Washington Report on Middle East Affairs, October/November 2013, Pages 22-24

Congress Watch

By Shirl McArthur

The Washington Report on Middle East Affairs current estimate of cumulative total U.S. direct aid to Israel is $130.212 billion, updating the estimate in the November 2011 issue.

It is an estimate because arriving at an exact amount is not possible, since parts of U.S. aid to Israel are buried in the budgets of various U.S. agencies or in a form not easily quantified, such as the early disbursement of aid, resulting in a direct benefit of interest income to Israel and a corresponding loss to the U.S. Treasury.

As a conservative, defensible accounting of U.S. direct aid to Israel, this estimate does not include the indirect benefits to Israel resulting from U.S. aid, nor the substantial indirect or consequential cost to the U.S. as a result of its blind support for Israel. Especially, this estimate does not include the costs resulting from the U.S. invasion and occupation of Iraq—hundreds of billions of dollars, thousands of American and allied casualties, and untold tens of thousands of Iraqi casualties—which is widely believed in the Arab world, and by many non-Arabs as well, to have been undertaken for the benefit of Israel.

Among the real benefits to Israel that are not a direct cost to the U.S. taxpayer is the provision allowing Israel to spend 26.3 percent of each year’s military aid ($815.3 million in FY ’13) in Israel rather than solely in the U.S. No other recipient of U.S. military aid gets this benefit, which has resulted in an increasingly sophisticated—and competitive—Israeli defense industry. As a result, the Congressional Research Service (CRS) reported that between 2004 and 2011 Israel was the eighth-largest arms exporter to the world, with sales worth a total of $12.9 billion. Also, in contrast with other countries receiving U.S. military aid, who must purchase through the Department of Defense (DOD), Israel deals directly with U.S. companies, and is exempt from DOD review.

Loan Guarantees

Another benefit to Israel is the loan guarantees that the U.S. has extended to Israel since 1972. While these have not yet been a cost to the U.S., they have enabled Israel to borrow from commercial sources at more favorable terms and lower interest rates, since the U.S. guarantees payment of the loans should Israel default.

The FY ’03 war supplemental appropriations act authorized $9 billion in loan guarantees over three years. In FY ’05 these were extended until FY ’07, and in ’06 they were extended again through FY ’11, with a “carryover” provision that Israel may draw on unused U.S. guarantees through FY ’12. Last year Congress passed the so-called “U.S.-Israel Enhanced Security Cooperation Act of 2012,” which extended the loan guarantee authority until 2015. CRS reported that $3.8 billion in loan guarantee authority remains as of 2013. Israel has not borrowed any funds against these guarantees since FY ’05, and CRS speculated that perhaps Israel views the U.S. guarantees as a “last resort” option should its unguaranteed commercial sources of funds become too expensive.

Subsidies for Israel’s Colonists and Colonies

A real benefit to Israel that has been an unquantifiable cost to the U.S. taxpayer is the private, tax-exempt money—probably hundreds of millions of dollars—that has been collected by charitable U.S Jewish and Christian Zionist groups that then send the money to support Israel’s colonists (“settlers”) and colony-related causes, including groups designated by the U.S. as foreign terrorist organizations.

Since every tax-exempt dollar that goes to the colonies represents a loss of, conservatively, 20 cents to the U.S. Treasury, that means that the U.S. taxpayer has indirectly subsidized Israel’s colonies to the tune of tens of millions of dollars, or more.

Sequestration

The widely-publicized “sequestration” of FY ’13 funds for most government agencies and programs, caused by congressional incompetence, also affects money for Israel. Although there have been some calls to somehow exempt aid to Israel, this probably won’t happen. Military grants (Foreign Military Financing, or FMF) are subject to a 5 percent reduction, and “non-exempt defense discretionary funding,” which includes DOD funds for Israel’s missile defense programs, are subject to a 7.8 percent reduction. CRS estimates that Israel’s funds from these two accounts will be reduced by a total of $192.4 million.

Components of Israel Aid

As with previous Washington Report on Middle East Affairs, estimates of U.S. aid to Israel, this report draws largely from CRS’ latest report on “U.S. Foreign Aid to Israel,” which uses available and verifiable numbers, primarily from the appropriations bills. Table 1 on the facing page is from the Appendix to that report, plus amounts from this writer’s reporting and research, especially for the columns showing DOD funds and interest income to Israel resulting from the early disbursement of aid.

Not counting the huge sums spent in Iraq and Afghanistan over the past decade or so, Israel is the largest cumulative recipient of U.S. aid since World War II. The $3.5 billion or so that Israel receives from the U.S. amounts to about $450 per Israeli. The largest amounts have been for military grants (FMF) and economic grants (Economic Support Funds, or ESF). In August 2007 the U.S. and Israel agreed on a new, 10-year, $30 billion aid plan, beginning in FY ’09 and calling for no ESF and incremental annual increases in FMF, reaching $3 billion or so by FY ’11 and remaining at that level through FY ’18.

Israel is the largest recipient of U.S. FMF funds. The president’s FY ’14 $3.1 billion request for Israel would amount to about 52 percent of total FMF funding worldwide. Furthermore, Defense News reported in August that Israel likely will be asking for even more military grants to maintain Israel’s “qualitative military edge” in the face of its alleged increasing security needs and U.S. sales of advanced arms and equipment to other countries in the region.

A major part of U.S. support for Israel’s defense program is the deployment to Israel in 2008 of the X-Band radar system to detect incoming missiles. Since this system is U.S.-owned and operated (meaning the constant presence on Israeli soil of U.S. troops and defense contractors), its considerable costs are not reflected in these numbers.

Another component of U.S. support for Israel’s defense program is the emergency U.S. stockpile in Israel. Since the 1980s the U.S. has stored military equipment and munitions in Israel for possible use by the U.S. and, with U.S. permission, by Israel in emergency situations. The stockpile consists of missiles, armored vehicles and artillery ammunition. Officially the equipment belongs to the U.S. military, but during Israel’s 2006 war against Hezbollah the U.S. gave Israel access to the stockpile. The authorized value of material stored in Israel started at $100 million, but has been raised in increments and now stands at $1.2 billion.

Another ongoing item is so-called “migration and refugee assistance.” This originally was intended to help Israel absorb Jewish refugees from the Soviet Union but was expanded in 1985 to include “refugees resettling in Israel.” However, since Israel doesn’t differentiate between refugees and other immigrants, this money subsidizes all immigrants to Israel.

Israel also regularly receives grants from the “American Schools and Hospitals Abroad” (ASHA) program.

A significant amount of aid to Israel comes from the DOD budget for “joint defense projects.” Previous Washington Report on Middle East Affairs, estimates identified about $8.5097 billion to Israel from the DOD budget through FY ’11. To that has been added amounts for FY ’12 and ’13, as shown in Table 1. Of the $479.7 million shown for FY ’13, the most significant amount is the $211 million appropriated to support Israel’s “Iron Dome” short-range missile defense system.

Table 1 also includes a conservative estimate of Israel’s interest income resulting from the early disbursement of U.S. aid. Assuming that Israel’s aid money is drawn down over the course of each year, a 2 percent interest rate is applied to one-half of the aid for FY ’09, and 1 percent is applied for FY ’10 through ’13.

The “All Other” column on Table 1 reflects information from the CRS report, plus this magazine’s reporting and research, giving amounts from other U.S. departments and agencies. The Washington Report on Middle East Affairs,’s 2006 summary uncovered $456.7 million in previously unreported grants and endowments, mostly to U.S.-Israeli scientific organizations. The two largest are the BIRD Foundation (research and development) and the BARD Fund (agricultural research). In June AIPAC reported that the BIRD Foundation had approved $11 million in grants to 14 new projects. The BARD Fund gets about $500,000 a year from the Agriculture Department. In addition, in each of FY ’09, ’10, ’12, and ‘13, Congress appropriated $2 million from the Energy Department for the U.S.-Israel Energy Cooperation Program; in FY ’11 $300,000 was appropriated. In FY ’10 the Energy Department contributed $3.3 million to the BIRD Foundation for clean energy projects.

For those who wish to look up more details, the adjacent Table 2 gives citations for the foreign aid and DOD appropriations bills for the past five years.

Shirl McArthur is a retired U.S. foreign service officer based in the Washington, DC area.