Netanyahu: I Hope Israel, U.S. Will Conclude Military Aid Deal in Coming Weeks

Israeli defense minister told a Knesset committee earlier Monday that he believes Israel and the U.S. will conclude a deal by the end of September.

U.S. President Barack Obama and Prime Minister Benjamin Netanyahu shake hands during their meeting in the Oval Office of the White House, Washington November 9, 2015.
Kevin Lamarque, Reuters

Prime Minister Benjamin Netanyahu said Monday that he hopes to close ongoing talks and reach a deal with the United States concerning long-term military aid to Israel in the coming weeks.

Addressing Israeli lawmakers during the local version of Question Time, the prime minister said that "I hope that within a few weeks, we will close the agreement on defense aid with the United States."

During an appearance on Monday before the Knesset Foreign Affairs and Defense Committee, Defense Minister Avigdor Lieberman reportedly said he believes that Israel and the United States will wrap up negotiations on long-term future American military aid by Rosh Hashanah, which this year begins on October 2. The comments were reported by two Knesset members who attended the meeting but asked not to be identified because the session was classified as secret. 

The Knesset members noted that Lieberman made the comments twice in the course of the committee session, and the defense minister also said that both Israel and the United States have the interest and the desire to sign the military assistance agreement while President Barack Obama, who finishes his term on January 20 of next year, is still in office. 

Lieberman noted that there is still disagreement between the two countries regarding various provisions but he said he believes they will be resolved within the next two months. The primary disagreement, he said, relates to the Americans' demand to modify the agreement now in force that permits the Israeli Defense Ministry and the Israel Defense Forces to spend close to 40 percent of annual U.S. aid on the purchase of equipment from Israeli defense industries and for fuel. The Americans contend that the current agreement no longer serves the interests of the two countries, claiming that it makes improper and inefficient use of the financial assistance. 

Israeli Defense Minister Avigdor Lieberman and Zionist Union MK Tzipi Livni, July 18, 2016.
Olivier Fitoussi

The defense minister said in practice Israel is reconciled to the change, but is interested in implementing it on a gradual basis. "It's an accomplished fact, but we are trying to explain to our American friends that an immediate halt to the existing arrangement would severely harm [Israel's] military industries," the two Knesset members quoted Lieberman as saying. "The large industries like Rafael [Advanced Defense Systems] and [Israel] Military Industries will survive, but the smaller industries won't survive. It's not possible within a year to halt the existing arrangement. We want a period of time that allows us to prepare seven or eight years."

In the American military assistance agreements that the two countries have signed beginning in the 1980s, there has been a so-called off-shore procurement provision, which has allowed Israel to convert 26.4 percent of annual American assistance from dollars to shekels and to use it to buy equipment from military industries in Israel instead of from U.S. defense firms. In this way, in practice, the United States has been subsidizing Israeli military industries by hundreds of millions of dollars a year for nearly three decades. 

In 2007, Israel and the United States signed the current military assistance agreement, which is in effect until the end of 2018. The current agreement provides Israel with average annual military assistance of $3 billion, of which it can spend about $800,000 a year on shekel-denominated purchases from Israeli defense industries. 

In addition, senior American officials have said that in recent years, Israel has been spending about 13 percent of the annual U.S. aid, or about $400 million, to buy fuel for the Israel Defense Forces, particularly airplane fuel. Israel is the only country in the world that can spend American financial assistance for these two uses.

The negotiations on the military assistance pact beyond the end of 2018 have been the subject of negotiations between the two countries since November of last year. The Israeli team is being headed by acting national security adviser Jacob Nagel while the U.S. team is headed by Yael Lempert, who holds the "Israel portfolio" at the White House. The national security adviser at the White House, Susan Rice, is overseeing the process and is also taking an active part in the talks. 

In private talks since he became defense minister at the end of May, Lieberman has said that he is not pleased that Prime Minister Benjamin Netanyahu is holding up signing the military assistance agreement, adding that efforts need to be made to have it signed as soon as possible so that the IDF can develop long-term work plans.

Another subject over which there is disagreement between the two countries relates to financing for Israel's anti-missile defense program. Up to now, every year, Israel has submitted a request to the U.S. administration and to Congress for funding for the development of anti-missile defense systems such as Iron Dome. Every year negotiations have been held at the end of which the White House and Congress would come to a sum that was acceptable to both sides and which was then sent to Israel.

In the course of the new negotiations on a new U.S. military assistance pact, the American administration asked that the procedure be changed, seeking to include the anti-missile program funding into the regular military assistance budget. The administration demanded that in return Israel commit no longer to act on a parallel track vis-à-vis Congress, attempting to increase the anti-missile assistance. Israel had reservations over the demand, and it is not yet clear if and how the matter will be resolved. 

Senior U.S. officials have noted that the suggested American approach provides a major advantage to Israel because currently there is no commitment on the American administration's part to provide Israel an annual special budget for its anti-missile defense program and the grant for this purpose was not assured. The American officials said the new approach would provide such a commitment.