Israel’s defense ministry warned the Knesset finance committee on Monday that the local arms industry is expected to lose $1.3 billion in revenue each year and as many as 22,000 workers could lose their jobs when the new agreement for military aid from the United States kicks in at the end of the 2018 fiscal year.
Committee chairman Moshe Gafni (United Torah Judaism) demanded the renegotiation of the new 10 year aid package with Washington because it “will increase aid but our society will crumble from the inside.”
The new agreement negotiated between Prime Minister Binyamin Netanyahu (Likud) and former US President Barack Obama’s administration altered the previous terms of the military aid Israel receives, making Jerusalem even more economically and militarily dependent on Washington than before.
Until now, roughly 25% of the aid, adding up to billions of shekels each year, could be spent on local Israeli products. The fact that three quarters of the money had to be spent on American arms often more expensive and qualitatively inferior to Israeli weapons caused many to cynically view the aid as a US government subsidy to its own military industrial complex.
According to the new agreement – beginning in stages at the start of October – 100% of military aid will have to be spent on American products, resulting in major losses for local defense companies that will essentially lose their own military as a client.
In late 2013, the Brill shoe company’s army boot factory – servicing the Israeli military since 1948 – was forced to shut down and lay off its workers after the defense ministry decided to begin purchasing American boots.
The estimated loss is 4 billion shekels per year in defense purchases, which could lead to the closure of 130 factories, many of which are in the periphery employing workers from Israel’s weakest sectors.
Israeli defense companies – originally established to equip Israel’s military – have attempted to compensate for their losses in recent decades by dealing arms to regimes engaged in large-scale human rights violations like South Sudan and Myanmar.
Gafni expressed concern about the new agreement’s “severe ramifications for the delicate fabric of the State of Israel.”
“We won’t let something like this pass,” he added.
Economist Z’ev Zilber of Israel’s defense ministry pointed out that “The current [US] government is tough in its preference of American industry. This is a dramatic change.”
He added that having a strong local defense industry would allow Israel to be more independent and respond more readily in case of an emergency.
Member of Knesset Eyal ben-Reuven (Zionist Union) concurred with Zilber’s point, adding that “we could lose our independence in times of emergency. If we need an Iron Dome during a war, the prime minister can call and tell those responsible that he needs it now, work on it all night. In the new situation, we’re dependent on American industry, and that possibility disappears. The second thing is the technological engine… we can’t let those industries close.”
Gafni closed the meeting by calling for the government to renegotiate the aid package with Washington.
“Explain to the Americans that this harm to us is unacceptable. It’s a good deal with bad results and problems for Israeli society, which should have been dealt with in advance.”
