The current Middle East breakup is the glaring proof that Barak's commitment to peace was phoney and that he's been playing for time all along.... Here's the big picture:
mepc.org
THE STRATEGIC FUNCTIONS OF U.S. AID TO ISRAEL
Stephen Zunes
Dr. Zunes is an assistant professor in the Department of Politics at the University of San Francisco.
The United States aid relationship with Israel is unlike any other in the world, or indeed, like any in history. In sheer volume, the amount of aid is the most generous foreign-aid program ever between any two countries, totaling $77.726 billion through fiscal year 1996. No country, including South Vietnam, has ever received as much congressionally mandated aid as has Israel. Indeed, Israel receives more U.S. aid per capita annually than the total annual GNP per capita of several Arab states, including Egypt, Mauritania, Sudan, Yemen and Morocco. What is perhaps even more unusual is that Israel, like its benefactor, is an advanced, industrialized, technologically sophisticated country, as well as a major arms exporter.
This paper examines the nature and extent of U.S. foreign aid to Israel, the strategic roots of this aid, how the relationship has been affected by the changing world order, the aid policy of the Clinton administration, its military component, its impact on Israel, the debate within both Israel and the United States, and the impact of aid on the Middle East peace process.
THE NATURE OF U.S. AID
U.S. aid to Israel began in the early 1950s with small grants and expanded modestly over the next decade to include Export-Import Bank loans, Food for Peace aid and general economic loans. Military loans began only after the 1967 war. These were replaced entirely by grants in 1985. U.S. economic aid increased greatly in subsequent years, and grants replaced loans for economic assistance in 1981. In recent years, the annual U.S. subsidy for Israel has remained at approximately $3 billion in military and economic grants, in addition to more than $500 million from other parts of the budget or off-budget. Unlike most U.S. recipients of economic aid, who are required to use the bulk of the money for specific projects, such as buying certain U.S. agricultural surpluses or finished goods, Israel gets to put its aid directly into the government treasury. In
every other country, officials of the U.S. Agency for International Development (USAID) oversee the actual programs, either administered directly, through non-governmental organizations, or under cosponsorship with a government agency. Since 1971, however, Israel has been the exception: the U.S. government sets the funding level and these become simply cash transfers to the Israeli government. Since 1992, the U.S. has offered Israel an additional $2 billion annually in loan guarantees.
Congressional researchers have disclosed that between 1974 and 1989, $16.4 billion in U.S. military loans were converted to grants and that this was the understanding from the beginning. Indeed, all past U.S. loans to Israel have eventually been forgiven by Congress, which has undoubtedly helped Israel's often-touted claim that they have never defaulted on a U.S. government loan. U.S. policy since 1984 has been that economic assistance to Israel must equal or exceed Israel's annual debt repayment to the United States. Unlike other countries, which receive aid in quarterly installments, aid to Israel since 1982 has been given in a lump sum at the beginning of the fiscal year, leaving the U.S. government to borrow from future revenues. Israel even lends some of this money back through U.S. treasury bills and collects the additional interest. In addition, there is the more than $1.5 billion in private U.S. funds that go to Israel annually in the form of $1 billion in private tax-deductible donations and $500 million in Israeli bonds. The ability of Americans to make what amounts to tax-deductible contributions to a foreign government, made possible through a number of Jewish charities, does not exist with any other country. Nor do these figures include short- and long-term commercial loans from U.S. banks, which have been as high as $1 billion annually in recent years.
Total U.S. aid to Israel is approximately one-third of the American foreign-aid budget, even though Israel comprises just .001 percent of the world's population and already has one of the world's higher per capita incomes. Indeed, Israel's GNP is higher than the combined GNP of Egypt, Lebanon, Syria, Jordan, the West Bank and Gaza. With a per capita income of about $14,000, Israel ranks as the sixteenth wealthiest country in the world; Israelis enjoy a higher per capita income than oil-rich Saudi Arabia and are only slightly less well-off than most Western European countries. AID does not term economic aid to Israel as development assistance, but instead uses the term "economic support funding." Given Israel's relative prosperity, U.S.
aid to Israel is becoming increasingly controversial. In 1994, Yossi Beilen, deputy foreign minister of Israel and a Knesset member, told the Women's International Zionist organization, "If our economic situation is better than in many of your countries, how can we go on asking for your charity?"
THE ROOTS OF U.S. AID POLICY
The U.S. commitment to Israel has often been articulated by American officials in moral terms, even presenting the issue as a case of a democracy battling for its very survival. Yet, were this actually the primary motivation for the aid program, U.S. aid to Israel would have been highest in the early years of the existence of the Jewish state, when its democratic institutions were strongest and its strategic situation most vulnerable, and would have declined as its military power grew dramatically and its repression of Palestinians in the occupied territories increased. Instead, the trend has been in just the opposite direction: major
U.S. military and economic aid did not begin until after the 1967 war. Indeed, 99 percent of U.S. military assistance to Israel since its establishment came only after Israel proved itself to be far stronger than any combination of Arab armies and after Israeli occupation forces became the rulers of a large Palestinian population.
In the hypothetical event that all U.S. aid to Israel were immediately cut off, it would be many years before Israel would be under significantly greater military threat than it is today. Israel has both a major domestic arms industry and an existing military force far more capable and powerful than any conceivable combination of opposing forces. While a cutoff of economic support might force Israel to negotiate a settlement with the Palestinians that would end the expensive patchwork of Israeli control and subsidizing of settlements, thereby increasing the likelihood of Palestinian statehood alongside Israel, there would be no question of Israel's survival being at risk militarily in the foreseeable future.
One of the most fundamental principles in the theory of international relations is that the most stable military relationship between adversaries (besides disarmament) is strategic parity. Such a relationship provides an effective deterrent for both sides against a preemptive attack by the other. If it were concerned simply with Israel's security, the United States would be dedicated to maintaining Israeli defenses to the point where they would be approximately equal to any realistic combination of Arab armed forces. Instead, leaders of both American political parties have called for the United States to help maintain not a military balance between Israel and its neighbors, but qualitative Israeli military superiority. When Israel was less dominant
militarily, there was no such consensus for U.S. backing of Israel. The continued high levels of U.S. aid to Israel does not likely come out of concern for Israel's survival. One explanation may come from a desire for Israel to continue its strategic and political dominance over the Palestinians and the region as a whole.
Indeed, the primary reason for the direction of U.S. policy is the role Israel plays for the United States. Israel has successfully prevented victories by radical nationalist movements in Lebanon, Jordan and Yemen, as well as in Palestine. They have kept Syria, for many years an ally of the Soviet Union, in check. Their air force is predominant throughout the region. Israel's frequent wars have provided battlefield testing for American arms, often against Soviet weapons. They have been a conduit for U.S. arms to regimes and movements too unpopular in the United States to be openly granted direct military assistance, such as South Africa, Iran, Guatemala and the Nicaraguan Contras. Israeli military advisers have assisted the Contras, the Salvadoran junta, and other movements and governments backed by the United States. The Mossad has cooperated with the CIA and other similar U.S. services in intelligence gathering and covert operations. Israel has missiles capable of reaching the former Soviet Union and has cooperated with the U.S. military-industrial complex with research and development for new jet fighters, anti-missile defense systems and even the Strategic Defense Initiative, a relationship that is expected to continue. As one Israeli analyst described it during the Iran-Contra scandal, "It's like Israel has become just another federal agency, one that's convenient to use when you want something done quietly."
The pattern of U.S. aid to Israel is revealing. Immediately following Israel's spectacular victory in the 1967 war, when it demonstrated its military superiority in the region, U.S. aid shot up by 450 percent. Part of this increase, according to The New York Times, was apparently related to Israel's willingness to provide the United States with examples of new Soviet weapons captured during the war. Following the 1970-71 civil war in Jordan, when Israel's potential to curb revolutionary movements outside its borders became apparent, aid increased another sevenfold. After Arab armies in the 1973 war were successfully countered by the largest U.S. airlift in history, with Israel demonstrating its power to defeat surprisingly strong
Soviet-supplied forces, military aid increased by another 800 percent. These increases paralleled the British decision to withdraw forces from "east of Suez," which also led to the massive arms sales and logistical cooperation with the shah's Iran, a key component of the Nixon Doctrine.
Aid quadrupled again in 1979 soon after the fall of the shah, the election of the right-wing Likud government, and the ratification of the Camp David accords. Aid increased yet again soon after the 1982 Israeli invasion of Lebanon. In 1983 and 1984, when the United States and Israel signed memoranda of understanding on strategic cooperation and military planning and conducted their first joint naval and air military exercises, Israel was rewarded by an additional $1.5 billion in economic aid, as well as another $500,000 for the development of a new jet fighter. During and immediately after the Gulf War, U.S. aid increased an additional $650 million.
The correlation is clear: the stronger and more willing Israel is to cooperate with U.S. interests, the higher the level of aid.
POLICY DEBATES
In reality, the history of unconditional U.S. aid to Israel is not that unfamiliar: it is a result of the same kind of thinking that has guided U.S. policy elsewhere. As Ron Young observes in his study Missed Opportunities for Peace, the same world view --an emphasis on military solutions to political problems, the underestimation of the power of popular movements, the tendency to take an exaggerated East-West perspective, and the insistence on unilateral initiatives--has dominated U.S. policy towards Israel and the Middle East as well. The perception of Middle East exceptionalism in U.S. foreign policy has made the widespread dissemination and discussion of critiques of that policy even more difficult than on other issues.
Traditionally, there has been a division among foreign-policy elites regarding the wisdom of such large scale and unconditional support for the Israeli government. One group, often referred to as the "State Department Arabists," held that the Arab world has much more to offer the United States strategically and economically than does Israel. Supporting of a militant Israel, they argued, could lead to strong anti-American sentiment in the Arab world and increasing instability in the region. The other faction, which has traditionally been dominant, holds that Israel is sufficiently strong militarily to play a stabilizing role.
Furthermore, whatever the resentment from the Arab masses, there is little political pluralism in the Arab world to worry about, and most Arab leaders--due to their investment of petrodollars in the West, recognition of Western military power, or general conservatism--can forgive the United States for its support of Israel. By blaming the "Jewish lobby" rather than American leaders for Washington's hostile position towards the Arab world, a perspective often deliberately encouraged by American diplomats, they can absolve the U.S. government of its responsibility. Indeed, since Israel is a status quo power whose interests often coincide with those of Arab regimes, a strong Israel can actually be to their advantage, not just because it offers
protection against radical challenges from within and from outside, but because it serves as a useful diversion for popular dissatisfaction with their own leadership.
During the first 20 years following Israel's victory in the 1967 war, this latter tendency dominated U.S. foreign-policy circles, particularly during the Reagan administration. Indeed, most of the Arabists were purged or had retired by the 1980s. However, the intifada led to a slight shift in perceptions. The inability of Israeli military might to curb popular resistance in the occupied territories and the dangerous precedent it set for possible insurrections against pro-Western Arab leaders led to a reevaluation of the role of the Israeli military as a stabilizing force. Combined with the end of the Cold War, which lessened the need for Israel as a major link in the "strategic consensus" against possible Soviet penetration in the Middle East, the intifada resulted in the Bush administration's challenging Israeli policies to a degree unheard of in Washington for more than a generation. These protests were in rhetoric only --unconditional military and economic aid to the Israeli government continued to flow--but it did indicate something of a more balanced policy, at least symbolically.
In addition, the dramatic increase in military cooperation and arms transfers to the states of the Gulf Cooperation Council (GCC) during and after the Gulf War demonstrated that Israel was not the only country on which the United States relied to maintain its interests in the region. However, it soon became clear that the potentially unstable Gulf monarchies, still suspicious of U.S. intentions and lacking the advantages of Israel in terms of well-trained forces, technological sophistication, and ability to mobilize their human and material resources, could never be a substitute for the U.S. alliance with Israel.
The Gulf War proved once again that, rather than being a liability, Israel was a strategic asset: Israeli developments in air-to-ground warfare were integrated into allied bombing against Iraqi missile sites and other targets; Israeli-designed conformal fuel tanks for F-15 fighter-bombers greatly enhanced their range; Israeli-provided mine plows were used during the final
assaults on Iraqi positions; Israeli mobile bridges were used by U.S. Marines; Israeli targeting systems and low-altitude warning devices were utilized by American helicopters; and Israel developed key components for the widely used Tomahawk missiles. It served as yet another reminder of how Israel remains, in the eyes of American policy makers, an important strategic ally. Given that continued U.S. support of Israel--despite its ongoing and, indeed, worsening repression of the Palestinians--did not interfere with an unprecedented degree of cooperation with Egypt and the Gulf monarchies or with rapprochement with
Syria, few risks seemed to be involved in continuing such an alliance.
With the weakening of the intifada, the triumph by the United States and its allied pro-Western monarchies in the Gulf War, and the election of a more moderate--and thereby less provocative--government in Israel, the odds of major political instability resulting from unconditional support of Israel decreased. As a result, the United States felt more confident in its unqualified backing of Israeli policies and increasing still further the level of aid, particularly when Bill Clinton assumed office in 1993.
CLINTON AND U.S. AID
Under the Clinton administration, the strategic relationship has been strengthened still further. This is in part because Israel's role as a surrogate for U.S. strategic interests has never been limited to concerns over Soviet influence. As in many other parts of the Third World, the Cold War was more the excuse than the actual reason for U.S. concerns over instability and challenges to U.S. economic and political hegemony. Indeed, radical nationalism and, more recently, extremist Islamic forces have been seen by American policy makers as at least as threatening to American interests in the region as was communism, and Israeli support in challenging such perceived threats to American hegemony has always been, and will continue to be, quite welcome.
Clinton's attitude towards the controversial $10 billion loan guarantee is revealing. During the 1992 campaign, Clinton attacked Bush from the right, criticizing the incumbent's insistence that the loan guarantee be linked to curbing the Israeli settlements in the occupied territories or that it be withheld until after the Israeli elections in June, a position which many Israelis interpreted as Clinton's endorsement of the Likud. Feeling heat from Clinton, by this point the Democratic presidential nominee, Bush approved the loans in August, despite a lack of Israeli assurance that they would halt settlement activity. Though Clinton claimed that the loans would be used for housing for Jewish immigrants, none of the money was used for such purposes; indeed, Israel had thousands of unoccupied housing units, particularly in Beersheva, where most refugees were initially settled. The Israeli government acknowledged that the loans were more of a cushion than anything vital to the economy.
Congress attached a provision requiring the president to deduct the costs of additional settlement activity from the $2 billion annual installment of the loan. In October 1993, the United States officially announced to Israel that there would be a $437 million deduction in the next year's loan due to settlement construction during the 1993 fiscal year. However, State Department Middle East peace-talks coordinator Dennis Ross immediately let the Israeli government know that the United States would find a way to restore the full funding. Within a month, Clinton authorized Israel to draw an additional $500 million in U.S. military supplies from NATO warehouses in Europe. A similar scenario unfolded the following year: after deducting $311.8 million on settlements from 1995 loans, Clinton authorized $95.8 million for redeploying troops from Gaza and $240 million to
facilitate withdrawal from West Bank cities, based on the highly controversial assertion that it cost more to withdraw troops than to maintain them in hostile urban areas.
Indeed, Clinton has explicitly promised the Israelis that aid would remain constant regardless of Israeli settlement policies. What has resulted, then, is that the United States is now effectively subsidizing the settlements directly, since the Israelis know they will be compensated for every dollar (and more) that they contribute to maintaining their presence in the West Bank, despite the fact that all of those settlements are illegal, according to Article 49 of the Geneva Convention, which bans occupying powers from transferring parts of their own civilian population into territory taken by military force. This conversion from loa guarantees to grants results in what amounts to a direct subsidy for Israeli settlement activity. U.N. Security Council Resolution 446, adopted unanimously with U.S. support, specifically requires Israel to withdraw from those settlements unconditionally, while Resolution 465 forbids any country from supporting Israel's colonization drive. Using U.S. aid to undermine U.N. Security Council resolutions is in sharp contrast to the U.S. insistence that the international community maintain strict sanctions against Arab states such as Iraq, Libya and Sudan for their violations of other U.N. resolutions.
Republicans in Congress, despite their fiscal conservatism and opposition to most other forms of foreign aid, are similarly munificent regarding aid to Israel. House Speaker Newt Gingrich (R-GA) has been a longstanding supporter of unconditional aid to Israel; indeed, his wife Marianne earns $2500 per month plus commissions from a corporation to lobby U.S. companies to invest in Israel. Senate Foreign Relations Committee chairman Jesse Helms (R-NC) insists that cutting U.S. aid to Israel is "off the table," and former Senate majority leader Bob Dole has also opposed any aid cutbacks.
ARMS TRANSFERS CONTINUE
Contrary to many predictions, the end of the Cold War and early advances in the Middle East peace process have not
lessened U.S. military and economic aid to Israel. It is higher now than 20 years ago, when Egypt's massive and well-equipped armed forces threatened war, when Syria's military was expanding rapidly with advanced Soviet weaponry, when armed factions of the PLO were launching terrorist attacks into Israel, when Jordan still claimed the West Bank and stationed large numbers of troops along its lengthy border and demarcation line with Israel, and when Iraq was embarking upon a vast militarization program. Now, given a longstanding peace treaty with Egypt and a large demilitarized and internationally monitored buffer zone; given ongoing peace talks with a gradually demilitarizing Syria weakened by the collapse of its Soviet patron; given the PLO's close cooperation with Israeli security; given Jordan's having signed a peace treaty fully normalizing
relations; and given the weakness of Iraq's armed forces, devastated during the Gulf War and under strict international sanctions and monitoring, why do such high levels of aid continue?
Matti Peled, the late Israeli major general and Knesset member, reported that as far as he could tell, the $1.8 billion figure for annual military support was arrived at "out of thin air." Such a figure is far more than Israel needs to replenish stocks, is not apparently related directly to any specific security requirements, and has remained relatively constant in recent years, thereby
reenforcing the impression that it is little more than a U.S. government subsidy for American arms manufacturers. This benefit to American defense contractors is multiplied by the fact that every major arms transfer to Israel creates a new demand by Arab states--most of which can pay hard currency through petrodollars--for additional American weapons to challenge Israel. Indeed, Israel announced its acceptance of a Middle Eastern arms freeze in 1991, but the United States effectively blocked it.
In 1993, when 78 Senators wrote President Clinton insisting that aid to Israel be continued at the current levels, they justified it on the grounds of massive arms procurement by Arabs states, neglecting to note that 80 percent of those arms transfers were of U.S. origin. Had they really been concerned about Israeli security, they would have voted to block these arms transfers to the Gulf monarchies. Yet this was clearly not the purpose. Even Israel did not actively oppose the sale of 72 highly sophisticated F-15E jet fighters to Saudi Arabia in 1992, since the Bush administration offered yet another increase in U.S. arms transfers to Israel in return for Israeli acquiescence.
In many respects, U.S. aid policy nicely serves the interests of both sides. Israel, Saudi Arabia and the United States all share an interest in curbing radical nationalism and preserving the regional status quo--if deemed necessary, by military force. In addition, for the Israelis, Arab militarism serves as an excuse for continued repression in the occupied territories and resistance to demands for territorial compromise. For autocratic Arab leaders, Israeli military power serves as an excuse for their lack of internal democracy and inability to address badly needed social and economic reforms. It is noteworthy that for many years before 1993, the United States was sending billions of dollars to Gulf states, which took a harder line towards Israel than the PLO did, while at the same time refusing to even talk with the Palestinians.
The resulting arms race has been a bonanza for U.S. weapons manufacturers, which may actually be a major explanation for
U.S. aid policy. For while the pro-Israel political action committees (PACs) certainly wield substantial clout with their contributions to congressional candidates supportive of large-scale military and economic aid to Israel, the Aerospace Industry Association--which promotes massive arms transfers to the Middle East and elsewhere--is even more influential, contributing more than $7.4 million in each of the most recent two election cycles, and provides the additional inducement of creating jobs and bringing federal dollars into key states and congressional districts. Indeed, the Clinton administration has showed no qualms about continued aid to Morocco, despite its ongoing occupation of Western Sahara, and to Indonesia, despite its continuing occupation of East Timor. Like Israel, these U.S. allies, all serious human-rights violators, continue to occupy neighboring states in defiance of U.N. Security Council resolutions, yet the Clinton administration--like its
predecessors--has rejected linking aid to these countries to their compliance with international norms, even without the support of a strong domestic lobby.
IMPACT OF AID TO ISRAEL
Arguably, the large amounts of U.S. aid to the Israeli government have not been as beneficial to Israel as many would suspect. Most of the economic assistance has gone primarily to finance non-productive sectors such as settlements and the military, as well as to finance loan repayments to American banks. Indeed, each fiscal year since 1974, approximately $1 billion of Israel's $1.2 billion in Economic Support Funds has been used to cover the interest and principal due on previous U.S. loans that were made primarily to finance arms purchases from the United States. In addition, the $1.8 billion in annual military aid is in fact simply a credit line to American arms manufacturers and actually ends up costing Israel two to three times that amount in training, staffing and maintenance, procurement of spare parts, and other related expenditures. The overall impact is to increase Israeli economic and military dependency on the United States and to drain Israel's fragile economy, taking money away from Israel's once-generous social welfare system.
Ezra Sohar has observed how, unlike borrowing money to build a factory, borrowing for armaments does not produce profits
or create the ripple effect or ancillary industries that strengthen the overall economy. Until the 1967 war, when Israeli military spending averaged a little over 8 percent of the GNP, Israel's annual growth rate was a healthy 9 percent. When military spending dramatically escalated with an enormous increase in procurement of U.S. weapons, at times reaching as much as 35 percent of GNP, the economy faltered. Currently, military spending is slightly under 20 percent of the GNP, and the economy is still struggling.
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