Israel has already used up its annual $3.1 billion in this year's US military aid, and has committed all the aid through 2018, when the current aid package expires. The funding has been allocated for the procurement of F-35I stealth fighters, transport aircraft, heavy troop carriers, and other equipment.
"Defense News" reports, "Under a US-approved deferred payment plan (DPP), Israel would pay only interest and fees over the course of the current agreement set to expire in September 2018. Principal will be covered by the new Obama-pledged package that would extend annual foreign military financing (FMF) aid through 2028." It adds that President Barack Obama, during his visit to Israel in March 2013, committed to talks aimed at extending US military assistance.
"The DPP formula, officials and experts say, will free up FMF funds to initiate procurement of V-22s, an anchor part of a package offered by Hagel during his visit here last April. At that time, Hagel announced that Washington “would make available to Israel a set of advanced new military capabilities” to augment Israel’s qualitative military edge," says "Defense News".
Minister of Defense Moshe Ya'alon fell in love with the V-22 during a visit to Washington in June 2013 to promote the Osprey deal. After the flight, his office issued a press release, "This is a very impressive plane… It will give unique capability to the long arm of the IDF."
Yaalon and the Israel Air Force commanders' enthusiasm for the V-22 promoted the government to approve the procurement, even though US military aid was fully earmarked. "After many months of internal debate and bureaucratic resistance from the Israeli Treasury, Defense Minister Moshe Ya’alon has government approval to take on more than $2 billion in commercial debt for near-term buys of V-22 tilt-rotor aircraft and other Pentagon-approved weaponry," says "Defense News." It adds that the agreement assumes that Israel will continue to receive military aid after 2018, on the basis of Obama's promise. Despite misgivings over his Mideast agenda and deep-rooted doubts about his ability to prevent a nuclear-armed Iran, the Israeli government is banking on ten more years of US military aid.
"Defense News" says, "Prospective DPP financing was not Israel’s first choice, officials and experts here say, but a compromise after Washington rejected earlier requests for US government-guaranteed bridge loans until the follow-on aid deal kicked in. US sources explained that regulations proscribe government-guaranteed loans based on future FMF agreements that are not yet in place. The DPP plan approved for Israel, said one Washington source, comes as close as procedurally possible to accommodating the Israeli request. p>"Defense News" quotes a Washington source as saying, "'According to our lawyers, this is not a government-guaranteed loan. The contractor is due payment by the US government through the [Pentagon-administered] Foreign Military Sales [FMS] program … and we are doing our best to facilitate deferred payment arrangements'. He acknowledged that the arrangement required 'a leap of faith' by all parties - not only the Israeli government - that a future bilateral 10-year military aid pact will materialize."
It adds, "That “leap of faith” sparked extensive internal debate in Israel among financial officials, oversight authorities and political skeptics. The high risk inherent in shouldering deferred debt to be repaid from a prospective, yet amorphous, future agreement continues to concern many here, sources here say. However, after Washington agreed to provide a letter of intent to support DPP purchases with prospective future FMF funding, Israel’s Ministry of Defense prevailed in pushing the plan through the Israeli government."
"Defense News" quotes former Israeli Ambassador to US Danny Ayalon as saying that given Obama’s backing and overwhelming congressional support for its “principal strategic partner” in the region, Israel can count on follow-on funding.
Published by Globes [online], Israel business news - www.globes-online.com - on April 3, 2014
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