US mulls demand for refund of Israel aid

Donald Trump, Benjamin Netanyahu  photo: Kobi Gidon, Laam

The White House's view on the State Department-led initiative is not clear.

A new dispute between the Trump administration and Israel is looming. The US Department of State is planning to demand that Israel return tens of millions of dollars in US aid money for 2017 it says were illegitimately obtained.

It is unclear how the White House will respond to the State Department's demand, but Congressional sources fear that the Trump administration will use this demand as a bargaining chip with Israel to expedite potential negotiations between Israel and the Palestinians.

State Department decision-makers say that Israel received this aid package after signing an agreement with the Obama administration in which it undertook to refund to subsequent administrations any amount added by Congress to the aid package agreed upon in the negotiations between Israel and US administration representatives. This argument is consistent with what Israeli representatives said at the time the agreement was signed.

The Israel embassy in Washington said it did not wish to respond to the report.

The agreement with the Obama administration, which was called a memorandum of understanding, guarantees Israel $38 billion in aid over 10 years from the 2019 fiscal year through the 2028 fiscal year. The annual package consists of a $3.3 billion grant for procuring US weapons system (FMF grants) and $500 million for developing, manufacturing, and purchasing anti-missile defense systems.

The negotiations on the memorandum of understanding were tough, among other things due to the US demand for a gradual elimination of the proportion of aid designated for procurement of weapons systems from Israeli companies. Israel was forced to agree to this, despite the expected damage to Israeli defense companies. The US administration only agreed to sign the memorandum of understanding, however, after Prime Minister Benjamin Netanyahu agreed to add an appendix to it in which Israel undertook to refund to the US any amount of aid legislated by Congress in excess of what was stated in the document. The letter refers only to the 2017 and 2018 fiscal years, to which the provisions of the current memorandum of understanding apply, not to the subsequent 10 years, which will be subject to the provisions of the new memorandum of understanding.

In a briefing for Israeli correspondents in Washington on September 14, 2016, the day on which the memorandum was signed, Brigadier General (res.) Professor Jacob Nagel, head of the Israeli delegation in the negotiations, said, "If we get more (as a result of Congressional legislation), we will return the excess to the US (in the next two years)."

The situation is less clear concerning the 10 subsequent years (2019-2028), which are subject to the new memorandum. The parties agreed on a clause that states that Israel and the US will not deviate from the amounts stated in the document with respect to military aid. Israel, however, made no commitment to refund to the US sums in excess of those appearing in the agreement in the event that Congress should approve such a supplement.

Asked whether Israel would refund the money in such a case, Nagel answered, "Talk to me when it happens" (the new memorandum allows Israel to ask Congress for more aid only for the development of missile technologies, not for procurement - in case of war).

This is the background for the State Department's intention to demand that Israel return $75 million to Washington. In addition to $3.1 billion in annual military aid in the 2017 fiscal year, Israel also received $600.7 million for development and production of anti-missile defense systems. In any case, in May 2017, several days before US President Donald Trump's visit to Israel, Netanyahu said at a Jerusalem Day ceremony, "The US has added $75 million to the aid package for the Israeli missile program." He did not say whether Congress of the administration was responsible for this generosity. If Congress initiated the supplement, it would explain the State Department's idea of making Israel return the money.

"Many sources" told the "Washington Free Beacon," a rightwing website, that the State Department was planning to demand that Israel return the money in order to subject it to the terms of the memorandum of understanding with the Obama administration. US Secretary of State Rex Tillerson is reportedly leading the effort to pressure Israel, arguing that Israel must adhere to the letter of the memorandum. The State Department is now lobbying the US National Security Council to give it a green light to exert pressure on Israel.

The "Washington Free Beacon" says that the State Department, led by Tillerson, has become a source of friction within the Trump administration. Sources quoted on the website said that many in Washington regard the State Department as being at "open war" with the White House on several important issues, including Israel-US relations and the nuclear agreement with Iran.

A veteran Congressional advisor told the "Washington Free Beacon," "This is a transparent attempt by State Department officials to f—k with the Israelis and derail the efforts of Congressional Republicans and President Trump to rebuild the US-Israel relationship. There's no reason to push for the Israelis to return the money, unless you're trying to drive a wedge between Israel and Congress."

The State Departments efforts to pressure Israel are encountering strong resistance in Congress. A Congressional aide familiar with the dispute said that Senator Tom Cotton (R, Arkansas) had warned the State Department "that such action would be unwise and invite unwanted conflict with Israel."

Congressional leaders are arguing that the Obama administration's memorandum of understanding with Israel imposes restrictions on Congress's constitutional right to allocate aid money to any countries it chooses. Like its predecessors, the new memorandum of understanding is the basis of US aid to Israel, but the memoranda have not hitherto been an obstacle to Congress in increasing aid beyond what they stipulate.

Senator Lindsey Graham (R, SC) is chairman of the Senate Subcommittee on the Department of State, Foreign Operations, and Related Programs, which is responsible for formulating the foreign aid law, and one of Israel's most loyal friends on Capitol Hill. He expressed anger last year, and criticized Netanyahu for his decision to support the memorandum of understanding. Graham is said to have viewed it as an effort to trample on Congress’s right to allocate US taxpayer funds and he worked to ensure Israel received the additional $75 million, which was included in the final fiscal year 2017 appropriations bill.

Published by Globes [online], Israel Business News - www.globes-online.com - on September 11, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Donald Trump, Benjamin Netanyahu  photo: Kobi Gidon, Laam
Donald Trump, Benjamin Netanyahu photo: Kobi Gidon, Laam
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