Israel will receive tens of millions of dollars in new benefits from the United States this year, offsetting the erosion that inflation has caused in the real value of the $3 billion U.S. foreign aid package it receives annually.
New perks, obtained through lobbying by the American Israel Public Affairs Committee, as well as competitive contracts won by Israeli firms “offset the inflation-induced loss because they increase trade opportunities,” explained one official in the pro-Israel community.
The U.S. foreign aid package to Israel has remained constant since 1986, when the Jewish state began receiving $3 billion annually, all of it in grants, rather than loans. Inflation has eroded the real value of that package considerably.
But AIPAC has not tried to increase the amount of direct U.S. economic and military aid, because of the likelihood that Israel would gain at the expense of other foreign aid recipients. It is already by far the largest recipient of U.S. aid.
So pro-Israel lobbyists try instead to secure funds for Israel through less politically charged measures.
They have succeeded in winning Israel an estimated $600 million in direct aid or defense trading benefits beyond the nearly $1.8 billion in military aid and $1.2 billion in economic aid it receives as a grant each year.
AIPAC recently secured congressional passage of a measure that gives the Pentagon the option of reducing the costs of weapons purchased with foreign aid, saving Israel as much as $56 million in 1990. A similar provision saved Israel $90 million in last year, when it purchased 75 U.S. F-16 fighter planes.
FUNDS MANDATED FOR ARROW MISSILE
Israel is still benefiting from a 1987 law that stretches Israel’s economic aid by about $100 million a year, by converting high-interest loans owed to the U.S. government into lower-interest private loans.
Israel owes the United States more than $16 billion from loans received during various Arab-Israeli wars and prior to a conversion in 1984 of the foreign aid program from loans to grants.
The economic aid has also been stretched by congressional language requiring the State Department to disburse the entire $1.2 billion package within the first month of the fiscal year, enabling Israel to reap $50 million in interest.
Another new benefit for Israel this year is that for the first time, it has been assured of receiving funds to complete research and development on its Arrow anti-tactical ballistic missile.
In the past two years, Congress gave the Pentagon discretion to expend as much as $158 million on the Arrow. Israel has received about $100 million of that amount, with another $52 million designated for 1990.
A second major benefit to Israel’s defense industry is that, for the third consecutive year, Congress is requiring the Pentagon to purchase $150 million worth of Israeli weaponry to help Israel offset the cancellation of its Lavi fighter aircraft program in 1987.
Also this year for the first time, Congress is requiring the Pentagon to permanently stockpile military equipment in Israel, worth $100 million.
Besides the big-ticket items approved by Congress, the Pentagon purchases tens of millions of dollars of Israeli military equipment not required by lawmakers.
One such example is the award in September of a $38 million multi-year contract to Israel Aircraft Industries to conduct research on unmanned aerial vehicles.
COMPETING WITH MCDONNELL DOUGLAS
A similar contract was awarded to the McDonnell Douglas Co., with the two companies likely to compete in 1991 for a full-scale production contract worth $400 million to $500 million.
But many of the largest contracts for Israeli defense firms contain funds earmarked by Congress. They include:
* $30 million to $50 million to buy the Single Channel Ground and Airborne Radio System, a new family of high-frequency anti-jam radios being developed by Tadiran Ltd. of Israel and General Dynamics;
* $11.6 million to procure, and $18.3 million to develop, the Cobra Laser Night Attack System, also designed by IAI;
* $25 million to procure the so-called Tactical Air Launched Decoy, made by Israel Military Industries, and $6 million to develop a more advanced version;
* $23.4 million to procure, and $1 million to buy spare parts for, the Popeye air-to-ground missile, made by Rafael of Israel;
One official in the pro-Israel community said that the United States gains more benefit from defense trade with Israel than from distributing the foreign aid.
And by reducing its emphasis on U.S. foreign aid, which is often perceived as a one-sided U.S. favor to Israel, Israel is becoming “not as dependent on the good will of the United States,” the official said.
TEMPERED BY PROPOSED SURCHARGE
Marvin Klemow, director of the Washington office of Israel Aircraft Industries, said such trade could continue to grow even if President Bush decides to lower U.S. defense spending because of a declining military threat from the Soviet Union.
He argued such cuts “could possibly help increase business” for Israel’s defense industry, especially if the Pentagon sees it can save money by buying “good existing systems in Israel.”
In addition to the uncertainty of future U.S. defense budgets, Israel faces the possibility of a new surcharge this year on its weapons purchases, which could weaken some of the gains achieved through various military contracts.
By Aug. 1, Congress is required to approve new four-year regulations governing Pentagon purchases of foreign weaponry. As proposed by Sen. Alan Dixon (D-III.), a surcharge would be imposed when a foreign bidder does not meet U.S. environmental or minority set-aside standards, for example.
But Israel’s defense industry also faces the prospect of winning billions of dollars in new U.S. defense contracts. The most lucrative of these, estimated in the billions of dollars, would be to deploy the Arrow ATBM.
Israeli firms are also being considered to supply the Pentagon with anti-jam radios and ammunition for 120mm mortars. Both of those contracts are estimated by pro-Israel activists to be worth hundreds of millions of dollars.
The Archive of the Jewish Telegraphic Agency includes articles published from 1923 to 2008. Archive stories reflect the journalistic standards and practices of the time they were published.
