Israel seeks early release of US Defense Funding


Arie Egozi

Breaking Defense  /  April 23, 2020

TEL AVIV: Israel’s Ministry of Defense and high command have hammered out an emergency plan for an appeal to Washington to make changes in the Foreign Military Funds (FMF) agreement between the U.S and Israel.

The situation created by the pandemic is having a huge effect on the Israeli Defense Forces (IDF) new multi-year plan to spend between four and 10 billion shekels in additional funds each year to make the army, air force and navy more capable. That effect comes on top of the political chaos that left Israel with no acting government for more than a year, almost freezing implementation of the new plan. Big parts of the plan’s acquisition programs will have to be delayed, if not cancelled.

Sources here say the COVID-19 pandemic is forcing Israel to ask Washington to change major changes to  the agreement, including a request to receive the annual allocation $3.8 billion earlier than planned.

“The declining portion of U.S money that can be converted into Israeli Shekels was bad news for the Israeli defense industry when the agreement was signed in 2018. Now, it looks like a disaster,” a senior source said.

On the other hand, “If the Americans will agree to give us, for example, the $3.8 planned for 2024 in this year or next year, this will allow Israel to perform some urgently needed procurement programs, and that will help the U.S industry to keep production lines open in this problematic times that are affecting also the U.S.,” a Ministry of Defense source told BD. The source added that if Washington agrees to such an unprecedented request, Israel will be able to make faster decisions on urgently needed procurement plans involving American weapons.

“In an election year in the U.S more contracts to the American industry is good for the White House” the source said, especially as the US economy faces recovery from the pandemic. While the source was reluctant to identify the programs, there are three main programs requiring immediate decisions.

After a long internal debate, Israeli Defense Forces general staff decided Feb. 18 to purchase another Lockheed Martin F-35 squadron and another Boeing F-15 squadron, in a deal estimated at $4 billion. The other programs involved are replacements for CH-53’s and 707 aerial refueling aircraft.

“The idea of asking for earlier annual allocations that are part of the FMF structure , is a wild one but makes sense in the special conditions created by  the pandemic,” Joseph Weiss, former president of Israel Aerospace Industries, told me.

Over the last decade, FMF aid to Israel totalled $31 billion. Israel was allowed to exchange 26.3 percent to local Israeli currency, allowing the Defense Ministry to buy defense systems from the Israeli companies.

The total value of the new MOU, which covers fiscal 2019- 2028, is $38 billion ($3.8 billion per year). It includes $33 billion in FMF funds and an unprecedented $5 billion for missile defense assistance.

American aid has been an important element in Israel’s military power over the last 45 years (primarily since the Yom Kippur War). It funds some of Israel’s most advanced weapons and currently constitutes almost one fifth of Israel’s gross defense budget.

Two researchers from the Institute for National Security Studies, Shmuel Even and Sasson Hadad, analysed the new FMF agreement immediately after it was signed in 2018 and found a significant rise in the cost of procurement, because IDF purchases from local industries are cheaper than those from the United States for the same type of products. But Even told BD on April 19 that, in spite of the new situation created by the pandemic, “any such request (for change to the FMF agreement) may be met with an unfriendly reaction.” Israeli companies with active U.S subsidiaries such as Elbit systems will be less affected than strictly Israeli-based firms, Even said.

Israeli officials say the expedited funds will speed Israeli decisions on the replacements for its old CH-53’s, 707 aerial refueling aircraft and the purchase of additional F-15 and F-35s.