Israel will spend over half the budget provided by the Pentagon for the Iron Dome system in the U.S. next year, in accordance with a co-production agreement between the two countries. This will increase U.S. contractors' production from 30 percent to 55 percent.
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This means over half of the air defense system, which intercepts short-range rockets and mortar shells (up to 70 kilometers or 40 miles), will be manufactured in the U.S.
According to a report in Bloomberg News earlier this week, American defense spending is in a period of decline. According to U.S. Missile Defense Agency report to Congress from April quoted in the article, the agreement is geared towards "maximizing economic activity in the United States while ensuring that Israel’s security needs are met.”
The U.S. invests nearly $900 million in the Iron Dome and over $3 billion on all defense systems. Since 2011, Congress has approved $703 million for Israel to spend on the Iron Dome alone. In March, Israel and the U.S. signed an agreement guaranteeing $429 million in American funding of the purchase of additional batteries.
During his last visit to Israel two weeks ago, U.S. Defense Secretary Chuck Hagel said the added funding will allow the U.S. to support additional batteries and interceptors in order to defend more Israeli towns, army bases and critical infrastructure.
Israel's Defense Ministry said in a statement that the U.S. is not involved in the research and development of the Iron Dome but rather only in its production:
"The U.S. government does not participate in or allocate the budget for development of the Iron Dome system. The Americans do expect to manufacture components of the system that they have allocated budgets for, a legitimate demand. We appreciate American support for the purchase and production of the Iron Dome, without which the crisis in industry would surely be greater."