Tuesday, June 19, 2007

Israel wants the United States to increase financial aid

Roni Bart:

Unless developments in Gaza overshadow the planned agenda for Tuesday's summit, Prime Minister Ehud Olmert and US President George W. Bush are set to discuss, inter alia, Israel's request to increase American financial aid.

A few months ago, Israel submitted a request to raise the annual sum by 25 percent over 10 years, from $2.4 billion to $3b. If implemented, this would reverse the course initiated by prime minister Binyamin Netanyahu 10 years ago, which gradually reduced annual assistance by 20%, from $3b to $2.4b. 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 reasons for requesting increased aid are fairly obvious: financial need in the face of multiplying security threats, and reinforcing a powerful public symbol of American support.

On the other hand, there are four reasons to continue reducing the aid, and eventually eliminating 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 $84b. in grants alone. Annual per capita American aid to Israel 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 also, or should be, 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.

# The desire for economic independence highlights a second reason for decreasing the aid.

Israel's financial dependence on the United States is a diplomatic liability.

True, this leverage has not been used by the US since 1956's 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 be dependent on crucial American support in other areas (technology, diplomacy). That, however, does not negate the importance of reducing dependence on the US as much as possible.

# A third reason for decreasing aid is maintaining long-term political support in the US. At some point, Americans will grow weary of the burden. It is already possible to detect potential warning signs. In 2003, against the wishes of the pro-Israel 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 disengagement from Gaza.

Starring 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 in the US to acknowledge that Israel is not just a "strategic asset," but also a diplomatic liability.

Israel would do well to limit the negative aspects of its image to this issue, without being regarded an eternal financial burden as well. Furthermore, if at some point the United States should, for any reason, wish to decrease the aid, it would be important that Israel preempt 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 a weakening of 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 advantages it will bring. American aid comes with strings, some of which shackle Israel's defense industry. Decreasing or eliminating American aid would help this sector in four ways. One, the IDF would buy more in Israel, investing in the local economy. Two, additional purchases by the IDF would bolster the reputation of Israeli firms, and thus their sales. Three, Israel's defense exports would be at least partly unshackled by American restrictions. Four, paying for purchases in the US with Israeli money would increase the volume of reciprocal purchases by American firms in Israel.

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

A Conservative Estimate of Total Direct U.S. Aid to Israel: $108 Billion (as of July 2006)

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