Measuring the Strength of the U.S. – Israel Relationship in Dollars

By Walter Pincus

Pulitzer Prize Winning Journalist Walter Pincus is a contributing senior national security columnist for The Cipher Brief. He spent forty years at The Washington Post, writing on topics that ranged from nuclear weapons to politics. He is the author of Blown to Hell: America's Deadly Betrayal of the Marshall Islanders. Pincus won an Emmy in 1981 and was the recipient of the Arthur Ross Award from the American Academy for Diplomacy in 2010.  He was also a team member for a Pulitzer Prize in 2002 and the George Polk Award in 1978.  

OPINION — “We believe that U.S. security aid must be used only to address to Israel’s genuine defense needs, and not to help implement or sustain illegal, unilateral actions which undermine Israel’s security, trample on Palestinian rights and contravene longstanding U.S. interests and values. In particular, American taxpayers must not foot the bill for unilateral annexation in the West Bank.”

That is a statement by J Street, a Washington-based non-profit which describes itself as representing “pro-Israel, pro-peace, pro-democracy Americans to promote U.S. policies that embody our deeply held Jewish and democratic values and that help secure the State of Israel as a democratic homeland for the Jewish people.”

J Street is not alone. Senator Bernie Sanders (I-Vt.) on CBS’ Face the Nation February 19 said, “The United States gives billions of dollars in aid to Israel, and I think we’ve got to put some strings attached to that and say you cannot run a racist government. You cannot turn your back on a two-state solution. You cannot demean the Palestinian people there. You just can’t do it and then come to America and ask for money.”

On Sunday, The New York Times reported, “More than 60 Palestinians have been killed in the West Bank so far this year, the deadliest start to any year this century in the territory, according to Palestinian officials. Most died during gun battles between Israeli security forces and Palestinian gunmen started by Israeli operations to arrest people suspected of involvement in carrying out or plotting attacks against Israeli soldiers and civilians.”

Last Wednesday, the Congressional Research Service (CRS) put out a report updating U.S. Aid to Israel and noted that “Prime Minister Benjamin Netanyahu’s inclusion of ultra-nationalist parties in the coalition government he formed in December 2022 may, according to some commentators, strain relations with the United States.”

The CRS report is both a reminder of the extent of U.S. military and financial aid to Israel, and a road map for Sanders and others who would want to attach strings to it.

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The U.S. and Israel are midway through the third, ten-year Memorandum of Understanding (MOU) between the two governments on military aid that runs through fiscal year 2028. Under it, the U.S. provides, subject to congressional appropriation, $3.3 billion each year in grants for Foreign Military Financing (FMF), plus $500 million per year in missile defense appropriations to Israel.

Congress, in the Fiscal 2023 Consolidated Appropriations Act that President Biden signed last December 29, appropriated $3.8 billion for Israel (FMF and missile defense), and added $98.58 million to fund other cooperative defense and non-defense programs. The U.S. contribution of $3.8 billion represented roughly 16 percent of Israel’s $24 billion overall defense budget in 2021, according to the CRS report.

The CRS report points out that “U.S. military aid has helped transform Israel’s armed forces into one of the most technologically sophisticated militaries in the world…[and] also has helped Israel build its domestic defense industry, which now ranks as one of the top global arms exporters.”

In fact, Israel in 2020, ranked twelfth among countries exporting arms, $8.3 billion worth, and in 2021, moved up to eighth, when it exported arms worth $11.3 billion. “Rather than producing large-scale hardware (combat aircraft, tanks), Israeli companies generally export advanced technological products (such as missile defense systems, unmanned aerial vehicles, cyber security products, radar, and electronic communications systems) to numerous customers globally,” the CRS report said, adding, “India, Azerbaijan, and Vietnam are Israel’s three largest export markets.”

One of the ironies of the decades of U.S. financing of Israel’s defense budget was that for years, the U.S. allowed some of its grant money to be spent buying defense equipment from Israeli companies, thereby helping build up those companies.

However, the U.S. and Israel are in the process of gradually phasing that out by fiscal year 2028. And yet, according to the CRS report, some Israeli defense contractors have opened subsidiaries in the U.S. enabling them to increase business with the U.S. military and, in some cases, conduct U.S. aid-financed military deals with the Israeli government.

Another long-term favorable arrangement for the Israelis began in 1991, when Congress mandated that the FMF grants, now $3.3 billion annually, be disbursed as a lump sum within 30 days of the appropriation becoming law. That has allowed the money to be transferred to an interest-bearing account with the U.S. Federal Reserve Bank, with Israel having the right to use the interest collected on any bilateral debt to U.S. government agencies.

As mentioned above, the current MOU with Israel contains an annual $500 million for Israel to fund missile defense programs being developed and produced jointly by the U.S. and Israel.

Iron Dome, a short-range anti-rocket, anti-mortar, and anti-artillery system with an intercept range of 2.5 to 43 miles, has been the most successful of these projects. Iron Dome’s targeting system and radar fire its interceptors only at incoming projectiles that pose threats to a roughly 60-square-mile-area being protected — strategically important sites or population centers.

The CRS report said, “Israel’s Defense Ministry claims that Iron Dome successfully intercepted 97% of all targets it engaged during a summer 2022 confrontation in which Palestine Islamic Jihad fired rockets into Israel.”

Iron Dome was developed by Israel’s Rafael Advanced Defense Systems with the U.S. providing financial support beginning in 2011. Since 2014, there has been a U.S.-Israeli co-production deal that saw manufacture of Iron Dome components in the U.S. To date, according to the CRS, “the United States has provided nearly $3 billion to Israel for Iron Dome batteries, interceptors, co-production costs, and general maintenance.

Ukraine has made a number of requests for various Israeli-made weapons systems, including Iron Dome. Despite a direct appeal from Ukrainian President Volodymyr Zelensky in March 2022, Israel, citing a range of considerations, has generally refrained from providing military support to Ukraine, according to the CRS. However, in October 2022, when Russia turned to Iran for unmanned drones, Israel offered to help Ukraine with a drone early-warning system and interceptors.

Another in Israeli’s anti-missile toolkit that has been supported with U.S. funds is an air defense system known as David’s Sling, designed to counter short- to medium-ranges rockets and slower-flying cruise missiles that had been fired from 25 to 186 miles away. Since 2006, the U.S. has contributed more than $2.4 billion to the development of David’s Sling. And in June 2018, Israel agreed to a co-production agreement for the joint manufacture of the interceptor, some of whose components are now built in the U.S.

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Since 1988, the U.S. and Israel have jointly developed three versions of Arrow anti-ballistic missile systems. The U.S. has invested more than $4.5 billion in the systems, just under half of the annual costs, with Israel supplying the remainder.

The first short-range Arrow system became operational in 2000 in Israel. A second-generation Arrow II was designed to defeat short- and medium-range ballistic missiles. According to the CRS report, in August 2020, Israel successfully tested the Arrow II system against a simulated long-range, surface-to-surface missile which could one day be fired at Israel from Iran.

In January 2022, Israel successfully tested an Arrow III interceptor, a higher-altitude and greater range anti-missile system, which has been in co-development with the U.S. since 2008 and since 2019 in co-production.

Another long-standing U.S.-Israel program, started in 1984, involves the stockpiling of U.S. military equipment in Israel for use in emergency situations. Since 2021, U.S. Central Command has managed the program, which includes missiles, armored vehicles, and artillery ammunition.

In 2022 and 2023, the United States reportedly withdrew 300,000 155-millimeter artillery
shells from the Israel stockpile to send to Ukraine. Last week, the CRS report said, “If the U.S. military has contributed the maximum amount legally permitted in each applicable fiscal year, then the non-inflation-adjusted value of materiel stored in Israel would currently stand at $4 billion.”

Finally, special consideration should be given to Israel’s role in the Pentagon’s most costly program — the F-35 fifth-generation, stealth Joint Strike Fighter.

Israel is considered one of the “security cooperation participants” in the F-35 program and Israeli companies are making F-35 wing sets and pilot helmets. Israel also was the first declared international operator of the F-35, having purchased 50 F-35s in three separate contracts funded with U.S. FMF grants.

According to the CRS report, in 2017, Israel took delivery of the first three of its now 36 F-35s, customized with Israeli-made command, control, and communications systems. In March of 2022, the Israel Defense Forces published footage of its F-35 jets intercepting two Iranian drones on March 15, 2021. The Israeli military announced it believed the drones were heading to the Gaza Strip and West Bank, based on their flight path, and were carrying arms presumably intended for Palestinian militants.

In late August 2022, Boeing and Israel signed a contract for four KC-46A aerial refueling aircraft, plus associated maintenance, logistics, and training for $927 million under the FMF program. Delivery is scheduled for 2026. “Israel may use the KC-46A to refuel its F-35 fighters, a key capability in projecting force toward Iran and elsewhere,” according to the CRS report.

In January 2023, it was disclosed that the U.S. had barred Israeli pilots from flying F-35s for fear of information security and technology leaks. It is unclear what other end use limitations exist with Israel’s F-35s or with other U.S.-supplied weaponry when it comes to Israel.

That would be a good question for those in Congress concerned about the directions being taken by the current Netanyahu government.

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