Israel is making feverish efforts to save part of the US military aid from the sequester, which will come into effect tomorrow. Israel realizes that it will have to absorb a cut of hundreds of millions of dollars in military aid for the 2013 fiscal year, and the question is what can be saved, if anything.
To some extent Israel is collateral damage of a financial attack, and must now undertake triage to decide which are the elements of US military aid are critical to the country's security, and which of them have the best chance of being saved. This means which items are attractive enough in the opinion of US administration officials or members of Congress so the budget axe can be stayed. At this point it seems that Israel will focus its rescue effort on financing for the Iron Dome and Arrow missile defense programs, and accept the reduction in current military aid.
Senior officials in the Ministry of Finance, Ministry of Defense, and Ministry of Foreign Affairs are drawing up a strategy for dealing with the problem, which is at the top of the agenda at the Embassy in Washington. One source believes that Minister of Defense Ehud Barak's unscheduled visit to Washington on February 13, shortly after his previous visit, was related to the sequester.
The severity of the sequester on Israel is still not fully clear. Assuming that it comes into effect, the worst case scenario is a $729 million reduction in US military aid for Israel. $250 million will be cut from current aid, which totals $3.15 billion for the 2013 fiscal year (the final figure is uncertain because how the sequester will be calculated has not been finalized).
But there is growing concern that separate aid packages in 2013 for the development and deployment of anti-missile systems will not be reduced proportionately, but will be eliminated altogether. Israel is due to receive $211 million for the procurement of more Iron Dome batteries and $268 million for the development of the Arrow 2 and Arrow 3 anti-ballistic missile systems and the David's Sling medium-range anti-missile interceptor.
Israeli decision-makers generally agree that Israel should stand shoulder-to-shoulder with the US at this time of financial distress, and that Israel will have to accept the loss of part of its US aid. They recognize that Israel cannot ignore the economic drama underway in the US, and that Israel has to set its priorities and which aid items are critical for national security and which can be given up, given the limitations imposed by the situation in the US.
For Israel, US aid for Iron Dome is the paramount item, and the Americans also strongly like it. Israel also believes that the Arrow 2 and 3 and David Sling are also very important. This means that Israel is seeking to avoid a $479 million cut in US aid, but that it will forego a $250 million cut in current military aid.
Israel is now trying to exempt the missile defense programs from other programs slated for budget cuts through intensive talks with administration officials and members of Congress. The idea is that it is better for the US administration to initiate a decision on such an exemption. Israel's argument in its talks with the Americans is that Iron Dome is the best tool for preventing a regional war. If Israel is perceived as lacking adequate defenses, Hizbullah might be tempted to launch missile barrages. Cutting a few hundred million dollars in aid is liable to ignite a regional war that could cost tens of billions of dollars.
In Israel's favor is that the US is very interested in Iron Dome, as the system could be very useful in defending South Korea from North Korea and defending strategic facilities in the Persian Gulf. Last November, Lt.-Col. Merav Davidovich, Homa Administration liaison officer at the Israeli Embassy in Washington told experts in a speech that terrorist organizations worldwide have the same capabilities as Hamas and Hizbullah, and that many countries could use Iron Dome. The experts in Washington agree.
Published by Globes [online], Israel business news - www.globes-online.com - on February 28, 2013
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