Photo: Reuters
Agreement signing ceremony
Photo: Reuters

The cost of doing business

Analysis: As a farewell present from President Barack Obama, the US and Israel have signed a $38 billion military assistance package, the largest of any such agreement. When the meat of the deal is dissected however, can it really be hailed as ‘historic’?

After months of debate since Prime Minister Netanyahu's speech before Congress, the $38 billion aid agreement between the United States and Israel was formally signed Wednesday. After the signing ceremony in Washington, in which National Security Advisor Susan Rice, US Secretary of State John Kerry and Congressmen from both parties attended, Yaakov Nagal, acting head of the National Security Council, hailed it as an "historic agreement."



The agreement essentially provides $33 billion for military assistance and another $5 billion to be used for missile defense systems. However, herein lies one the disadvantages of the agreement: For the first time, the missile defense funds will be part and parcel of the agreement, rather than a supplement provided by Congress.


Official signing ceremony (Photo: Reuters) (Photo: Reuters)
Official signing ceremony (Photo: Reuters)


Under the terms of the previous agreement signed in 2007, Israel received $31 billion in military aid and another $4.4 billion for missile defense. Meaning, the new agreement brings an additional $2.6 billion in total. However, critics of the agreement have noted that the purchasing power of the dollar has declined due to price increases in arms. As such, in reality, the value of the $3.8 billion today is proportionately lower than the value of the $3.1 billion a decade ago.


"I see this agreement as a great source of pride. The United States has signed no such agreement with any other country," said Nagal at the State Department. At a press briefing, Nagal denied that tensions following Netanyahu's controversial speech before Congress hindered Israel's ability to achieve a better deal.


Netanyahu speaking before Congress (Photo: AFP) (Netanyahu speaking before Congress (Photo: AFP))
Netanyahu speaking before Congress (Photo: AFP)


Nagal went on to say, "when we started this process three years ago, there were many who said we don't have a chance of getting a deal for $3.1 billion with the American economy in a difficult situation."


Nagal also provided an explanation for the fact that contrary to the previous agreement, which allowed Israel to use more than a quarter of the assistance for Israel's domestic defense establishment, this agreement stipulates that Israel can only acquire American-made products for 6 - 8 years. "We did not want the exchange to shekels to stop, so we arrived at a compromise in which we could use 70% of what we've used until now in shekels—a value of $5.6 billion from the aid package up to 2028."


Iron Dome air defense system (Photo: EPA) (Photo: EPA)
Iron Dome air defense system (Photo: EPA)


Critics of the agreement however warned of the damage the deal will cause to the Israeli domestic defense industry and the unusual Israeli concession not to seek any additional financial aid from Congress in the coming decade.


One condition was inserted into the agreement however, which permits Israel to seek additional assistance only in the event of an outbreak of a serious military conflict. Prof. Uzi Arad, a former national security advisor to Netanyahu, slammed the deal saying, "Netanyahu gambled and missed an historic opportunity. Reality slapped him in the face. Bibi made an error of judgment and as a result, handled matters incorrectly. As usual, the result is a loss compared with what was possible and what should have been." Arad went on to say that had Israel had entered into negotiations before the signing of the nuclear agreement, it would have been able to achieve far more.


President Obama welcomed the agreement Wednesday night and said, "The aid agreement will significantly contribute to the defense of Israel, which lives in a dangerous neighborhood."


פרסום ראשון: 09.15.16, 15:41
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