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How Israel's String of Peace Deals Triggered a Mideast Arms Race

Peace typically means less defense spending, but the latest deals are defying that logic – Israel is spending more of its GDP on defense than it has in years

Hagai Amit
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Israeli Prime Minister Benjamin Netanyahu reaches to one of the first two next-generation F-35 fighter jets in Southern Israel, Dec. 12, 2016
Israeli Prime Minister Benjamin Netanyahu reaches to one of the first two next-generation F-35 fighter jets in Southern Israel, Dec. 12, 2016Credit: Ariel Schalit,AP
Hagai Amit

Israel has reached three peace agreements over the last six weeks with Arab or Muslim-majority countries. Meanwhile, another five countries are reportedly on their way to signing agreements with Israel, say U.S. President Donald Trump and Israeli Prime Minister Benjamin Netanyahu.

The course of events should lead to a big boost for Israel’s non-defense spending. The education, welfare, health and transportation ministries should also be enjoying bigger budgets as the national security threat recedes and Israel makes new friends in the region.

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That has been the equation we’ve grown used to. Thus, when Israel reached peace agreements with Egypt and Jordan decades ago, it enabled us to cut spending on deploying forces on our eastern and southern borders. Shouldn’t there be some kind of knock-on effect from peace agreements with the United Arab Emirates, Bahrain and Sudan?

There is a difference: None of these three countries ever played more than a marginal role as a security threat to Israel. Israel never had to prepare for a missile threat emanating from Abu Dhabi. Israel’s concerns were focused on Tehran.

However, it’s doubtful whether any game theorist could ever explain how a peace process, as marginal as it may be to Israel’s security, can produce the outcome we’ve witnessed in recent days. The agreements are actually being accompanied by increased Israeli defense spending. Perversely, they have created an aggressive new arms race between Israel and its new partners in the Gulf that promises to enrich the U.S. arms industry.

Evidence of this will likely emerge on Monday when the ministers committee for procurement meets to discuss what Defense Minister Benny Gantz accomplished during his Washington trip, namely a list of aircraft and other armaments that the United States will generously allow Israel to buy. The shopping list is compensation for Israel’s acceptance of a deal for the U.S. to sell the UAE advanced F-35 fighter jets.

What’s on that list has not been revealed and, in any case, it’s still not final. Israel Defense Forces Chief of Staff Aviv Kochavi and Air Force commander Amikam Norkin have yet to decide exactly what equipment they want. The ministerial procurements committee will almost certainly be meeting several more times before it approves any deal.

Right now, what we do know is the list of weapons that Israel has been trying to buy from the U.S for many years. It includes advanced weaponry for the Lockheed Martin F-35s that it already has acquired, including the GBU-III laser-guided bomb. It also includes Boeing’s most advanced F-15 fighter jet, the F-15 EX, of which even the U.S. Air Force has taken delivery of just eight prototype models. Israel aspires to be the first country outside the U.S. to buy the jet. Also on the list is the Bell Boeing V-22 Osprey, a multi-mission, tiltrotor military aircraft with vertical takeoff and landing capabilities. And if that’s not enough, Israel is also eying the Joint Direct Attack Munition, or JDAM, a kit that converts unguided, or “dumb,” bombs into all-weather precision-guided munitions, as well as the KC-46 tanker plane.

UAE Foreign Minister bin Zayed, U.S. President Trump, Israeli Prime Minister Netanyahu and Bahrain's Foreign Minister Al Zayani at the Abraham Accords signing ceremony in the U.S., September 2020.
UAE Foreign Minister bin Zayed, U.S. President Trump, Israeli Prime Minister Netanyahu and Bahrain's Foreign Minister Al Zayani at the Abraham Accords signing ceremony in the U.S., September 2020.Credit: Tom Brenner / Reuters

The ministerial committee will certainly want to know what the price of all this hardware will come out to. In fact, the ministers were originally scheduled to meet on Sunday, but Finance Minister Yisrael Katz postponed that meeting in order to wage a last-minute battle against Netanyahu and Gantz over the budget cuts that will have to be imposed in order to pay for all these American gifts.

The committee is expected to discuss a request by the Defense Ministry to defer payment on a loan it took from U.S. arms makers, among them Lockheed Martin, six years ago. The interest cost of delaying repayment will amount to $230 million. The practical significance is that over the coming decade, the Defense Ministry will effectively enjoy 10 billion shekels ($3 billion) for procurements above and beyond what it would have had it kept to the original loan repayment schedule.

That’s the cost of gifts from America: Beyond the deferred loan repayment, the U.S. enables Israel to mortgage its defense aid for the coming years and take out loans from the U.S. government for arms purchases it makes with U.S. aid grants.

All of this is happening at a time when Israel is being tested fiscally as never before due to the huge spending demands of the coronavirus pandemic. As one senior treasury official put it on Sunday, “This is a time when, more than ever, we need to adhere to a policy of strict fiscal credibility.”

The Bell Boeing V-22 Osprey at an air show in 2014.
The Bell Boeing V-22 Osprey at an air show in 2014. Credit: FOX 52

Israel could have sought an agreement with the U.S. that lifted some of the restrictions the domestic defense industry faces in selling equipment to China or Latin America. Or, it could have asked for enhanced rights for Israeli defense companies to serve as subcontractors to the giant U.S. makers. Instead, Israel chose in the main to get the right to spend more money in the U.S.

Over the years, Trump earned a reputation as a failed businessman who filed for bankruptcy on several occasions. But, as president of the United States, he has become the best-performing salesman for the American arms industry ever. Accordingly, customer Israel will mark the Trump era, spending a bigger share of its gross domestic product than it has in years.

Netanyahu beside an F-35 fighter jet, 2019.
Netanyahu beside an F-35 fighter jet, 2019.Credit: Amos Ben Gershom / GPO

Instead of reporting that he had signed an agreement with U.S. Defense Secretary Mark Esper – a “major leap forward” for Israel’s security interests – to preserve Israel’s qualitative military edge, Gantz should have told the Israeli public the truth: that he and Netanyahu are proud to report that in the years ahead the money available for health, welfare and education will shrink.

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