Search JTA's historical archive dating back to 1923

Israeli Finance Minister Moves to Phase out U.S. Economic Aid

January 28, 1998
See Original Daily Bulletin From This Date

For years, Israel has talked about ending its dependence on American foreign aid.

Now the Jewish state is doing something about it.

Israeli Finance Minister Ya’acov Ne’eman came to Capitol Hill and the White House this week to respond to Republican congressional proposals aimed at phasing out $1.2 billion in annual economic aid from the United States. Israel traditionally receives an additional $1.8 billion in U.S. military assistance.

The Israeli move ends the longtime debate over whether Israel should hold out for the aid as long as possible or move proactively to help shape a new aid package.

Successive Israeli governments have pledged to end the aid but have said the time is not ripe.

News of the development caught most Jewish officials by surprise. U.S. aid to Israel has long been a top legislative priority in the Jewish community.

Israeli Prime Minister Benjamin Netanyahu pledged in a 1996 speech to a joint meeting of Congress to begin phasing out Israel’s U.S. aid before the end of his scheduled four-year term.

Eager to cut the foreign aid budget, many Republicans hailed Netanyahu’s proposal. Some lawmakers joked during the speech that they should ask Netanyahu for the pledge in writing.

But Netanyahu later backed away from the promise, telling reporters that the cut would depend on Israel’s economic situation and could take two terms in office.

But now, according to Israeli, congressional and Jewish sources, Netanyahu’s finance minister has brought a plan that could begin cuts in aid in fiscal year 2000.

Since 1993, at least, the Israelis have talked openly about the need to cut aid.

When Israel’s former ambassador to the United States, Zalman Shoval, left Washington that year, he sensed a growing antipathy toward foreign aid.

Israel has long been the largest recipient of U.S. aid, with Egypt second at $2.1 billion. This year’s total foreign aid allocation was $13 billion.

Shoval said at the time that Israel would be well advised to begin weaning itself off the economic aid, and to solidify its grip on the military assistance.

Unless something is done, “we could face a situation where we shall be faced with a unilateral decision on the part of the United States to cut foreign aid along lines that would be less convenient for us and also politically more difficult for our friends in Congress to resist,” Shoval said in an interview with the Forward newspaper.

While more details were likely to emerge after Ne’eman met with members of Congress and Clinton administration officials this week, the plan appears to follow a outline originally proposed over the last few years by Sen. Jesse Helms (R-N.C.) and Rep. Sonny Callahan (R-Ala.)

Callahan discussed the ideas with Ne’eman last year.

Of the $1.2 billion in cash Israel receives each year, about $1 billion is returned to pay loans dating back to the 1960s and 1970s.

Under the Ne’eman plan, Israel would use the extra $200 million to pay off the loan’s principal. As the loan payments and outstanding balance shrink below $1.2 billion, the United States would phase out the economic assistance all together.

At the same time, the United States would increase military funding for specific programs through the defense budget. These would likely include the Arrow missile-killing missile, the Nautilus laser project and other Israeli and joint U.S.-Israeli projects.

At the end of the process, which as proposed would take 10 years, the United States would provide Israel annually with about $2.5 billion in military aid in place of the combined $3 billion in economic and military assistance, sources said.

The de facto guarantee of continued military aid would allow Israel to plan its long-range defensive strategy, U.S. officials said.

Egypt, with a $2.1 billion aid package that has been linked to Israel’s since the signing of the Camp David accords, faces similar cuts, congressional sources said.

The move comes only months after Israel agreed for the second year to divert $50 million of its economic aid package to Jordan. Israel’s contribution to Jordan’s aid could rise to $100 million next year.

Officials at the American Israel Public Affairs Committee, the pro-Israel lobby, welcomed Ne’eman’s initiative, while emphasizing that this is an Israeli proposal.

“This will be well received by Congress,” predicted an AIPAC official, who added that Israel has always “been sensitive to U.S. economic constraints.”

AIPAC’s primary responsibility is to lobby for Israel’s aid package.

Many Jewish officials expressed pride that Israel is in a position to talk about ending the economic assistance that has long been vital for the Jewish state’s economic success.

“It’s a marvelous thing to see Israel say, `We are a healthy, economically secure country,'” said Reva Price, Washington representative of the Jewish Council for Public Affairs.

Others used the occasion to reflect back on the role that the aid played in Israel’s success.

“This aid was one of the most generous and far-sighted decisions ever made by one nation to help another,” said Rabbi David Saperstein, executive director of the Religious Action Center for Reform Judaism.

Saperstein, who has lobbied for Israel’s aid for decades, said, “This will not have a major impact on the way pro-Israel advocacy is done in America. There’s still plenty to work for.”

Recommended from JTA