$3.4b in US military aid delayed

US military aid to Israel in 2011 is due to be largest amount Israel has ever received.

Partisan infighting between Republicans and Democrats in Congress is delaying US military aid to Israel. $3 billion in US military earmarked for fiscal year 2011, which began on October 1, 2010, and more than $400 million in grants to upgrade the Iron Dome and Arrow anti-ballistic missile systems, has been delayed for three months, and is unlikely to reach Israel before March, six months late. The annual military aid normally arrives just after the start of the US fiscal year, subject to Congressional approval of the federal budget.

The immediate effect of the delay is the loss of millions of dollars in interest payments. Israel is the only recipient of US military aid which receives it in a single installment, within 30 days after the president signs the budget. In theory, the aid for 2011 should have been transferred to Israel's bank account in the US in early November at the latest.

This is not the first time that Congress has missed the October 1 deadline. However, sources in Washington believe that the situation will deteriorate in the next two years following the Republicans' recapture of control of the House of Representatives. The next Congress, which convenes in January, will also reflect the increased influence of the Tea Party movement on its political home, the Republicans. The Republicans have announced that they will use their power in the House to block what they allege is unrestrained federal spending.

US military aid to Israel in 2011 is due to be among the largest amounts Israel has ever received: "at least $3 billion" in Foreign Military Financing (FMF), according to the budget bill, up from $2.4 billion in the 2010 fiscal year. Israel is also due to receive at least $415 million to build and/or deploy anti-missile systems, as follows: $205 million for the Iron Dome program; $64.4 million to upgrade the Arrow anti-ballistic missile, of which $12 million will go to Boeing Company (NYSE: BA) to build components in the US and to Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) to build components in Israel; $58.9 million to develop the highest tier component of Israel's anti-ballistic missile defense; and $84.7 million to prepare a short range ballistic missile defense program separate from the Iron Dome.

The aid package also includes $25 million for immigrant absorption and $2 million for the Department of Energy's energy research cooperation program.

However, on Capitol Hill, on December 8, after partisan wrangling, the House passed a continuing resolution (CR) funding bill, allowing the federal government to continue operating on the basis of the 2010 fiscal year, without changes or amendments, instead of on the basis of 2011 budget. For Israel, this means that the budget supplements included in the 2011 budget cannot be implemented. An attempt by the Senate to pass an omnibus bill for the 2011 budget, which would include aid for Israel, was withdrawn by Democrats in the face of strong Republican objections.

At this point, it is unclear when Israel will receive the military aid for 2011 and how much it will get. It is also clear that budget battles in Congress will only get worse in the next two years, irrespective of Israel.

Israeli sources believe that Israel will ultimately get what it is supposed to get at some point in 2011, but they admit that the forecast for US aid for Israel will be stormy in the coming years.

On November 26, "The New York Times" reported that tens of incoming Tea Party card carrying Republican members of Congress are isolationists, and oppose US involvement in foreign conflicts. They want to restrict US foreign aid irrespective of the objectives of that aid in specific cases.

"The New York Times" reported that incoming Senator Rand Paul (Republican-Kentucky), a Tea Party stalwart, told AIPAC that he and they would have to agree to disagree on US foreign aid. "Let's move on to the next issue," he said. Paul, like his father, Congressman Ron Paul (Republican-Texas), is a libertarian who calls for a minimalist foreign policy and an end to foreign aid.

A pro-Israel source told "Globes" that there is no doubt that Rand Paul will launch an attack against foreign aid, but that his influence will be limited because Republicans are still a minority in the Senate.

Nonetheless, there is concern that opponents of foreign aid are so numerous that the sole senior Jewish Republican leader, Eric Cantor, has initiated a plan to exclude US aid for Israel from the foreign aid budget package and transfer it to the Department of Defense budget to prevent any potential cuts by the incoming House of Representatives.

An official Israeli spokesman told "Globes" on Friday, "Israel is aware of the US budget difficulties. However, the US is a strong friend of Israel, we know that support for Israel in Congress and the Administration will bring about creative solutions."

The source added that Israel was careful to stay out of partisan disputes over the budget, and carries out no campaigns to promote aid to Israel, because support for Israel has always existed in both parties. "We don’t express a position. It does not matter to us from which budget item the aid for Israel is given. We hope and believe that aid for Israel won't be thrown out with the bathwater."

Published by Globes [online], Israel business news - www.globes-online.com - on December 26, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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