Israel-US aid accord could deal massive blow to local defense industry, MKs told

According to current terms, all of the money must be spent in US, meaning local manufacturers could lose over $2 billion a year, up to 22,000 could lose jobs, Defense Ministry says

Sue Surkes is The Times of Israel's environment reporter.

Golani soldiers in a Namer APC during an exercise in the Golan Heights, August 2012 (Photo credit: CC-BY-SA, Abir Sultan/IDF)
Golani soldiers in a Namer APC during an exercise in the Golan Heights, August 2012 (Photo credit: CC-BY-SA, Abir Sultan/IDF)

Up to 22,000 workers in Israel’s defense industry could lose their jobs amidst $1.3 billion in annual losses unless US President Donald Trump agrees to reverse a clause in a US military aid package to Israel that insists the money only be spent on US-made arms, the Defense Ministry told lawmakers.

At a special meeting Monday of the Finance Committee on the matter, Knesset members urged the government to reopen negotiations with the US on the deal signed in 2016 by Prime Minister Benjamin Netanyahu and Trump’s predecessor Barack Obama.

The aid package — the biggest of its kind in US history — will give Israel $38 billion in military assistance over the next ten years, starting from 2019.

One clause specifies the gradual phasing out of a practice that has enabled Israel to use 26.3 percent of the cash on its own defense industries. By 2028, all of that money will have to be spent on US-made military hardware.

Warning that the agreement would cause “unacceptable harm,” committee chairman Moshe Gafni (United Torah Judaism) said that while the aid would increase, society would “crumble from within.”

United Torah Judaism MK Moshe Gafni chairs a Knesset Finance Committee on March 5, 2018. (Yonatan Sindel/Flash90)

Yesh Atid MK Mickey Levy, who called for the discussion, said, “The administration today in the United States is different from the previous one, and it is possible to do something on the political level.”

A representative of the companies involved in manufacturing the Israel-made Merkava tank said the aid deal’s conditions would result in an almost 40% cut in Defense Ministry spending on the local industry per year.

Describing the deal as a “honey trap,” he said it threatened the 200 local companies involved in manufacturing the Merkava as well as the Namer armored personnel carrier.

A representative of the Israeli aircraft industry said that while 80% of its production was for export, 95% of the workers, suppliers and subcontractors were local and stood to be harmed by the aid deal with the US.

Defense Ministry economist Zeev Zilber said $1.3 billion would be lost by the Israeli defense industry each year and that up to 22,000 jobs were at risk, many in Israel’s periphery.

The local military industry was part of a system, he went on, that provided easy access, emergency response and manufacturing and technological independence.

“Both the finance and economy ministries understand that this case requires a comprehensive government response,” he added.

An Israeli soldier stands on top of a Merkava Mark IV tank as troops take position near the Syrian border in the Golan Heights on May 9, 2018. ( AFP PHOTO / JALAA MAREY)

Lawmaker Eyal Ben-Reuven (Zionist Union) warned that Israel could lose its independence in times of emergency, for example in the event that the local defense industry would have to quickly ramp up production of Iron Dome anti-missile systems during wartime.

“The most disturbing thing is that the government has no solutions,” he said.

Calling for another discussion of the subject in a month, committee chairman Gafni said it was clear that the deal, as it currently stood, had “very serious” implications for the country’s defense industry.

In the meantime, the government would be asked to detail what, if anything, it had done to resolve issues such as “the collapse of small companies,” and the move to “dependence on US companies” instead, he said, and it was the government’s job to explain to the Americans that the deal would cause “unacceptable harm.”

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