Israeli official in US for expected announcement of massive military aid package

The current military aid package, which provided Israel with some $30 billion in military assistance over the last decade, expires in October 2017.

September 13, 2016 18:54
2 minute read.

An iron dome launches rockets to intercept incoming rockets from Gaza on Tuesday.. (photo credit: REUTERS)

Acting National Security Council head Yaakov Nagel arrived in Washington on Tuesday amid expectations of an imminent announcement on the conclusion of a new 10-year US military aid package to Israel known as the Memorandum of Understanding (MoU).

The package, under negotiations for nearly a year, is expected to provide Israel with some $38 billion in military aid over the next decade, making it the largest US foreign defense guarantee in history.

Nagel is expected to conclude the deal with US National Security Adviser Susan Rice, with whom he has been negotiating the package.

In June, Rice told the American Jewish Committee Global Forum: “Even in these days of belt tightening, we are prepared to sign the single largest military assistance package – with any country – in American history.”

She said the deal “would constitute a significant increase in support, and provide Israel the funding to update much of its fighter aircraft fleet, substantially enhance the mobility of its ground forces and continue to strengthen its missile defense capabilities.”

The $38 billion over 10 years, includes supplemental funding for missile defense that up until now Israel received outside the MoU framework. Still, the new sum constitutes about a $4 billion increase in the $34 billion in military aid Israel received over the past decade, which included $30 billion under the MoU, and another nearly $4 billion from 2007-2017 in supplemental missile defense aid.

On the down side of the ledger, from an Israeli perspective, is that it is expected that by the end of the new MoU, all the money received will need to be spent in the US, as opposed to the current situation where 26% of the annual $3 billion could be converted into shekels and spent in Israel.

This will gradually be done away with over the next 10 years, something that will have an impact on Israel’s defense industry.

The current MoU, which provided Israel with some $30 billion in military assistance over the last decade, expires in October 2017.

In May, the head of the Manufacturer's Association of Israel Shraga Brosh demanded that Netanyahu veto any deal that would eliminate procurement in Israel.

"The Israeli government's acceptance of Obama's plan would be a mortal blow to Israel's defense manufacturing, and mean the loss of thousands of jobs in Israel in favor of the Americans," Brosh said at the time.

Even with a higher overall level of defense aid, he said, blocking the government's ability to spend the money in Israel would cut hundreds of millions of dollars out of the local industry. According to the MAI, Defense accounts for about 15% of all Israeli manufacturing jobs, and every $1 billion in defense procurement supports 2,000 direct jobs and 5,500 overall jobs in the economy.

In 2015, Israel's defense exports amounted to $5.7 billion, around 13% of all industrial exports. The loss of American procurement from aid would break up supply lines and technological investment that help the industry flourish, Brosh said.

On Tuesday, however, Brosh and the MAI remained mum on the emerging deal.

The change in the procurement regulations are not expected to kick in until the seventh year of the deal, allowing the defense industry ample time to adjust to the new reality, senior government officials said.

Niv Elis contributed to this report.

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