Fast Draw – US Military Assistance is invitation to Trouble

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By Arie Egozi

The present Israeli government led by Benjamin Netanyahu has been characterized by its lack of insistence. This was reflected during the painful and bleeding experience of Operation Protective Edge, and it will be manifested soon at the conclusion of the new military assistance agreement with the US, which will have a devastating impact over the Israeli defense industries.

A crucial round of discussions will be held in Washington during the next few days regarding  the agreement of the American military assistance to Israel for the next 10 years.

Netanyahu reportedly tends to withdraw from an important part of his demands and accept most of the American conditions for the conclusion of the assistance agreement, including a gradual discontinuation of the arrangement enabling Israel to use a quarter of the US assistance sums for purchasing from the Israeli defense industries.

The Israel-US negotiations on the new military assistance agreement for the next decade started in November 2015. Several negotiations rounds took place since then, but two months ago the talks reached a stalemate, when the Americans made it clear that their offer was final and that Israel was left to decide whether to sign the agreement or rather wait for the next US president term in the White House beginning in January 2017.

Netanyahu’s spokesmen said he was not satisfied with the American offer – both regarding the extent of the assistance agreement and the US Administration’s conditions.

So why hurry? In any event the agreement will be valid only from 2018.

True, increasing the 10-year-assistance from $37 billion to $40 billion is important, but the other clauses in the agreement will be lethal to the Israeli defense industries.

According to the present agreement Israel can convert some $800 million yearly into shekels in order to finance purchases from the Israeli defense industries.

Netanyahu is about to give up this clause, according to all prospects.

What is going to happen?

Still recovering from the shock, officials in the defense industries say that the consequences will be devastating especially for the governmental industries, such as the IAI, the Military Industries and Refael.

Without shekels the defense administration will have to purchase military systems from the US even if they will be less appropriate from the Israeli ones.

Without shekel the defense industries will be obliged to include US industries in their projects in order to purchase the systems in dollars. It may sound great but in such case you give the US administration a right of veto on the export of Israeli defense systems, that are manufactured in the US because of financial difficulties.

In short, no one understands why the Prime Minister hurried to sign a bad agreement. The present agreement is still valid and nothing would happen if they’ll wait for the next US president.

But in Jerusalem they want to clear the table quickly without thinking about the consequences. Lack of insistence, fast draws, lack of understanding?

No matter what. The consequences of the offered agreement draft will be destructive for the Israeli defense industries.