US-Israel Relations: Beyond the $38 Billion

By September 27, 2016

BESA Center Perspectives Paper No. 366

EXECUTIVE SUMMARY: The MOU signed last week which grants Israel $38 billion of military aid over a ten-year period demonstrates the robust nature of the US-Israel special relationship. However, in strictly financial terms, the aid is far less significant that it was in the past. While the deal was designed to insulate Israel from domestic American politics, it could have the opposite effect. The aid is valuable, but less so than other aspects of the US-Israeli strategic relationship. Nor does the agreement address the most significant strategic challenge: the threat of a nuclear-armed Iran. The first order of business with the new administration should be to seek to coordinate a joint approach to that issue.

More than anything else, the Memorandum of Understanding signed last Wednesday granting Israel $38 billion of US military aid over a ten-year period demonstrates the enduring and robust nature of the special relationship. No other country receives anything like that amount of American aid. Moreover, the fact that the deal was signed despite the troubled relationship between Prime Minister Netanyahu and President Obama, and the deep divide between them over core policy issues, underlines for both Israel’s allies and its enemies the depth and strength of America’s commitment to Israel.

From the US perspective, the agreement reflects the fact that Israel remains an important, powerful and reliable ally, with superb intelligence capabilities. In a very unstable Middle East and with the US less inclined to play an assertive interventionist role in the region, Israel’s value as a strategic asset is clear. Thirty-eight billion dollars is a lot of money, but it is far less than would be required to deploy American troops directly, which is what America does in order to protect its interests and allies in much of the world.

The aid, in fact, constitutes an indirect subsidy to American arms producers, because Israel – in a significant change from prior agreements – will have to spend all of it in the US itself. Some have even speculated that without previous Israeli purchases, some key American weapons systems might not have been produced.

In terms of domestic American politics, the aid deal and the subsequent meeting between Netanyahu and Obama were designed to help Democrats retain their pro-Israel credentials prior to the upcoming elections. These credentials were questioned by a significant number of Democratic supporters of Israel in the wake of the Iran deal.

From the Israeli perspective, the deal was intended to lock in the maximum amount of military aid over the medium term, without laying Israel open to the vicissitudes of either an unpredictable Trump presidency or Congress’s relations with the administration. Signing with Obama also bolstered the image of bipartisan support for Israel.

Following the 2012 presidential election and Netanyahu’s speech to Congress in March 2015, the impression took hold among many Democrats that the Prime Minister favors the Republicans. It is hoped that his signing of this deal with Obama will redress this perception to some extent.

In simple monetary terms, the deal represents an increase in the amount of aid – but this will be offset by dollar inflation, the rising cost of arms, and the phasing out of Israel’s right to spend about a quarter of the aid within Israel itself.

The deal has been criticized on the grounds that Israel could have received more aid had the relationship between the leaders been better, or if Netanyahu had backed off from opposing the Iran deal before its passage through Congress in September 2015. There might be some truth to this, but it misses two important points.

First, conceding on the Iran deal for the sake of more money would have sent a bad message to both Israel’s regional friends and Iran about how seriously Israel takes the threat of a nuclear Iran. That message would likely have affected other states’ resolve to stand up to Iran, and might have adversely affected the legitimacy of any future Israeli military strike. Second, the extra cash would not have made a strategic difference in of itself; it would have only eased the general budgetary pressure in Israel. American aid to Israel is very helpful, but it now constitutes about 1% of Israel’s GDP, compared to about 6.5% in the 1980s.

In addition, the politics of the aid deal could be problematic. It was reported that the administration initially offered Israel two options: a lower figure with an option to apply to Congress for additional funding (as was previously the case), or a higher figure without the option to go to Congress for extra funding, except in an emergency such as during an actual military conflict. Israel chose the latter option. Thus, the aid deal includes funding for missile defense that was previously funded separately from the general aid budget. Israel even agreed to return any extra money Congress grants Israel outside the framework of this aid deal.

This has annoyed Congress, especially Congressional Republicans, including some of Israel’s best friends, notably Senator Lindsey Graham (R-SC). Rather than insulating Israel from a clash between the two branches of government, it may well place Israel right in the middle of such tensions. This is because several figures in Congress have claimed that the deal contravenes the spirit of the constitution, which grants the ‘power of the purse’ to Congress.

Moreover, despite the best of intensions, the deal could serve to weaken bipartisanship on Israel. Increasingly, Democrats and Republicans, including supporters of Israel, disagree on key policy issues such as the Iran nuclear deal and important issues related to the peace process. However, US military aid to Israel has wide-ranging support. So increasing aid to Israel is an excellent way for Congress to demonstrate bipartisan support for Israel. By limiting its ability to do this, the agreement may serve to increase the emphasis on partisan divisions on policy issues, which would be to Israel’s detriment.

Finally, while US military aid to Israel is valuable, especially as it demonstrates the US commitment to Israel; it is less significant than other aspects of the strategic relationship. Those aspects include the American commitment to maintaining Israel’s qualitative edge, intelligence co-operation, and US diplomatic support for Israel at the UN, as well as the broader significance of America’s role as the sole superpower in the Middle East and beyond.

For better or worse, none of these elements will be directly affected by this agreement. Nor were the policy differences over Iran and the peace process dealt with by the agreement or resolved during the meeting between the leaders.

On the peace process, the Israeli government is concerned that the US administration may support a UN Security Council resolution outlining the nature of a permanent settlement. This is possible, especially if Trump wins. However, any such resolution would in all probability fall well short of the Palestinian goal, which is a resolution that places the onus on Israel to withdraw from the territories within a set time period or face sanctions. Still, a Palestinian resolution focused against Israeli settlements could present a challenge for Israeli diplomacy.

Of greater strategic concern is the threat of a nuclear Iran. This subject was not addressed in the agreement or in the public comments made after the leaders’ meeting – a sign of continued deep disagreement. Yet Obama has personally acknowledged that within 10-15 years, Iran’s breakout time will effectively be reduced to nothing. Secretary of State for Defense Ashton Carter has spoken of the US commitment to maintaining an ‘insurance policy’ against such an eventuality by sustaining a military option.

The first order of business with the new US administration should be to seek to coordinate a joint approach on this issue through a high-level institutionalized strategic dialogue. This should include discussion about how to respond to violations of the Iran deal and coordination about the conditions under which one or both of the allies might activate that ‘insurance policy’.

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Prof. Jonathan Rynhold is a research associate at the Begin-Sadat Center for Strategic Studies, director of the Argov Center for the Study of Israel and the Jewish People, and deputy chair of the department of political studies at Bar-Ilan University.

BESA Center Perspectives Papers are published through the generosity of the Greg Rosshandler Family

Prof. Jonathan Rynhold
Prof. Jonathan Rynhold

Dr. Jonathan Rynhold, a senior research associate at the Begin-Sadat Center for Strategic Studies, is a senior lecturer of political studies at Bar-Ilan University, and director of its Argov Center for the Study of Israel and the Jewish People. Email: [email protected]