An unprecedented American aid deal to Israel?

In real terms, the new American military aid package to Israel shows little improvement and erodes the ability of local defense industries.

US Undersecretary of State Tom Shannon (R) and Israeli Acting National Security Advisor Jacob Nagel (L) shake hands after participating in a signing ceremony for a new ten year pact on security assistance between the two countries, in Washington (photo credit: REUTERS)
US Undersecretary of State Tom Shannon (R) and Israeli Acting National Security Advisor Jacob Nagel (L) shake hands after participating in a signing ceremony for a new ten year pact on security assistance between the two countries, in Washington
(photo credit: REUTERS)
AFTER UNNECESSARY and damaging delays, Israeli and American officials signed the new Memorandum of Understanding (MoU) at a modest ceremony in Washington on September 14. It was signed in the White House by acting National Security Adviser Jacob Nagel and United States Undersecretary of State Tom Shannon.
In nominal terms, it is an unprecedented deal. From 2019, the US will provide Israel with a total of $38 billion over a ten-year period. By all accounts it is a huge amount, even for a superpower like America.
Many Israelis don’t appreciate this gesture and take such American generosity for granted. But it is not something to be taken for granted. Where is it written that nearly 25 percent of the annual Israeli security budget (currently it is 56 billion shekels or 15 billion dollars) has to be financed by US taxpayers? Israelis shouldn’t flatter or delude themselves.
The US’s financial assistance and support is not just a manifestation of American strategic interests in the region, in the sense attributed to US Secretary of State Alexander Haig when he said, “Israel is the largest American aircraft carrier in the world that cannot be sunk, does not carry even one American soldier, and is located in a critical region for American national security.”
On the contrary, sometimes it seems that Israel is more of a liability rather than an asset for US foreign policy. Even American domestic policy considerations and the dwindling pro-Israel lobby and Jewish influence have their limits. The US’s unequivocal support of Israel’s security is rooted in the realms of shared democratic values, morals and cultural ties. Because of these ties, relations have overcome many crises, obstacles and differences, such as disputes over Israeli settlements and occupation. But once the common denominator binding the two nations is eroded, the financial aid will follow suit.
Indeed, with the new MoU, Israel is the biggest recipient of US foreign aid. But it has already been so for three decades. This is the main argument of Israeli Prime Minister Benjamin Netanyahu. Despite the lack of chemistry – not to say mutual dislike – between him and President Barack Obama, an unprecedented deal was struck.
THE TRUTH, however, is more complex.
The existing agreement, which is set to expire at the end of 2018, was already the largest between the US and any other country.
Actually, the new MoU doesn’t show a substantial improvement from previous agreements. It is more of a freeze of the current situation. At the end of the current agreement, Israel will have received a total of 31 billion dollars, an annual average of 3.1 billion dollars. Congress has allocated additional funds of 6 billion dollars, due to its hard lobbying and political influence, as well as sympathy.
The additional funds were designated to help Israel develop and produce its three types of anti-missile defense systems. The Iron Dome, which intercepts short-range rockets of up to 40 km, has shown great success in the summer of 2014 operation against Hamas in Gaza. The second-tier David Sling is a joint Israeli-US venture designed to destroy rockets and missiles at a range of up to 200 km. It is set to be operational in 2017. There is also the joint Arrow system project aimed to intercept longdistance missiles of over 300 km. Iran’s Shahab missiles are its primary target.
Additional funds were also assigned to help Israel develop new technologies to expose underground tunnels on the precarious fronts with Hamas in Gaza and Hezbollah in Lebanon.
The new agreement however is “all inclusive.”
Israel is legally forbidden to ask Congress for additional funds, neither for its anti-missile defense systems nor against the tunnels. The agreement states that in case Congress independently decides to provide Israel with more funds, they would be deducted from the administration’s aid.
THE OBAMA administration forced these clauses upon Israel to prevent Israeli leaders from interfering in US domestic policies by creating a wedge between the administration and Congress, as Netanyahu tried to do when he went to Congress over the head of the president to stop the Iran nuclear deal.
There is, however, a vague exemption.
In case of a “war situation,” Israel is permitted to approach Congress, whether the administration agrees or not. But “war situation” was left vaguely defined. What is the meaning of “war” in the Middle Eastern context? The last classical war Israel fought was the Yom Kippur War in 1973 against Egypt and Syria. Since then, all Israel’s engagements have been “asymmetrical wars,” a match between a regular army and guerrilla-type militias, such as the PLO, Hezbollah and Hamas. Will future military operations – another round of hostilities with Hamas or Hezbollah – be accepted by future US administrations as meeting “war” conditions? The clause is not clear and leaves plenty of room for disputes between the signatories.
A further problem is that six years into the agreement – in 2025 – Israel will be able to convert part of the US aid from dollars into shekels. In past agreements, including the current expiring MoU, Israel was allowed to spend up to 26 percent or 800 million dollars of US money in the local market. The funds were used to produce Israeli-made weapon systems and technologies, as well as to finance jet fuel for the air force. Such funds helped local defense industries innovate, create jobs and maintain Israel’s qualitative edge over its enemies.
But now, within six years, Israel will have to spend every US cent to purchase weapons from US manufacturers. Israeli defense contractors – state and private owned alike – are worried. They fear that within a few years they will have to lay off a substantial number of their workforce.
Furthermore, if we take into account inflation and price hiking of modern weapon systems in the last decade, it won’t be completely wrong to assume that 3.8 billion dollars in 2019 or 2022 will be worth less than 3.1 billion dollars in 2009 or 2012. In other words, Israel will most likely buy less with more money.
And this is exactly the argument used by former prime minister Ehud Barak, who served in Netanyahu’s last cabinet as defense minister and now has become his nemesis.
On several occasions, Barak put on Netanyahu’s head a price tag of 7 billion dollars.
He accused him of bad judgement, lack of statesmanship and of damaging Israel’s security interests and relations with the US for his limited political agenda and messianic hallucinations.
Barak’s argument is very simple: Had Netanyahu begun the negotiations over the new MoU earlier and had he not gone to Congress in an attempt to sabotage the Iran nuclear deal, the Obama administration would have shown more generosity. It could have agreed to an increase of 45 billion dollars for the entire ten-year period.
Netanyahu swiftly rejected Barak’s claims and countered as would a good salesman (Netanyahu’s previous job before entering politics). In his endless briefings with Israel media outlets – he devoted nearly 70 hours to such meetings in the last weeks – the prime minister says that the new MoU is a compromise between Israel’s demand of 45 billion dollars and the 31 billion dollars of the expiring MoU.
Netanyahu also says that despite fierce battles with Obama over the Iran nuclear deal, good relations and close strategic cooperation (especially in the fields of defense and intelligence) were not affected.
His ultimate evidence is in the fact that Obama agreed to meet him once again on September 21 in New York during the UN General Assembly. This is true. Despite Obama’s aversion to Netanyahu, the US president showed magnanimity and overcame his personal feelings by not attaching additional strings to the MoU, as some commentators in Israel and the US anticipated and hoped for.
Yet, while Israel remains America’s closest ally and enjoys its financial kindness, hurdles between the two countries remain.
They revolve around Israel’s stubbornness against reigniting the peace process with the Palestinians, its continued occupation of the West Bank and the construction of more settlements.
Sooner or later, all these problems will resurface, regardless of who the next occupant of the White House will be. Not to mention that these issues are above all an Israeli problem. They may change the country from a Jewish democratic state to a binational one in which a Jewish minority rules an Arab majority and deprives them of their basic democratic and human rights. 
Yossi Melman is an Israeli security commentator and co-author of ‘Spies Against Armageddon.’ He blogs at and tweets at yossi_melman