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The U.S. Role in Israel's Arms Industry
Pressured to export arms in order to maintain and expand its arms industry, Israel looked elsewhere for markets. Increasingly, the United States has emerged as the most promising and reliable market. Under the 1979 U.S.-Israeli Memorandum of Agreement, renewed and expanded in 1984, Israel could bid for U.S. military contracts along the lines of other NATO allies. The U.S. also committed itself, under the terms of the Memorandum of Understanding on Strategic Cooperation, signed on November 30, 1981, to purchase Israeli military equipment worth up to $200 million a year. Within a short period of time, Israel succeeded in penetrating the U.S. defense market. Aviation Week & Space Technology reported that Israel’s defense product sales to the U.S. doubled from 1984 to 1985.113 Following a trip to Washington, in January 1985, by Israel’s Minister of Defense, Yitzhak Rabin, Israeli officials were delighted to learn that the Pentagon was planning to allow a sizable increase in Israeli military sales to the U.S. armed forces. Among the additional equipment that the Pentagon was planning to purchase were pilotless reconnaissance aircraft, mortars, other types of ammunitions and all sorts of other hardware. “We’re talking about several hundred million dollars in Israeli exports to the Pentagon,” a well-placed American source said.114 The Jerusalem Post reported that in 1986 Israel sold more than $400 million worth of military goods and services to the U.S., while the New York Times indicated that during the same year, Israeli exports in arms and services to the U.S. were roughly $500 million worth.115 In the spring of 1986, Israel’s Prime Minister Shimon Peres requested the U.S. to increase its military purchases in Israel for U.S. Army units stationed in Western Europe from $100 million to $500 million. Within a month, Peres received a favorable reply from the U.S. Department of Defense.116 Two other important developments could significantly increase Israeli arms sales to the U.S. The Free Trade Agreement (FTA), signed by Israel and the U.S. in March 1985, calls for the gradual elimination of customs duties on all trade between the two countries. The first of its kind between the U.S. and another country, the FTA is expected to increase Israeli exports to the U.S.117 And in relation to the cancellation of the Lavi project in August 1987, a reported compensation for Israel would be “a variety of attractive classified contracts pending [between the U.S. and Israel] that could potentially dwarf all current levels of U.S.-Israeli military cooperation.”118 Already an increasing number of Israeli arms manufacturers are counting heavily on the U.S. market, Ze-ev Bonen, general manager of Rafael, Israel’s Armaments Development Authority, stated in July 1986, that the “company’s future market possibilities are mainly in the U.S.”119 Israel’s Tadiran, which in 1984 sold approximately $60 million in communications equipment to the U.S. defense market, was anticipating doubling that figure in 1985.120 Israel’s largest trading organization, Koor Industries, Ltd., recently opened a Washington office to market the military products, including electronics and ground equipment, that are produced by some of its 300 affiliate companies.121 On a number of occasions, the U.S. has opted to lease rather than buy Israeli military equipment. For example, the U.S. leased from Israel three mine plows and six 105 mm guns for evaluation and possible future purchase.122 The most widely known case of U.S. leasing of Israeli military equipment involves the Kfir fighter jets. In 1985, the Israeli Air Force agreed to lease 12 Kfirs to the U.S. navy which were later based at the U.S. Naval Station in Oceana, Virginia. In return for the “free of charge” lease, IAI was given the exclusive right to service the Kfirs in the U.S. at a cost of $68.5 million for a three-year period.123 In reality, this lease was part of a barter exchange with the U.S. Navy which lent Israel 12 Ch-53A Sea Stallion Helicopters.124 The Kfirs are used by U.S. Navy pilots to simulate Soviet-made MiG-21 and MiG-23 fighters in training exercises.125 The program at Oceana was instrumental in convincing the Navy to lease another 13 Kfirs assigned to an airbase in Yuma, Arizona. Again, IAI won a 38-month $96.5 million contract from the U.S. Navy to service the planes.126 Israel benefited in a number of ways from this leasing arrangement. With a surplus of Kfirs, because of a limited ability to sell the plane worldwide, Israel stands to gain by winning the exclusive service contracts. Second, the leasing was viewed as promoting closer military ties with the U.S.127 Third, the introduction of Kfir into the U.S. Navy, according to Marvin Klemow, director of IAI’s Washington office, “will give not only IAI but all other Israeli companies a chance to demonstrate that Israel can maintain a complicated, total weapons system in the U.S. inventory.”128 Finally, the lease was viewed as enhancing Israel’s arms industry reputation around the world. The fact that the U.S. Navy leased the Kfirs, it was argued, shows that “IAI is a leader in the aerospace industry and deserves the respect of a lot of people.”129
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