Monday, August 4, 2014

The Funding Irony of the Israeli - Hamas Conflict

With the violence between Israel and Palestine being on page one of most mainstream newspapers in the United States, I wanted to supply a bit of information on the financial support that Israel receives from American taxpayers.

A Congressional Research Service paper from April 2014 looks at the total level of foreign aid supplied to Israel by the United States.  In total, since World War II, Israel has received $121 billion in non-inflation adjusted dollars from the United States, the most of any foreign country.  Most of this aid is in the form of military assistance rather than in economic support.  Not only has Israel been the biggest recipient, it has the privileged position of receiving its aid within the first 30 days of the beginning of a given fiscal year, unlike other nations that receive their aid in instalments throughout the fiscal year.  In addition to aid, Israel also has access to the United States military for research and development in the United States and for military purchases from Israeli manufacturers.

United States aid has allowed Israel to develop and maintain one of the most technologically sophisticated armed forces in the world.  The rationale behind the aid is to allow Israel to maintain a "qualitative military edge" or QME over its neighbours since they have a much smaller population and geographic area than its adversaries.  Not only has the aid allowed Israel to develop a massive armed forces, it has allowed Israel to become one of the top ten suppliers of military hardware in the world.

According to Global Firepower, Israel has the following military capabilities which put it in 11th place globally:

Active Frontline Personnel: 176,500
Active Reserve Personnel: 445,000
Tanks: 3870
Armoured Fighting Vehicles: 9436
Towed Artillery: 350
Multiple-Launch Rocket Systems: 88
Fighter/Interceptor Aircraft: 243
Fixed Wing Attack Aircraft: 243
Attack Helicopters: 48
Submarines: 14
Frigates: 3
Destroyers: 3
Corvettes: 5

In 2007, the Bush Administration and the Israeli government signed a ten-year, $30 billion military aid Memorandum of Understanding, spanning the fiscal years from 2009 to 2018.  Here is a quote from former Under Secretary of State Nicholas Burns who signed the agreement on behalf of the United States:

"We consider this 30 billion dollars in assistance to Israel to be an investment in peace - in long-term peace. Peace will not be made without strength. Peace will not be made without Israel being strong in the future. Of course, our objective as a country and our specific objective as a government is to contribute to that peace, a peace between Israel and the Palestinian people, the creation of an independent Palestinian state willing to live side by side in peace with Israel, and a general peace in the region that has eluded the Israeli people for 59 years but which is, we hope, the destiny of the Israeli people as well as the Arab peoples of the region. Our policy in this entire region is dedicated to that final objective." (my bold)

For fiscal 2014, Israel will receive the full amount Foreign Military Financing (FMF) amount of  $3.1 billion.  This amount represents around 55 percent of total American FMF worldwide funding and covers between 23 percent and 25 percent of Israel's total defense budget.  Once the money is transferred to Israel, it is deposited into an interest-bearing account with, guess who, the Federal Reserve Bank!  This interest is then used to pay down Israel's debt to various United States government agencies which stood at $318 million in October 2013.  Of the total FMF, 26.3 percent can be used to purchase military equipment within Israel.

Let's look at a few details.

1.) The F-35 Purchase Agreement: In 2010, Israel agreed to purchase 19 F-35s at a cost of $2.75 billion.  The purchase will be made using FMF grants.  In addition, Israel has the right to purchase up to 75 aircraft for a total of $15.2 billion.  As part of the deal, the United States will make reciprocal purchases of equipment worth $4 billion from Israel's defense industries.

2.) Missile Defense Programs: To defend against the missile and rocket capabilities of its neighbours, Israel has invested heavily in its missile defense program, part of which is the Iron Dome.  This is funded using defense authorization and appropriations bills and are not formally considered to be direct bilateral aid.  

a.) The Iron Dome: This is the signature missile defense system designed to defend against short range rockets; since its inception, the United States has provided over $704 million for Iron Dome batteries, interceptors and general maintenance.  In fiscal 2014, Congress appropriated an additional $235.309 million for Iron Dome.  As shown in this letter, Defense Secretary Chuck Hagel has passed along a request from the Israel's for an additional $225 million in aid for fiscal 2015 to accelerate its Iron Dome project, largely because of its current Operation Protective Edge:

Incidentally, the House passed the measure 395 to 8 on Friday August 1, one of the few times that Congress has actually nearly unanimously approved anything other than the renaming of post offices.

b.) David's Sling (aka the Magic Wand): This missile defense system is designed to defend against long-range rockets and slower flying cruise missiles, similar to those possessed by Syria and the Hezbollah in Lebanon.  It is being jointly developed by Raytheon and Israel's Rafael Advanced Defense Systems.  In case you were wondering, this is what Raytheon has been up to during the 2014 election cycle:

It kind of makes one wonder how Raytheon got selected, doesn't it?

c.) Arrow I, II and III: This missile defense system is designed to counter short-range ballistic missiles.  Between 1990 and 2003, American taxpayers invested $2.365 billion into the Arrow Weapon System program.

Here is a summary of the U.S. Defense Budget Appropriations for Israel's missile defense system from fiscal 2006 to fiscal 2014:

On top of all of this, Israel has a stockpile of United States arms and other equipment at their bases that can be used during wartime.  In 2010, the allowed value of the stored materiel was increased from $800 million to $1.2 billion.

I think that's enough information for this posting.  I'd like to close with a topic that's slightly different but related since it involves taxpayers' dollars, Israel and Palestine:

So, basically, American taxpayers have the privilege of funding the Israeli Defense Forces at the same time as they are paying to provide aid to the Gaza Palestinians who need the assistance because of the actions of the IDF.  Not only is there the $47 million in emergency aid to the United Nations Relief and Works Agency (UNRWA) earmarked for Gaze, there is the 2013 American contribution of $130 million to UNRWA as a whole. UNRWA estimates that in 2014 it will need $380 million for repairs to its infrastructure in the Gaza and to repair Palestinian homes as well as  a total of $187.6 million to provide emergency aid to 250,000 for an eight week period.  My suspicion is that the generosity of American taxpayers will once again come to the rescue.



  1. To answer the last question, very. I wish the US would stop giving away money we don't have. Its all deficit spending with make belive money. Its also part of the reason the US dollar has lost its purchasing power.

  2. No more taxpayer money to rebuild Gaza. Humanitarian aid yes, but not for rebuilding. They used those materials to make the tunnels.