With the well drying up on Pentagon purchases, U.S. defense contractors are seeking a controversial change in the mission of the Export-Import Bank to allow it to support overseas military sales, Bush administration and industry officials said yesterday.

The plan has won support from the Defense and State departments. It is included in a preliminary draft of the new federal budget, which will be released next month. The draft calls for up to $1 billion of the Ex-Im Bank budget to go for financing military sales to NATO nations, Japan and possibly Israel. The $1 billion could support as much as $30 billion in military sales, however. The appropriations sought by the defense contractors would serve only as a reserve for the Ex-Im Bank in case of default on its loans, an industry official said.

The Export-Import Bank, which provides loans and guarantees to help U.S. companies finance sales in overseas markets, has been banned by law for 23 years from financing military sales to developing countries. As a matter of policy, the bank has refused to support military sales to developed nations.

Now, major defense contractors such as Grumman Corp., Martin-Marietta Co. and Lockheed Corp. are working with the Pentagon to push for the change, industry sources said.

But the idea has run into opposition on Capitol Hill and at major exporting firms, such as Boeing Co., which fear that opening the door to Ex-Im Bank financing of military sales will divert money from commercial exports at a time when arranging for cut-rate credit has become a major technique for winning overseas orders.

"Crowding out is what worries me. The bank doesn't have enough money for commercial transactions as it is," said Sen. John Heinz (R-Pa.), a member of the Senate Banking Committee, which has jurisdiction over the Ex-Im Bank.

"Philosophically, we are opposed to the use of Ex-Im Bank funds to finance military sales," said Jack Pierce, Boeing's treasurer, adding that all aspects of military sales should be handled through the Pentagon, which has the needed expertise.

As recently as July, Ex-Im President John D. Macomber opposed adding a military-support program, writing to Senate Banking Committee Chairman Donald W. Riegle Jr. (D-Mich.) that it would "represent a fundamental reorientation of the focus of Ex-Im Bank's programs" and "divert personnel from commercial export financing."

Bank officials appear now to have changed their position, administration sources said, partially as a result of a meeting after Christmas between Macomber and Deputy Secretary of State Lawrence W. Eagleburger, who strongly supports allowing Ex-Im Bank financing for military sales.

The Defense Department and military contractors want new markets for U.S. equipment in the face of shrinking U.S. defense expenditures. The Pentagon is seeking to preserve the industry capability to build planes, tanks and guns in case of future needs, and defense firms are fighting to stay alive, sources said. Pentagon funding for foreign military sales currently are almost exclusively earmarked for two countries -- Egypt and Israel.

"There has been a change in the business of military sales with intense competition" among countries to win foreign markets, said Eugene Lawson, first vice president of the Ex-Im Bank. "As defense production winds down, it is very difficult {for companies} to make the transition from basically a Cold War environment to a civilian economy."

Defense Secretary Richard B. Cheney's decision Monday to cancel the Navy's $6.2 billion contract to design a new A-12 "stealth" bomber illustrated how much the defense industry has changed since the end of superpower confrontation. Defense contracts are looking more now to sales to developed countries that can afford to buy sophisticated and expensive weapons systems.

A State Department official noted that Britain, France and Germany provide Ex-Im Bank-type financing for their defense industries.

"There is no question the pressure is mounting. It is not only the United States but Europe that sees a shrinking of the military budget formerly devoted to NATO and the East-West conflict. But that is all the more reason that military financing should rest in the Pentagon," said Boeing's Pierce, voicing one of his company's rare public disagreements with the rest of the U.S. aerospace industry.

He said Ex-Im Bank funding should be reserved for commercial projects because of the uncertainty in global financial markets that could reduce the ability of U.S. companies to gain money for their export sales.

A proponent of the program said, however, that "it is an industry-wide effort to find some way to compete with foreign countries that subsidize their companies. We are just looking for some kind of government help, at least credit guarantees, so we can sell our products."

The Ex-Im Bank's Lawson said any program of supporting military sales would be very small and wouldn't crowd out commercial financing. "There will be no commercial sales that will go unfunded," he said. "There will be no robbing of Peter to pay Paul."