The global financial crisis will have an important effect on Israel's foreign policy and security: It will force Israel to give up some of the aid it receives from the United States. If the economic trend suddenly shifts - if the markets go back to climbing and employment rises - then the financial aid can be maintained at its current level. But if the predictions of a serious financial ebb come true and millions of Americans lose their jobs, homes and savings, Israel will not be able to remain indifferent and insist on receiving an unaltered financial aid package.
To prevent embarrassment and pressure, Israel would do well to initiate an aid reduction itself, which the new prime minister should raise in his first meeting with the new president in the spring. It's better to determine the punishment yourself than to wait until the aid is cut by the Americans and suffer more.
In the next few months, the scope of the financial crisis will become clearer, as will the way America plans to resolve it. Last year Israel reached an agreement with the Bush administration under which it will receive $30 billion in military aid over a decade. The aid comes to $2.5 billion this year, $150 million more than the previous year, and will increase gradually until it stabilizes at $3 billion a year. The financial aid is about a sixth of Israel's defense budget, and most of the money is slated for purchasing planes for the air force. Israel is allowed to convert about a quarter of the annual grant from dollars into shekels so it can buy from local industry as well.
In the past, Israel also received financial aid in the form of an annual check that it could waste as it wanted. Benjamin Netanyahu stopped this grant when he came to power in 1996, and transferred half of it toward increasing military aid. The defense establishment sees any mention of reducing American aid as heresy, especially against the backdrop of the intensifying Iranian threat.
The grant is not just important because it charges some of Israel's security expenses to American taxpayers, but also because it makes a clear statement about American support and commitment to strengthening the Israel Defense Forces and maintaining its qualitative edge. The aid is considered a component of Israeli deterrence, not just a source of funding. That's why it is important for Israel to be at the top of the chart of recipients of American aid.
Israel's critics in the United States argue that the military aid distorts the allocation of resources, under the damaging influence of "the Jewish lobby." They say that instead of saving Africans who are starving or afflicted with AIDS, the United States is arming the most aggressive army in the Middle East, subsidizing the occupation and the settlements in the territories, and indirectly deepening the Muslim world's hatred of America. Paradoxically, such criticism just adds to the omnipotent image of pro-Israel advocates in Washington.
So far, U.S. aid to Israel enjoys firm bipartisan support. But even Israel's greatest friends in America are Americans first of all, and they must first worry about the problems of their country and their voters. And in order to ensure that they support Israel in the future as well, these friends of Israel must not be left vulnerable to charges of dual loyalty. It's true that the aid to Israel is negligible compared to the trillions lost on Wall Street and the huge sums allocated for saving the banks. But it's not the money, it's the symbol.
In speeches at the last AIPAC conference, presidential candidates Barack Obama and John McCain said they would honor the agreement to increase military aid to Israel. But the American Israel Public Affairs Committee convened in June, before the markets, investment banks, mortgage banks, insurance companies and real estate market all tanked. An Israeli request that the next president honors his campaign promise on this issue would be foolish and seen as an impertinent disregard for America's troubles. There is a precedent for such an Israeli move: When New Orleans was hit by Hurricane Katrina, Ariel Sharon retracted his aid request for the disengagement plan, the cost of which Israel absorbed on its own.
The defense establishment and treasury need to prepare now for the aid reduction, or at least for a halt in its gradual increase. The IDF will need to pull long-term projects and put off equipping new planes and ships. Some creative thinking will be necessary to consider alternatives to the U.S. aid, like a long-term loan of equipment or an expansion of American deployment in Israel beyond the U.S. radar system in the Negev.
Of course, there will also be an incentive to become more efficient. Political agreements requiring Israel to withdraw from the West Bank or Golan Heights could justify American compensation in the form of increased aid or special grants to fund security arrangements. But at the moment, no such deals are on the table.
Maintaining the relationship with the United States during its time of crisis requires Israel to take into consideration the problems of its friends, and to relinquish some of the financial aid it had expected to receive.
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