Saturday, November 20, 2010

The Israeli Dependence on the American Support


By Dr. Mohsen Saleh, General Manager of Al-Zaytouna Centre for Studies and Consultations in Beirut

     The notion of the Israeli occupation’s dependence on the American financial support is prevalent among many intellectuals concerned with the Palestinian issue. They argue that if it wasn’t for the billions of dollars presented annually from the US, the Israeli Occupation would have collapsed.

     However, a more accurate and in-depth reading of the statistics related to the American financial support for Israel leads to a different conclusion. It exposes an exaggeration of the reality and reveals other forms of economic and non-economic support, not necessarily related to direct financial support.

     First: To start with, we should note that the American support to Israel includes the political support that makes the latter a state above the law. Thus, it is never called to account by the United Nations, the Security Council and various international bodies. It also provides Israel with the support and cover of United States allies and those in its orbit.

     The American support to Israel includes also military support that provides Israel with the latest and most destructive arms technology. It guarantees Israel's superiority in this field with a combat capacity enough to beat all Arab armies simultaneously. It also provides a cover for Israel's nuclear program, by which it had produced till today more than 200 nuclear heads. Add to the above the economic and media support.

     Second: On the other hand, the American financial support to Israel is undeniably big, as annual aid exceeds three billion dollars since 1979 until today. Thus, making it the largest aid compared to that provided by the US to other countries.

     The American financial aid to Israel has accumulated to a sum of 106 billions and 160 million dollars, between the Occupation's establishment in 1948 and the end of 2009, according to the report of the Congressional Research Service (CRS).

     The aid presented during the first two decades of the Occupation's establishment (i.e., 1949-1968) accumulated to 1.327 billion dollars; and in the following decade (1969-1978) around 11.427 billion dollars.

     This aid actually rocketed following the signature of Camp David treaty with Egypt, whereby the statistics of total aid between 1979 and 1988 indicate a sum of 29.934 billion dollars. Increased also slightly in the next decade (1989-1998) reaching an estimated 31.552 billion dollars. Then, it stayed in the same range for the following decade (1999-2009), where it was estimated by 31.922 billion dollars.

     Third: Regardless of the fact that the American financial support has maintained its levels throughout the past three decades, the Israeli dependence on this aid has dropped with time significantly.
Elaborating on the above, the Israeli Gross National Product (GNP) has been increasing at an approximate annual rate of 10% between 1948 and 1972. Then, the Israelis were making advantage of expropriating Palestinian lands and properties, of the high Jewish migration rates to Occupied Palestine, and of compensations paid by Germany for the Jewish victims of World War II; the American financial support was not a critical factor in the structure of the Israeli economy.

     During the period 1972-1985, the Israeli economy suffered a stifling crisis caused by many factors, mainly: the increase in oil prices, the increased expenditure on social services, and the increased military expenditure that totaled more than one fourth of the GNP, i.e., more than one third of the Israeli budget.

     Consequently, the Israeli economy suffered during that period from a drop in the GNP by an annual rate of 2%, from an earlier 10% annual increase. Concurrently, inflation rates have increased to 51% in 1978, reaching 400% by 1984.

     During that period, the American financial support was critical to the Israeli economy, especially as the former increased to about 3.1 billion dollars. Taking into consideration that the Israeli GNP in 1983 for example was in the range of 15.3 billion dollars, we conclude that the American support hence represented more than 20% of the GNP, covering for more than 30% of the Israeli government's budget in that year.

      Early in 1985, the situation was indicating a catastrophe and a complete financial collapse in the Israeli economy, had it not the US intervened again, and an emergent American assistance was sent, with a total value of 1.5 billion dollars. A national unity government was formed in Israel, including ministers from the Likud and labour party. This government adopted an economic reform program based on decreasing the governmental expenditure and salaries, imposing new taxes, and adopting more liberal and capitalist policies. These strategies proved efficient to a large extent in economic reform.

     The uprising of the first Intifada in 1987 incurred some losses on the Israeli economy. The Israeli government, however, was able to overcome its effect by taking full advantage of signing the peace treaty with the Palestinian Liberation Organization (PLO) in 1993, and with Jordan in 1994; of the dissolution of the Soviet Union and communist regimes in Eastern Europe (1988-1991); and of the consequent unipolar world order dominated by the United States.

     This allowed the Israelis to establish new diplomatic relations with around 50 countries, and develop increasing economic relations with big countries like China, India and Russia.

     Adding to the above that Israel took advantage of the emigration of around one million Jews during the period 1989-2000, following the dissolution of the Communist system in Eastern Europe. Among these migrants were tens of thousands of distinguished specialists, experts, brains and professionals.

     Hence, the Israeli GNP witnessed in the year 2000 a sevenfold increase compared to 1983, amounting to about 110 billion dollars, whereby then the percentage of Israeli dependence on American financial support dropped to 3%. Later, by 2008 and 2009, the Israeli GNP yet increased to the range of 200 billion dollars, thus decreasing the percentage of American financial support to merely 1.5%, i.e., practically, the Israeli economy has become independent from the American financial support.

     Fourth: Approaching the subject from another perspective, Israel gains a lot from its trade with the United States. This trade allows it to gain huge income revenues, and to compensate for the deficit in its trade balance. The United States is Israel's first trade partner, and the Israeli exports to the United States constitute usually more than one third of the total Israeli exports. For example, the Israeli exports to the United States reached 18 billion dollars in 2006 (38.4% of total exports), and around 16.7 billion dollars in 2009 (35% of total exports).

     Similarly for imports, the United States is Israel's first trade partner. In 2009, the Israeli imports from the United States were estimated at 5.848 billion dollars, constituting around 12.3% from the Israeli total imports value estimated by 47.367 billion dollars for the same year.

     The above points out a trade surplus of 11 billion dollars in the Israeli trade balance with the United States. This has actually been the average surplus for the past four years. It is by this surplus that Israel substitutes for the largest part of its trade balance deficit with other countries. Actually if it wasn't for this surplus, the Israeli trade balance would have suffered an annual increase in trade balance deficit ranging between 19.5% and 25.7% in the period 2006-2009.

     Fifth: With the upgrade of the Israeli economy during the few years following Oslo Accords, it reached economic levels of Western European countries, and even becoming better than economies of countries like Spain, Portugal, Greece and KSA. The annual Israeli per capita income in 2000 was estimated by 19 thousand dollars, and in 2008 by 28 thousand dollars; making it harder for the United States to justify the huge financial aid presented to Israel.

     Consequently, Israel has agreed with the American Administration in 1998 on a gradual reduction of economic aid (amounting then to 1.2 billion dollars) replaced by a gradual increase of military aid (amounting then to 1.8 billion dollars). According to the agreement, the economic aid will be reduced on average by 120 million dollars annually, while the military aid will be increased by 60 million dollars annually, for a ten year period starting from 2000; i.e., until the military aid reaches 2.4 billion dollars annually.

     However, before the end of the agreement period, the United States announced in August 2007 that it would increase its military aid to Israel by 6 billion dollars in the coming ten years. That meant that the annual military aid presented to Israel from the US will amount to 3 billion dollars in 2018. This indicates the tendency towards military aid rather than economic aid.

     The above not only indicates an escape from the accountability towards the American tax payers who might question the expenditure of their money on rich and developed countries; but also raises doubts regarding the sincerity of the American intentions towards achieving a peaceful settlement. It reveals the continuous American hegemonic desire of keeping Israel the regional baton and the policeman who imposes his will and conditions on the region even after reaching a peace settlement.

     Sixth: The Israeli entity has always been a manifestation of the Zionist project that presents itself in light of the political, economic and strategic interests of major powers and western countries. The sustainability of this entity and its power serve these interests, similarly does keeping the regional states weak, underdeveloped and disunited. This weakness will prevent civlizational development, keep them in a state of dependency, and keep them as well a large consuming market for Western products.

     This is why the Israelis consider the American support a "cheap price" for the role they are playing. The Israeli minister Ya'akov Meridor expressed this in a radio interview where he said that Israel for the United States is replacing ten aircraft carriers. If the construction cost of these carriers amounts to 50 billion dollars and the US pays a 10% interest on these costs, an annual sum of 5 billion dollars would have been due (not mentioning running costs of soldiers and maintenance, and the accompanying political unease resulting from its presence). Subtracting from the five billion dollars the three billion dollars value of the actual American annual aid, Meridor cynically asked: "So where is the remaining sum?"

     Twenty-three years earlier, Ariel Sharon said that Israel has presented services for the United States that exceed a 100 billion dollars value while the American aid doesn't reach 30 billion dollars. He added that 'the United States still owes Israel some seventy billion dollars'. [both quotes of Sharon and Meridor are translated from the Arabic translation of Hebrew].

     Seventh: The true value of the Israeli American economic cooperation is not in mere financial aid, but rather is in many aspects invaluable, like for example the cooperation in the fields of military industries and hi-tech fields, and the exchange of experiences and information so that the Israeli industry becomes capable of further improving its capacities, expanding its job market, and competing internationally with high quality imports especially in the markets of arms, computer, petrochemicals, … and others.

     Internationally, Israel has ranked in the top five countries exporting arms throughout the past years, following the United States, Russia and France. The total value of Israeli arms sold annually is estimated between 4 and 5 billion dollars.

     Eighth: The financial support reaching Israel from the US is not limited to the official sources, as the US is one of the eminent and well-known places for raising funds for Israel. It is also the most notable area where support bonds for Israel are sold. Annually, an estimate of one billion dollar aid is collected from donations to Israel, while another one billion is raised through bonds; most of it originating from the US.

      Ninth: Israel took advantage of the American political and economic pressure on many countries, where the US used to request from whoever wants to improve its relations with it to normalize its political and economic relations first with Israel. This led many countries to realize that the prelude to the American satisfaction is through Israel, and that establishing economic relations with Israel would thus be within a pragmatic approach to their own interests.

     Concluding, researchers and scholars should be more careful when discussing the Israeli financial dependence on the US, noting that such dependency has decreased to a large extent in the past years compared to the Israeli GNP and per capita income.

     What remains, however, is Israel's vital dependence on the American support in other aspects, such as trade, economic cooperation, and military support; which helps cover up the deficit in the Israeli trade balance, opens up opportunities of technological and military development, and provides huge consumer markets for the Israeli exports.

Translated by Al-Zaytouna Centre for Studies and Consultations
The original Arabic article appeared on Al-Jazeera net on 31/10/2010

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