pressure on my subcommittee, commitments having been made across many countries that exceed what we can carry,” Sen. Chris Coons, D-Del., the chairman of the State Department appropriations subcommittee, told Defense News. “And so, a reasonable observation would be that these things will have to be reconciled at some point.”

Taiwan defense plan

The State Department budget for fiscal 2022 totaled $56 billion, with roughly $6 billion for Foreign Military Financing. Of the 25-plus countries that receive FMF annually, the major recipients are Israel ($3.3 billion), Egypt ($1.3 billion) and Jordan ($425 million).

Taiwan’s $850 billion per year GDP is significantly higher than all three of those countries, and Taiwanese lawmakers have approved an $18.3 billion defense budget for FY23 — a 13.9% increase over FY22.

“We should use every security assistance tool at our disposal, and that should include FMF grants,” Risch told Defense News. “The Taiwan NDAA package puts conditions on our FMF — that Taiwan has to increase its own defense spending to be eligible. Taiwan has done that and more over the last several years to provide for its own defense. Taiwan understands that U.S. support is a supplement, and not a replacement, for what they are doing.”

He noted the aid “recognizes the enormity of China’s military, the urgency of the threats Taiwan faces, and the severe impact on U.S. interests if Taiwan comes under China’s control.”

Meanwhile, lawmakers are still waiting for the Biden administration to submit a plan as to how it intends to use the Taiwan military aid authorized in the NDAA.

Risch said the Senate Foreign Relations and Armed Services committees asked the Biden administration for such a plan in September.

“Three months later, we are still waiting,” said Risch. “This information is critical for Congress’s work in putting together a substantial but realistic appropriations package for Taiwan. We are concerned that the administration is not backing up its rhetorical support for the Taiwan package with actual substance and cooperation with Congress.”

Bryant Harris is the Congress reporter for Defense News. He has covered U.S. foreign policy, national security, international affairs and politics in Washington since 2014. He has also written for Foreign Policy, Al-Monitor, Al Jazeera English and IPS News.

Joe Gould is the senior Pentagon reporter for Defense News, covering the intersection of national security policy, politics and the defense industry. He served previously as Congress reporter.

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