Differences Over Missile Defense, Fine Print Snag U.S.-Israel Aid Deal

(Reuters) -
U.S. President Barack Obama meets with Israeli Prime Minister Binyamin Netanyahu in the White House Oval office on Nov. 9, 2015. (AP Photo/Andrew Harnik)
U.S. President Barack Obama meets with Israeli Prime Minister Binyamin Netanyahu in the White House Oval office on Nov. 9, 2015. (AP Photo/Andrew Harnik)

Negotiations meant to guarantee U.S. defense aid for Israel over the next decade have snagged on disputes about the size, scope and fine print of a new multibillion-dollar package, officials say.

Five months into the talks, several U.S. and Israeli officials disclosed details about the disputes to Reuters on condition of anonymity. The U.S. and Israeli governments said negotiations were continuing, declining to elaborate.

Israel is seeking up to $10 billion more than the current 10-year package and billions more than the U.S. administration is offering, partly by asking for guaranteed funding for missile defense projects hitherto funded on an ad hoc basis by the U.S. Congress, the officials said.

U.S. President Barack Obama wants to ensure the funds, thus far spent partly on Israeli arms, are eventually spent entirely on U.S.-made weapons.

The differences partly reflect Israeli Prime Minister Binyamin Netanyahu’s vocal opposition to the international nuclear deal with Iran championed by Obama. In seeking a sharp increase in military funding, Israel argues it needs to offset military purchases by Iran, Israel’s regional arch-foe, after it secured sanctions relief in the accord limiting its nuclear program.

The current Memorandum of Understanding (MOU), signed in 2007 and due to expire in 2018, gave Israel a total of about $30 billion, or an average of $3 billion annually, in so-called “Foreign Military Financing.”

The Israelis, whose annual defense budget is $15 billion, want at least $3.7 billion annually under the same rubric in the new MOU, officials say.

Israel also wants guaranteed missile defense aid& built into the MOU for the first time, which could mean hundreds of millions of dollars more per year, bringing the full package to more than $40 billion over the next decade.

U.S. negotiators have proposed a total of between $3.5 billion and $3.7 billion in annual aid to Israel, but it was not clear if this included any money for missile defense.

The Obama administration has balked at Israel’s request to stipulate a separate funding track in the MOU for missile defense projects, one official said. It was not known how much Israel had proposed under the missile defense clause.

Israel wants the missile defense component to be “viewed as the ‘floor’ amount, as Congress can be asked for more on an ad hoc basis if circumstances require,” said one official.

U.S. lawmakers have in recent years given Israel up to $600 million in annual discretionary funds for missile defense, well beyond the $150 million requested by the Obama administration.

More than four-fifths of the U.S. Senate signed a letter last week urging Obama to conclude an increased 10-year aid package.

“These discussions are continuing and we remain hopeful we can reach agreement on a new MOU that will build on the United States’ historic and enduring commitment to Israel’s security,” a White House official said in response to a Reuters request for confirmation of the latest negotiating terms.

The official declined to comment directly on the terms.

The current MOU allows Israel to spend 26.3 percent of the U.S. funds on its own defense industries. The United States wants to phase this provision out gradually so that all of the money is spent on American military products, the sources said.

Israel wants to keep the provision in place, or only partly reduced, they said. It fears a devastating blow to Israeli arms firms that glean some $800 million a year from the current MOU.

In another move to shore up its own defense industries, the United States wants to end a provision allowing Israel to spend around $400 million in annual MOU funds on military fuels.

One official paraphrased Washington’s message to Israel as: “We want (you) to be spending this money on actual security, on weapons systems, ways to make you safer.”