Commentary Magazine


Israel's Economic Crisis: What the U.S. Can Do

Israel is in serious financial trouble, and the American press is filled with analyses and solutions. Most accounts treat the country as an almost hopeless basket case—at least as an endless sponge off the American taxpayer. Authorities offer differing explanations of the problem: the high rate of government spending (in Israel the national budget is about equal to the country’s GNP); the cost of West Bank settlements, or of the Lebanon war; the high rate of private consumption; serious errors in judgment which have impaired the nation’s economic performance. While there is disagreement about the cause of the current crisis, nearly everyone agrees on the need for a government-imposed austerity program. Even many of Israel’s friends in this country believe that budget cuts, not aid, are what Israel requires. Indeed, at the end of 1984 the U.S. refused to increase aid until Israel adopted a much tougher economic policy.

The one element missing from the discussion happens to be the crucial one—the dimension of strategy. Whether and how the United States helps Israel in this period of serious budgetary constraint should depend, in large measure, on the manner in which our interests will be affected by one course of action or another. To grasp the implications of this statement requires a look at the nature of Israel’s economy and its relation to American strategic and defense needs.

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I

In contrast to most countries that are the recipients of U.S. aid, and in spite of the current crisis, Israel boasts an economy that is fundamentally sound. The country is able to feed itself and export a surplus in agricultural products; it has a significant and growing high-technology industry. Indeed, Israel is a pioneer in both defense and civilian areas of high technology and in many instances surpasses Europe on the frontiers of the latest developments. This success is reflected in exports that were higher per capita than Japan’s until 1983 and are still almost twice as high as South Korea’s. From 1970 to 1982 Israel had a higher export growth rate than Japan, the United States, and West Germany.

Why, then, the crisis? The main cause is the chronically huge defense burden. Israel suffers from one of the world’s highest per-capita defense expenditures—an average of 25.5 percent of GNP over the last decade. (The comparable figure for the U.S., even after the Reagan build-up, is about 7 percent.) Military expenditures ballooned after the October 1973 war when the cost of weaponry began to increase dramatically and Israel was forced to compete with rapidly escalating Arab purchases. In 1968, Israel had purchased Phantom jets from the United States at a cost of $2.4 million per plane; when it purchased F-15′s only a decade later, each jet cost $24 million. It is not surprising, therefore, that the intensified arms race in the Middle East has forced Israel to increase imports at an alarming rate, swamping the country’s exports in the process. The results are depleted foreign reserves, a huge imbalance of payments, and an annual inflation rate approaching 450 percent.

The figures tell the story. In 1972 Israel’s growth rate was an impressive 12.6 percent. Ten years later it was zero. As Israel began to borrow large sums to pay for its post-1973 rearmament program, its external debt mushroomed. In 1972, Israel owed $4 billion abroad; today that figure is $23 billion. Before the October 1973 war Israel spent “only” 17.6 percent of GNP on defense and its economy was regarded as vibrant. The extra 8 percent of GNP spent on defense over the last decade is about $2 billion—the amount critics say the Israelis should be cutting from their budget.

Even the conclusion of peace with Egypt complicated the country’s economic difficulties. The need to move critical airfields and bases, and to purchase equipment to compensate for the loss of strategic depth, exacerbated the burdens of debt and inflation, and easily cost the country the equivalent of an extra year’s defense budget. Moreover, if Israel had retained the Sinai it would have become a net exporter of oil. Today its annual oil bill of almost $2 billion adds to the balance-of-trade problems.

Defense and debt servicing together account for about 60 percent of Israel’s national budget. Both are related to national security and account for about $14.5 billion out of a $23-bil-lion national budget. A further defense-related drain is caused by the incalculable costs of a reserve system in which every male citizen under the age of fifty-five is eligible to serve up to 45 days a year in the army, under “normal” conditions. Even construction adds to the defense burden, because of the need to build expensive shelters in homes and offices. The costs to society of conscription, stockpiling, and civil defense are hidden burdens that add as much as another 25 percent to the Israeli defense budget.

It is true that Israel receives the highest proportion of American foreign aid of any country—in Fiscal Year 1985, at $2.6 billion, some 17 percent of the total aid budget. It is also true that the President and Congress have recently moved to convert Israel’s aid package, which has traditionally been in the form of market-rate loans, to outright grants. American assistance to Israel has been impressive and generous.

Nevertheless, in 1984, aid to Israel, when viewed in constant 1984 dollars, was less than 50 percent of what it had been a decade earlier. Economic aid now barely covers Israel’s annual debt payments to the United States. Since U.S. aid is typically allocated only if the recipient is prepared to spend the funds on American goods in the U.S., Israel’s aid has almost invariably had to be used in America, where the costs are not always competitive. (Major exceptions have been funds extended to Israel for the development of the Merkavah tank and the Lavi fighter aircraft, and loans covering a part of the expense for redeployment from the Sinai.)

Moreover, in view of the services Israel performs for the U.S., it is possible to argue that the assistance it receives is rather small. Critics often focus on the $2.6-billion figure, ignoring the fact that this only approaches 1 percent of the U.S. defense budget. This, for a country that is not a Third World dependency but a major unit in America’s network of allies around the world.

In addition, many of the services the United States gets from Israel cost nothing—which is not the case with our other allies. For example, both Israel and West Germany have bases on their soil which might be used by American armed forces in an emergency, but only the bases in Germany are co-financed, i.e., the U.S. pays a portion of the cost but West Germany controls them. This is an element of the NATO infrastructure program to which we contribute about $500 million annually; through the same program, the U.S. pays for a portion of West Germany’s radar surveillance and air defense systems. In the case of Israel, there is no comparable burden-sharing mechanism. When Israel’s E2C Hawkeyes watch Soviet aircraft activity in the eastern Mediterranean and over Syria, Israel pays the entire bill; when AWACS watch Soviet aircraft in Eastern Europe, the U.S. shares the cost with its NATO allies. The U.S. depends on Israeli control of the eastern Mediterranean, which has key implications for NATO’s security, but Israel alone performs the task.

The U.S. today has about 330,000 troops stationed in Europe and another 110,000 in East Asia; although the presence of the troops aids these countries in their own defense, it is not called a subsidy. In the critical period after World War II the United States helped Germany and Japan emerge from defeat; the assistance inherent in occupation and alliance was not regarded as largesse. At various points over the last three decades the United States has increased aid to South Korea in response to Seoul’s participation in the Vietnam war and to contemplated U.S. withdrawals from other positions in East Asia; the aid, which helped produce the Korean economic advances of the 1970′s, was not regarded as charity.

The U.S. legitimately subsidizes its allies because they assist in the defense of America’s vital interests. But the failure to classify this assistance as foreign aid—or, to put it the other way, the failure to classify aid to Israel as defense assistance—creates a distorted picture, both of our own burdens and of those shouldered by Israel. In 1983, the entire U.S. aid budget worldwide was only $14 billion; the amount allocated to Israel in that budget—17 percent—seems abnormally high. But the total aid budget was only 10 percent of what we spent in 1983 on NATO alone. Defense is more expensive than foreign aid. In terms of defense, what Israel costs us is minuscule, while what it gives us in return is invaluable.

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II

Since Israel is obviously important to American interests, why is aid to Israel seen as charity, whereas subsidies to other allies are viewed in terms of security? The answer to this question lies in the history of the overall American approach to the Arab-Israeli dispute.

As Peter Grose has pointed out in his recent book, Israel in the Mind of America, support for the Jewish state was regarded from the beginning as a moral rather than a security commitment by the United States. In the early days of the state, anyone who seriously suggested that Israel could serve as an important asset in the effort to combat Communism in the Middle East was either ignored or derided. To most national-security analysts, indeed, American support for Israel was an act of charity for which the U.S. would suffer, in diminished influence in the Arab world. Only after the Six-Day War of 1967 did Israel begin to be viewed by some officials as having a modicum of strategic utility, but these positive perceptions vanished again in October 1973 with the initially successful attack by Egypt and Syria and the accompanying oil embargo by the Arab members of OPEC.

The disposition to think of Israel as a charity case has been encouraged—however inadvertently—by the American Jewish community, the group which has also provided the bedrock of Israel’s support in American society. Much of Jewish life in this country since the 1940′s has been organized around fundraising for Israel. The dinners, the meetings, the rallies, the constant appeals for cash, although based on a vision of Israel as a country of superhuman warriors and pioneers, have paradoxically fostered a “poor cousin” syndrome. This became exacerbated in the late 1970′s when some American Jewish leaders came to believe that the “cousin” was not spending its donated funds with probity and efficiency.

What many of these leaders were really reflecting was an unhappiness with Israel’s negotiating posture, which they felt to be intransigent and myopic. And in this unhappiness they were taking their cue from the Carter administration, with its belief that only Israel stood in the way of a comprehensive settlement of the Middle East conflict. In this atmosphere, not surprisingly, the notion that support for Israel meant a sacrifice of American interests gained new adherents.

But if, for a variety of historical reasons, Israel has been widely seen in the United States as either a charity case or a liability, in the late 1970′s a series of events occurred which transformed America’s relations with most of the states of the Middle East and began to cause some rethinking of the role of Israel.

When Egyptian President Sadat traveled to Jerusalem in 1977, he refuted the American view that peace between Israel and the Arab states had to be pursued indirectly and comprehensively. And when, subsequently, Saudi Arabia and Jordan refused to assent first to the Camp David agreements and then to the Reagan plan, it was suddenly their turn to incur the displeasure (however qualified) of Washington.

The fall of the Shah of Iran was another factor conducing to a reassessment of the role of Israel in maintaining America’s security interests in the Middle East. Successive administrations had seen Iran as a linchpin of the U.S. position. Even Carter, harsh though he was on the Shah’s human-rights policies, called him an “island of stability in one of the more troubled areas of the world.” If the Shah’s regime had proved fragile, how could any non-democratic government in the area be considered stable?

Moreover, the replacement of the Shah’s regime by one officially committed to fanatic anti-Americanism triggered a rapid deterioration of U.S. interests. In 1979, panic buying on the stock market led to a tripling of oil prices. Later in the year the hostage crisis drained American energies and influence for months thereafter. The chaos facilitated the Soviet invasion of Afghanistan, bringing the threat of Soviet expansion closer to the Middle East oil fields. In the fall of 1980 the Iraqi regime—frightened by the Khomeini threat and covetous of territory—attacked Iran. This border war, in seemingly endless stalemate, still continues.

At the same time, the rise of the Shi’ite threat exacerbated traditional divisions within the Arab world, already sharpened by the growing gap between oil-rich and population-dense countries. When Arab Syria and Libya decided to support Persian Iran against Arab Iraq, the taboo against collaborating with countries at war with a part of the Arab nation was broken no less sharply than when Sadat traveled to Jerusalem. This did not mean that other Arab states were about to follow the example of Sadat (who was assassinated by Muslim fundamentalists in October 1981). But the preoccupation with Iran and with intra-Arab opponents did dissipate energies hitherto directed onto the conflict with Israel and reduced the importance of the Palestinian issue. Israel’s smashing of the PLO base in Lebanon in the summer of 1982 further removed the Palestinian issue from the forefront of Arab attention.

All this forced the United States to begin rethinking its policies in the area. Since October 1973, it had been assumed that only a comprehensive settlement of the Arab-Israeli dispute would resolve the energy crisis, improve America’s relations with the major Arab states, and enhance regional stability. This ruled out any strategic cooperation with Israel, which, it was thought, would alienate the Arabs and jeopardize the entire structure of American diplomacy in the Middle East. The new crises in the area, for the most part unrelated to Israel yet involving the largest oil-price rises in history, the most violent indigenous Middle East war, the greatest humiliation of the United States, and the most provocative Soviet action ever, thoroughly undermined these assumptions and helped bring about a reconsideration of the role of Israel in American strategy.

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III

To be sure, there were those in Congress and outside government who had already begun to question the treatment of Israel as a problem rather than an asset. These critics argued that the Arab states, whatever objections they might have to close U.S.-Israeli ties, were more interested in their own survival. Were not these Arabs more likely to be alienated by U.S. weakness than by actions—even if taken in concert with Israel—that would strengthen American credibility? And quite apart from the Arab reaction, the fact was that Israel was the premier military power in the area, especially after the Shah’s downfall; this alone suggested the need to expand and strengthen our ties with the Jewish state.

One of the leading figures in this group was the then-candidate Ronald Reagan, who with simple incisiveness brushed aside the cautious fears of national-security officials (and the qualms of many American Jews) and proposed in effect to treat Israel as a strategic ally. Yet when Reagan became President he allowed his Secretary of Defense, Caspar Weinberger, to press for a closer relationship not with Israel but with pro-American Arab regimes, on the theory that this would lead to a more defensible Western position in the area. Although this did not necessarily rule out cooperation with Jerusalem, during the first three years of the Reagan term conflicts within the administration and with the Begin government prevented the implementation of any new strategic program with Israel.

The most important of the disputes occurred over the Israeli invasion of Lebanon in June 1982, which—initial appearances to the contrary notwithstanding—the United States did not support. Although there may have been sympathy for the Israeli objective of ending the PLO threat to the Galilee, there was also a widespread belief within the administration that the broader objectives of destroying the PLO, breaking Syrian control over Lebanese politics, remaking the Lebanese polity under Christian control, and achieving an Israeli-Lebanese peace could not be accomplished. During the summer of 1982 the U.S. and Israel were working at cross-purposes. The administration was concerned to limit any possible damage to its position in the Arab world. It also sought a particular solution to the Palestinian question which it feared Ariel Sharon’s gambit in Lebanon was designed to prevent. Therefore, it agreed to participate in a multinational force whose prime mission was to guarantee the safe exit of PLO fighters still in West Beirut, and it issued the Reagan plan on September 1.

Because the administration approach in 1982 was based on assumptions which had become outdated, each part of this policy proved a failure. When the United States released the Reagan plan, it believed it had assurances that Jordan would rapidly agree to enter into negotiations with the U.S., Egypt, and Israel; but King Hussein tarried and then refused. When the United States gained an Israeli-Lebanese accord in May 1983, it believed that Syria had agreed to withdraw from Lebanon once Israel made a parallel commitment; Assad reneged. The administration thought Saudi Arabia would press both Hussein and Assad to acquiesce in the two American initiatives; but Saudi Arabia held back. The Reagan team had simply ignored the weakening of the Arab states over the previous years, the increasing reluctance of pro-American Arab regimes to take independent initiatives, the reduced centrality of the Palestinian question, and the disintegrative impact of the dynamic new movements emanating from Teheran.

The administration’s greatest failure in Lebanon, however, came in the wake of its third initiative—the attempt to use the American presence in the multinational peace force to determine the outcome of the Lebanese civil war. The U.S. simply did not have the capacity to achieve its objectives by means short of a massive intervention that would not be supported at home and whose success could not be guaranteed. The attempt to achieve these aims “on the cheap” by employing a small force in a non-combat role, backed by offshore firepower, was bound to have the devastating consequences it did.

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Neither the Israeli nor the American experience in Lebanon is a testimonial to successful policies. But they have not proved to be strategically damaging. They carried a price—in the loss of life, in tarnished reputations, in the improved Soviet weapons sent to Syria, in the cooling of Egyptian-Israeli relations, and, for Israel, in the $3-billion cost of the war and the harm caused to the social fabric of the country. But in calculating the political-military position of both countries it cannot be stated on balance that either is weaker than it was before the war. Moreover, the war has had the unforeseen effect of deepening the conception in Washington of Israel as a strategic ally.

The failure of the U.S. to develop an effective policy which would secure a united and independent Lebanon has underlined the significance of trustworthy local allies in the area. Confrontation with terrorism in Lebanon has made American officials more sympathetic to Israel’s problems and more dependent on the tactical lessons of Israeli experience. Israel has, in addition, proved once again to be the only country in the area ready and willing to identify with the fundamental strategic objectives of the United States and sufficiently powerful to act on the basis of that identification. The Arab states remain either hostile to the United States or too frightened by Iran or the radicals in the Arab world to act.

Thus the Saudis have refused to grant Washington bases on their soil and have refrained from actively backing U.S. initiatives. King Hussein has proved once again that the very quality which enables him to survive, his tactical caution, makes him a weak pillar on which to base policy. The Sultan of Oman, traditionally friendly and with a country located strategically on the Strait of Hormuz, has indicated that American use of his facilities cannot be guaranteed. Although some believe that the new diplomatic relations between Iraq and Washington hold out hope, Baghdad shows no signs of willingness to further U.S. interests in the area; even if it were prepared to do so, the war with Iran has sapped its strength. (Association with Iraq would also harm whatever chance there might be for reconciliation with Iran.) Worst of all, negotiations with Egypt over the use of upgraded facilities at Ras Banas on the Red Sea—considered critical to any American activity in the area—completely broke down in early 1984, and discussions on the use of other facilities have also fared poorly. The current Egyptian government remains reluctant to risk its newly regained respectability in the Arab world by becoming too closely associated with the United States.

In short, the idea of a pro-Western entente among Saudi Arabia, Egypt, Jordan, Iraq, and Arafat’s wing of the PLO has proved chimerical. None of these parties is sufficiently strong or independent to pursue policies in close cooperation with the United States. The power of Saudi Arabia and Iraq has been further diminished by the billions of petrodollars wasted in the war with Iran and by the worldwide oil glut of the 1980′s which has decreased their leverage with respect both to their fellow Arab states and to the Western powers. Added to this, in the eastern Mediterranean, are the moves by the Papandreou government in Greece to distance itself from the United States, and continuing tensions between Greece and Turkey that place in question the reliability of either Athens or Ankara in a crisis.

If Israel’s perceived value has thus grown since the upheavals of the late 1970′s, this is hardly to suggest that it is or should be America’s sole ally in the Middle East. Nor could the Israelis be expected to behave like mercenaries, to defend the oil fields with their own blood and treasure, or to act as arbiters of regional antagonisms. The country is too small, its struggle for survival too urgent, and its acceptance in the area too tentative. Yet Israel’s value as a democratic, militarily and politically vibrant ally cannot be underestimated. In the Middle East, Israel plays a role fully comparable to that of the NATO countries in Europe, which by their very existence serve as buffers against anti-Western onslaughts.

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IV

Events of the last decade have thus made Israel more critical than ever to the maintenance of U.S. interests throughout the Middle East; yet Israel stands on the brink of economic collapse. Unless a satisfactory policy is developed for dealing with this situation, the U.S. position in the area will be compromised and America will have to assume a series of new and costly burdens.

Shimon Peres was right when he suggested on his trip to the United States in October 1984 that Israel could have a robust economy or a strong defense, but not both: “Our own problem is either to make Israel weak militarily and strong economically, or to maintain our military posture and try to look for economic assistance.” The economic crisis has already forced reductions in defense spending, which will mean cutbacks in procurement, research and development, training, and in the size of the regular army, and is bound to affect morale in the Israel Defense Forces (IDF) as well.

Because the U.S. requires a viable Israeli defense posture, it cannot allow a deteriorating economy to threaten Israeli security policy and ultimately the balance of forces in the area. Yet in recent years, and despite the growing recognition of Israel’s strategic importance, American policy has sunk into a vicious circle by which the Israelis are being bankrupted. Billions in arms sales to the Arabs are “balanced” by millions in aid increases to Israel. Israel is then forced to increase spending drastically in order to offset the Arab advances. The Israelis are being swamped by the effects of burgeoning Arab arsenals without the Arabs’ having to fire a shot.

Although Israeli defense spending increased (in constant 1981 dollars) from $2.9 to $5.5 billion between 1972 and 1982 and is now declining, Arab military expenditures in that time period increased from $7.8 to $41.5 billion and are still rising. The effects have been dramatic. Before the Six-Day War of 1967, Israel had about 250 combat aircraft and the Arabs about 800. In 1984 the comparable numbers were 550 for Israel and 2,500 for the Arabs. In 1969 Israel had about 1,000 battle tanks to the Arabs’ 2,200; by 1984 the Israelis had under 4,000 but the Arabs had about 15,000. As late as 1970 Israel could mobilize about 300,000 men, and the Arab states combined could mobilize about 750,000. Today Israel can mobilize 500,000, while the Arab manpower pool exceeds 3,400,000, a larger number of troops than the United States maintains. Thus, the mobilizable manpower ratio has changed between 1970 and the mid-1980′s from less than 2½ to one to almost seven to one against Israel.1

Despite their series of defeats at the hands of the Israelis, the Arabs thus have a weapon which could yet undo the Jewish state. It is true that Israel has previously been able to balance sophisticated Arab arms purchases with its own expensive technological developments, but as Arab purchases continue and Israel is forced to cut costs, the margin of advantage is systematically being reduced. Some observers argue that the current Middle East stalemate is likely to be broken by Arab frustration, but a greater danger lies in a breakdown of the all-important Israeli deterrent, without which U.S. policy in the area will itself be wrecked.

The strange logic of our current arms policy nonetheless continues in place. In 1985, new American arms sales are being considered to the Arab states—including 40 additional F-15′s to Saudi Arabia. At the time of previous such sales, in 1978 and 1981, it was argued by their proponents that the Saudis would reciprocate by encouraging the “peace process,” or by keeping the price of oil down. These arguments have worn thin. But today there are other arguments: the Europeans will sell to the Arabs in any case; the sophisticated arms are necessary for defense against Iran and the Islamic fundamentalists; the U.S. must maintain its influence in the Arab world; the U.S. needs the cash.

In 1978, the sale of F-15′s to Saudi Arabia signaled the entry of major new weapons systems into the area; in 1981, with the sale of AWACS, the United States for the first time offered an Arab state a system technologically superior to comparable weapons being sold to Israel. From this point of view the latest round of arms sales is not so ominous, constituting primarily additional quantities of sophisticated weaponry and specialized add-ons to the existing equipment, rather than totally new systems. But unlike the situation in 1978 and 1981, Israel is increasingly unable to afford the technological counters to these arms. By engaging in major arms sales to Arab states, the U.S. is thus undercutting the security of its key supporter in the area, and jeopardizing its own vital security interests.

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V

Out of concern for its own interests the United States cannot permit Israel to suffer a defense breakdown or an economic collapse. The question is therefore not whether to assist Israel, but how. There are four general approaches, and they are not mutually exclusive. The United States can reduce arms sales to Arab countries; accede to Israel’s requests for major increases in economic and military assistance; initiate a program of security assistance through the U.S. defense budget; begin to provide the Israeli defense industry with the long-term contracts it requires.

The first two approaches—ameliorating Israel’s burdens or offsetting its budgetary pressures—are familiar enough. As to the third, some Congressmen have already suggested placing the increases in assistance requested by Israel within the defense budget. The suggestion has thus far been thwarted by the State Department, which seeks to keep all forms of foreign assistance within its jurisdiction, and by the Pentagon, which is uninterested, but it remains a sensible proposal.

The fourth approach is the most intriguing because it is the only one which addresses Israel’s key economic problem—the need to increase exports. By providing long-term contracts, some through the defense budget, the U.S. could assist Israel in expanding its high-technology industries, which form the basis of the country’s economic future and are central to its continued viable defense. Ironically, defense cooperation with Israel could actually be profitable to the U.S., because the Israelis have developed a host of innovations which could save substantial sums if adopted by the American armed forces.

As Gerald Steinberg has pointed out, the Israeli specialty is to develop arms which are “technologically current and more reliable but less complex, easier to maintain, and far less expensive than their American counterparts.” The Israelis maintain their competitiveness by upgrading, refurbishing, and even rebuilding major high-cost weapons systems. In contrast to the United States, the Israelis stress operations and maintenance rather than new weapons, which can frequently demonstrate serious problems of performance and repair.

Moreover, the Israelis take advantage of their combat experience to adapt new designs to specific needs rather than merely emphasizing the latest technology, as is the American habit. They have developed rigorous testing procedures which are used before production begins, to avoid the types of errors frequently confronted in the United States. In weapons development they take an incremental approach, often grafting new components onto proven systems. As a consequence, their lead time between design and fielding a weapon is usually one-third to one-half that of the United States.

Thus, it may be wiser to pay the Israelis to develop certain systems. For example, the Israelis have produced a mini-RPV (a miniature plane with a TV camera used for battlefield intelligence) which is less sophisticated than the comparable U.S. model, but highly successful. The Israeli RPV has already been in combat, while the U.S. Army is still working on its program, the Aquila, which has suffered long delays and significant cost overruns. Two Israeli systems were developed at a cost of about $15 million each; the projected development cost of the U.S. system is $2.44 billion. In frustration, the U.S. Navy and Marines recently purchased several Israeli RPV’s for their own use. As this one example only begins to illustrate, the Israelis are in a position to aid the U.S. in overcoming massive costs and cost overruns, problems of reliability, delays in production, “gold-plating,” and rapid obsolescence.

Israeli skills also have profound implications for Europe. Outdated conventional equipment deployed by NATO could be refurbished by the Israelis at a fraction of the cost of new equipment. The sharing of skills with the United States and its European allies could be an important step toward reinforcing NATO’s capabilities, especially significant during the next several years when the NATO stockpile of battlefield nuclear weapons will be reduced.

By helping to overhaul and maintain U.S. armed forces in the Mediterranean, Europe, and the Middle East, both in normal periods and during a crisis, Israel could save the United States several hundred million dollars, not only in improved procedures but by reducing the need to deploy as much equipment. With long-term contracts the U.S. could help expand Israeli facilities so that the Israelis could maintain equipment (especially aircraft) not currently in their inventory.

In the strategic-cooperation talks between the U.S. and Israel, no agreement has so far been reached for prepositioning American matériel such as arms, spare parts, and oil in Israel in case of an emergency. Yet Israel is a perfect point from which to resupply U.S. forces in Europe and the Middle East. American forward stockpiles are also increasingly vulnerable to a Soviet conventional first strike, and a reliable supply line would be an even more critical need if Greece and Turkey were not participating. Using Israel as a “swing” base to either the Persian Gulf or Europe would mean that the U.S. would be able to transport larger amounts of matériel more quickly and cheaply than if the equipment had to be shipped from the U.S. directly. Israel is peculiarly appropriate as a base of supply because it already has most of the facilities that the U.S. would require, and U.S. leaders need not worry that these facilities might become unusable due to government instability, indecisiveness, or even military attack.

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These are just some of the benefits that might flow from a U.S. policy based forthrightly and not just formally on the notion of strategic cooperation with Israel. Such a policy could serve simultaneously to revive the Israeli economy, insure the Israeli deterrent, save substantial sums in the U.S. defense budget, and safeguard the American and Western position in the Middle East. Perhaps best of all, in contrast to what happens with foreign aid, such a program would begin to pay its own way immediately.

One objection that might be raised to this proposal is that Israel could thereby become a competitor of the United States in the arms field. But Israel is simply too tiny; even with its intolerable defense burden, it spends under $6 billion to America’s $300 billion. Other constraints—the small domestic market, geographic distance, barriers on imports to the U.S.—similarly make it inconceivable that Israel will become a defense Goliath. What it is in a position to do is to offer the product of its know-how to American companies for cooperative programs in development or production. The result could, in fact, mean increased employment opportunities in American plants.

What is required on the part of American leaders is the wisdom and foresight to initiate a new program with a critical ally. The time to act is now, before Israel’s economic crisis becomes so acute, or arms sales to Arab countries so large, that the effectiveness of the Israeli deterrent is compromised and we too begin to suffer the consequences of miscalculation.

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Footnotes

1 These figures include Egypt, despite the peace treaty, because Israel cannot afford to ignore Egyptian military capabilities. Even if Egypt is discounted, however, the Arab figures are still staggering: arms expenditures of $39.2 billion; 2,000 combat aircraft; just over 13,000 battle tanks; and almost 2,500,000 mobilizable men.

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