At the end of a meeting between United States President Barack Obama and Israeli Prime Minister Benjamin Netanyahu in the White House last November, the two announced the beginning of negotiations over a memorandum of understanding to cover the years 2019-2028 focused on U.S. military assistance to Israel.
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Before the meeting, Israeli commentators predicted that Netanyahu would ask for an enlarged package as compensation for the U.S.-Iran nuclear deal. It would include new attack weapons systems (including a device for locating and destroying bunkers and tunnels), upgraded security and intelligence cooperation and an increase in assistance from $3.1 billion annually in 2009-2018 to as much as $5 billion in 2019-2028.
Last February Netanyahu prepared the cabinet for the possibility that the negotiations would not end this year and would continue under Obama’s successor, who would take office nearly a year later. Netanyahu said at the time: “We may not succeed in reaching agreements with the present administration and will be forced to reach an agreement with the next administration.”
A senior American official, who did not identify himself, replied to Netanyahu that same day: “Of course Israel is free to wait for the next administration in order to reach an agreement, but we must warn it that the American budget environment is not about to improve in the next year or two, and Israel will certainly not find any president more committed to Israel’s security than the incumbent.”
Talks went on in fits and starts, but finally last Wednesday an MoU was signed in Washington at a lower official level – by the U.S. Under Secretary of State for Political Affairs Thomas Shannon and Israel’s acting National Security Adviser Jacob Nagel. U.S. assistance will total $38 billion for 10 years. Of the $3.8 billion Israel will receive every year, $500 million will be earmarked for the development of Israel’s anti-missile systems – the Iron Dome, Magic Wand and Arrow.
Next week Obama and Netanyahu will be in New York for the opening of the new session of the United Nations General Assembly. In better times the two would have met, and there would have been a festive signing of the MoU with extensive media coverage.
The money is the positive side of the agreement as far as Israel is concerned, but it also includes several negative aspects. The present agreement, which ends in 2018, allows Israel to use 26.3 percent of the annual sum (about $815 million every year) to purchase military equipment from the local defense industry and another 13 percent ($400 million) to buy fuel for Israel’s fighter planes in the U.S.
Under the new agreement, starting in the sixth year the local procurement clause will begin to drop and eventually reach zero. In other words, Israel will be able to spend the $3.8 billion in the U.S. only. In addition, already from the start of the agreement in 2019 Israel will no longer be allowed to buy fuel in the U.S.
Blow to the defense industry
MK Shelly Yacimovich (Zionist Union) said that “one of the most serious consequences of the new agreement, in addition to the money, is a decline in future assistance that can be used for orders from our military industries, until it stops in the sixth year. This means the closing of dozens of medium-sized plants (the large ones will survive), mass dismissals, a blow to Israeli industry and a serious blow to growth.”
The reason for the two decisions is clear. When the previous MoU was signed in 2007, Washington was still interested in strengthening the Israeli defense industry, which was not yet globally competitive. By 2016, Israel defense contractors are major exporters and sometime beat their U.S. counterparts to contracts in third countries as well as at home. Thus, in Washington the attitude has become that charity begins at home: If the U.S. is giving gifts, at least its own industry and their employees should be the beneficiaries.
The same is true of fuel. America isn’t interested in subsidizing the Israel Defense Forces’ gas bills any longer. It prefers that Israel spend the hundreds of millions of dollars it has paid until now for American fuel in U.S. defense industries.
According to another clause in the agreement, Israel will not lobby for additional budgets from the U.S. Congress to purchase advanced weapons systems. In the 2009-2018 agreement, in addition to the billions it received each year, Israel received generous supplements for the Iron Dome, Magic Wand and Arrow systems. In 2011 the supplements totaled $415 million, fell to $306 million, in 2012 and grew again in 2013 to $448 million. In 2014, the year of Operation Protective Edge, they grew to $729 million. Last year, the supplements dropped but were still a hefty $616 million.
Estimates are that this year Israel will receive about $600 million. Israel received supplements to the $3.1 billion in annual aid, earmarked for developing technology for locating Hamas tunnels and closing gaps in the IDF’s arsenal after fighting in Lebanon and Gaza.
Occasionally, Israel has also received incidental gifts worth hundreds of millions of dollars from the U.S. For example, at the end of last week it received eight F-15 two-seaters that the U.S. no longer needs.
But the new agreement is all-inclusive. Israel will receive $3.8 billion annually, including $500 million for the Iron Dome, Magic Wand and Arrow systems, and won’t be able to request additional funds from the president or Congress, except in case of war.
The Obama White House has been selling the agreement, as has the Netanyahu government, as the best deal Israel has ever had.
In an open letter in August 2015 to Democratic Jewish Congressman Jerrold Nadler, the president wrote: “No administration has done more for Israel’s security than mine. I am prepared to further strengthen that relationship.”
Obama wrote that he has always treated Israel’s security as sacrosanct, and that he reiterated that to Netanyahu and Israelis several times. He also wrote that his commitment to Israel’s military advantage is at the heart of the bilateral cooperation. On another occasion Obama noted that Israel had received the most advanced weapons systems in the world on his orders, including F-35 fighter jets, which no other Middle Eastern country has.
The U.S. says the new agreement is the best ever. It has transferred over 55 percent of all U.S. military assistance to a single country in recent years – although that’s not accurate when taking into account U.S. partnership in NATO and the present cost of the U.S. military presence in South Korea.
Aid is 4% of Israel’s budget
The first 10-year agreement (2009-2018) was reached by President George W. Bush and Prime Minister Ehud Olmert. Negotiating for Israel was a team of officials headed by Finance Ministry Director General Yarom Ariav that included Bank of Israel Governor Stanley Fischer, Maj. Gen. Ido Nehushtan of the Israel Air Force and Foreign Ministry diplomat Yoram Ben-Zeev. This time negotiations were conducted by Netanyahu, via Nagel, acting head of the National Security Council, who is directly subordinate to the prime minister. The defense and finance ministries were sidelined and heard about developments from the media.
Since 1962 American military and civilian aid to Israel has totaled $130 billion, about $90 million for the military. Since 1985 the U.S. has regularly provided about $3 billion annually.
In 1977, newly elected Prime Minister Menachem Begin announced that he was giving up the American assistance. The political leadership raised an outcry, and in the end a new arrangement was reached: Civilian assistance would be reduced and military assistance increased. After agreements with the first Netanyahu government (1996-1999) the U.S. grant was restricted to military purposes.
According to Yacimovich, a member of the Knesset Foreign Affairs and Defense Committee, “The story is not about them, it’s about us, about a country imprisoned in the lunacies and the mistakes of a prime minister who is gradually becoming cut off from reality, and is becoming a victim of his whims,” as she wrote on her Facebook page. Referring to the aid agreement with the U.S., Yacimovich wrote, “That’s how it is when an entire country is subject to the egocentric and megalomaniacal whims of one person. It’s important to internalize this truth, so it can be put to an end.
“Netanyahu’s shocking behavior vis-à-vis the U.S. administration cost us at least $7 billion. U.S. assistance to Israel in the coming decade was supposed to be much more than was finally agreed, which is causing tremendous distress to the defense establishment,” Yacimovich claimed.
“I’m telling you these things from knowledge, not as a guess,” she stressed. “My membership in the joint committee for the defense budget requires me to know what is happening, and I’m not referring to the closed committee discussions but to what’s happening outside. Netanyahu himself told the defense establishment leaders that the expected assistance from the U.S. would total $5-$6 billion annually.
“The Defense Ministry is one of the most well planned and meticulous of all the ministries. It’s the only one with a multi-year plan. They take the prime minister seriously and prepare seriously, and that was the basis for the plan for the next 10 years. Netanyahu was right at the time. The Americans were amazingly sensitive to our sensitivity surrounding the Iran deal and were ready to protect us with additional aid. We were left in the end with $3.8 annually. That’s not success, it’s failure, plain and simple.”
U.S. aid totals about 4 percent of the state budget. The largest amount, $15.7 billion, was awarded in 1979, when the peace agreement between Egypt and Israel was signed.