Ehud Olmert and wife arriving in the US for meeting with Bush
Photo: Amos Ben Gershom

Cut US aid to Israel

Israel can gain much by doing away with America's financial assistance

Unless developments in Gaza overshadow all the planned agenda for the summit meeting, Prime Minister Olmert and President Bush are set to discuss Tuesday, inter alia, Israel's request to increase American financial aid. A few months ago, Israel submitted a request to raise the annual sum over 10 years by 25 percent, from $2.4 billion to $3 billion. If implemented, this would reverse the course initiated by Prime Minister Netanyahu a decade ago, which gradually reduced American annual assistance by 20 percent, from $3 billion to $2.4. Doing so would be a mistake.


The underlying rationale for the Israeli request is to take advantage of the final two years of the firmly pro-Israel Bush Administration. Israel's main reasons for increased aid are fairly obvious: financial need for multiplying security threats, and reinforcing a powerful public symbol of American support. On the other hand, there are four reasons to continue the process of decreasing aid, perhaps leading to eventual elimination of it.


First, since 1976, Israel has been the largest annual recipient of US foreign assistance. In the past 55 years, Israel has received more than $84 billion in grants alone. Annual American aid to Israel per capita is more than $340, which is by far the highest in the world. Average global aid per capita is only $22! This comparison becomes all the more glaring, given that according to various indices Israel is ranked 27th or 37th on the "rich scale."


From a moral point of view, Israel's place at the top of the list of aid recipients, ahead of all poor and sick and malnourished Third World countries, is, to say the least, problematic. Furthermore, this is, or should be, also a matter of national honor. It was only a generation ago that the goal of "economic independence" was still mentioned in Israel, if only as a distant aspiration. The process initiated by Netanyahu inched Israel toward that goal; freezing the process, let alone reversing it, means forsaking the dream.


Diplomatic drawback

Economic independence highlights a second reason for decreasing aid. Israel's financial dependence on the United States is a diplomatic drawback. True, this leverage has not been used by the United States since the 1956 brutal American pressure to withdraw from the Sinai Peninsula, but that is only because there is no need for anything explicit to be said.


The American leverage over Israel, inter alia due to financial dependency, is manifested by the ever-present question: "What will the United States say?" True, even if Israel were economically independent, it would still depend on crucial American support in other areas (technology, diplomacy.) That, however, does not negate the importance of diminishing Israel's dependence on the United States as much as possible.


A third reason for decreasing aid is maintaining long-term political support in the United States. At some point, despite - or perhaps because of - the influence of the pro-Israeli lobby, Americans will grow weary of the burden. It is already possible to detect potential warning signs. In 2003, against the wishes of the pro-Israeli lobby, Congress included aid to Israel in an across-the-board cut in all foreign aid. And in 2005, both the Administration and Congress cold-shouldered an Israeli request for extra assistance to offset the costs of the disengagement from Gaza.


Remaining effortlessly at the top of the list of aid recipients far into the future should not be taken for granted. Important voices calling to engage more seriously in the Israeli-Palestinian conflict (a euphemism for pressuring Israel) indicate growing willingness to acknowledge that Israel is not only a "strategic asset" but also a diplomatic liability. It would do well for Israel to limit the negative aspects of its image to this problem, without being regarded an eternal financial burden as well.


Aid only 4 percent of Israel's budget

Furthermore, if at some point for some reason the United States would wish to decrease aid, it is important that Israel preempts this by initiating the process itself. As mentioned above, aid to Israel is a powerful public symbol of American support. Any American-initiated decrease, even for purely budgetary reasons, would be perceived as weakening support. Not so if the initiative is Israel's, as proven by the Netanyahu process.


A fourth and final reason for decreasing aid is the economic advantage this step will bring. American aid comes with strings, some of which shackles the Israeli defense industry. Decreasing or eliminating American aid will help this sector in four ways. One, the IDF will buy more in Israel, investing in the local economy. Two, purchases by the IDF bolster the reputation of Israeli firms and thus their sales. Three, Israel's defense exports will be at least partly unshackled by American restrictions. Four, paying with Israeli money for procurement in the United States will increase the volume of reciprocal purchases by American firms in Israel.


Furthermore, from a purely economic angle, Israeli shekels will not have to compensate for 100 percent of vanishing dollars. According to some experts, between $250 million and $500 million could be saved by extricating Israeli procurement from American restrictions, mainly from the obligation to buy American products that are sometimes more expensive than equivalent items manufactured elsewhere.


Israel's military needs are many and expensive, and the United States is generous. However, American aid amounts to only 4 percent of Israel's annual budget. Israel can and should change its budgetary priorities in order to gradually decrease American aid. Instead of asking for a 25 percent increase over 10 years, Israel should suggest a weaning process: a 100 percent decrease over 25 years.


The writer is a research associate at the Institute for National Security Studies in Tel Aviv


פרסום ראשון: 06.18.07, 08:31
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