With U.S. Military Aid, Are Netanyahu’s Strong Beliefs Worth $7 Billion?

The prime minister persuaded the Gulf states that Israel was countering Washington’s defeatist, conciliatory approach to Iran. But in the long term that strategy might fail.

Amos Harel
Amos Harel
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Israel wanted to make a large purchase of F-35 fighter jets (pictured).
Israel wanted to make a large purchase of F-35 fighter jets (pictured).Credit: Reuters
Amos Harel
Amos Harel

Even in the flexible world of Israeli politics, it’s been a while since there was such a gap between reality and how the Prime Minister’s Office was spinning reality. In press statements and talking points, the military aid agreement with the United States is being portrayed as an unprecedented achievement. “The biggest aid package ever,” we keep hearing.

But the chasm between the headlines and the real numbers is huge. Nominally, Prime Minister Benjamin Netanyahu and his spokespeople are right. The agreement includes a commitment for $38 billion in aid over a decade, higher than the $31 billion in the current deal that ends in 2018.

ANALYSIS: Israel feasts on new aid deal, but Obama's Palestinian appetizer could leave bad taste

But it’s doubtful that this is a reliable comparison. At the insistence of the Obama administration, the new agreement is “all-inclusive” – Israel has committed not to go behind the administration’s back to Congress to request more money.

Such additions, initiated by Congress and sometimes by the administration itself, have been awarded to Israel to fill the gaps caused by the 2014 Gaza war, to help develop technology to locate Hamas’ terror tunnels, and especially to expedite the development and procurement of missile-interception systems. According to the U.S. Missile Defense Agency, Israel received $729 million for these purposes in 2014 and $620 million last year; according to Israeli sources, this number will come to $600 million in 2016.

In other words, the real upgrade in the new “unprecedented” agreement is around $100 million to $200 million annually compared with recent years, and that’s without considering inflation; neither the old nor new agreements account for erosions in purchasing power.

But that’s small change compared with the $7 billion that many claim Netanyahu lost for Israel due to his performance on the Iranian nuclear agreement, his difficult relationship with President Barack Obama and the repeated delays in sealing the new agreement.

U.S. Secretary of Defense Ash Carter, left, and Defense Minister Moshe Ya'alon embrace on the tarmac at Ben-Gurion International Airport, Israel, July 21, 2015. Credit: Reuters

As the Israeli opposition parties and the media put it, this is the price of Netanyahu’s address to Congress against the nuclear agreement in March 2015 despite the administration’s pleas not to do so.

But defense officials have told Haaretz that the damage was actually done later. They say that even after the signing of the Vienna accord with Iran in July last year, agreements in principle had been reached between U.S. Defense Secretary Ashton Carter and his Israeli counterpart at the time, Moshe Ya’alon, on an aid package totaling $45 billion for the decade.

Netanyahu, however, insisted on one last effort to manipulate Congress against Obama and the deal in September. That failed attempt was apparently the point where the White House lost patience.

In his defense, the prime minister and his people say that taking a principled stand against the Vienna agreement was important from both a historical and a practical perspective. The move persuaded Saudi Arabia and the Gulf states that Israel was standing her ground, even at the cost of a clash with a United States that was displaying a defeatist, conciliatory approach to Iran, which backs insurgencies and terror all over the region. The value of a principled approach is hard to quantify, but is it really worth $7 billion?

To the question marks surrounding the aid package we must add another key issue. Under pressure from the administration, the option of using up to a quarter of the aid money to buy equipment from Israeli defense companies will be gradually phased out. Israel will get a gradual phase-out; it will be six years before such purchases must end.

This bad news isn’t directly connected to the argument over Iran or the lack of chemistry between Netanyahu and Obama. The administration was responding to pressure from U.S. arms makers, which have lost huge contracts because of budget cuts, and which are seeking new markets abroad. But they’ve found they’ve had a hard time competing with Israeli firms buoyed by U.S. aid.

Israelis who visited Washington earlier this year got the impression that this change to the agreement was raised by the administration only in March or April. This means that if Israel hadn't acted as if it had all the time in the world, it might have been able to sign the agreement before the cancellation of the buy-in-Israel provision came up. (This is exactly what administration officials, including Vice President Joe Biden, had urged Israel to do.)

In the long term, thousands of Israeli jobs will be lost. The Israeli companies have already said they will have to start producing in the United States, in cooperation with local companies, to be able to keep a portion of the aid.

The man representing Israel at the signing ceremony in Washington was Jacob Nagel, the acting national security adviser and the second person to refuse a permanent appointment to the job, which has been vacant since the beginning of the year. Not only is Netanyahu not going to Washington to celebrate his amazing security achievement, but there have been no reports about an Obama-Netanyahu meeting planned for the sidelines of the UN General Assembly meeting at the end of the month.

It seems that given the tension between Obama and Netanyahu, the U.S. president is doing the minimum. He raised the aid level in a way that lets him claim that it’s the highest aid package ever (which is important both for the White House and the Democrats ahead of the November election). Still, Obama is signing the agreement with Netanyahu the way a recalcitrant husband finally grants his wife a divorce: on condition they no longer have to spend any time in each other’s presence.

While it’s all coincidental, of course, the deterioration in former President Shimon Peres’ health will let the Prime Minister’s Office skirt the aid-package issue quickly and deal with the next storm to erupt. The damage and gaps in the agreement, however, will be with us for years to come.

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