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Israel May Have to Change Way It Buys U.S. Defense Equipment

Beginning next year, Israel may be facing major changes in how it buys its defense equipment from the United States.

The Pentagon announced earlier this summer that as of January 1994, it would end the commercial sales channel of the Foreign Military Financing program, under which Israel buys a substantial part of its equipment.

FMF is a program assisting U.S. allies in buying weapons and other defense equipment, generally from the United States.

Currently, some FMF recipients, such as Israel and Egypt, can go through either a government channel, in which the U.S. government buys desired items on behalf of the recipient, or a commercial channel, in which the foreign government engages in direct commercial contracts with suppliers.

Israel is the largest recipient of FMF funds, with an annual grant of $1.8 billion per year.

The Israeli government is currently hoping an arrangement can be worked out with the U.S. government that would enable it to continue purchasing certain items through commercial channels, according to Ruth Yaron, the Israeli Embassy spokeswoman here.

Yaron said that about one-third of Israel’s FMF purchases are currently going through commercial channels. “We attach great importance to that,” she said.

Israel is concerned that if it is barred from buying equipment through commercial channels, it will not be able to purchase some of the equipment it needs. Certain equipment is not available through the government, and some that is available is cheaper when purchased commercially.

Israeli officials have raised the issue with U.S. officials, and Yaron said the Americans were “sympathetic” to Israel’s needs.

Yaron said that the Israelis would ultimately like a solution under which exceptions to the government-channel policy could be made, at the discretion of the U.S. administration.

The Israelis have “no complaint or disagreement” with the Americans on the issue, she said.

Some in the pro-Israel community expressed concern that the new policy represents a real problem, and could dramatically affect the methods by which Israel buys its military equipment.

But others played down the importance of the Pentagon announcement, saying either that a compromise would be worked out or that the policy would eventually not be implemented at all.

RESPONSE TO DOTAN AFFAIR

The Pentagon announced in June that it was planning to terminate the commercial channel.

According to a Pentagon statement, the decision was made in part because of congressional criticism of the program.

A recent congressional report detailed a large-scale audit conducted by the General Accounting Office of military sales to Israel and Egypt.

The report was requested by Rep. David Obey (D-Wis.), an advocate of foreign aid reform who chairs the powerful House Appropriations subcommittee on foreign operations, which appropriates foreign aid money.

The audits were done in the wake of a major fraud case in Israel involving an Israeli general, Rami Dotan, who was convicted of taking approximately $40 million in U.S. money by filling out false reports on U.S. defense contracts.

The so-called Dotan affair caused concern here that foreign military contracts were not being properly monitored.

The commercial channel was viewed by some as particularly vulnerable to abuse, because the U.S. government has fewer methods of monitoring commercial sales in which it is not involved.

Embassy spokeswoman Yaron said that as a result of the Dotan affair, the Israelis had “dramatically” changed their procurement ratio and were now obtaining fully two-thirds of their military needs through government-to-government channels.

While the GAO report did discuss various “weaknesses” found in the entire process by which Israel and Egypt purchase military equipment, the Israeli Embassy here proclaimed itself “pleased” by the report’s overall conclusions.

The report noted that in some cases Israel and Egypt had valid reasons, including price and safety considerations, for using the commercial channel instead of the government channel.

In addition, the report noted that Israel had added controls to its procurement process following the Dotan affair.

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