Israel’s defense industry is now a key partner of the US and this is good for Israel and America; A response to claims that there should be an end to US aid

By SETH J. FRANTZMAN

A new article at Tablet has argued it is time to End U.S. Aid to Israel: America’s manipulation of the Jewish state is endangering Israel and American Jews.

The article makes several key points, among them;

• “Israel ends up sacrificing far more value in return for the nearly $4 billion it annually receives from Washington. That’s because nearly all military aid to Israel—other than loan guarantees, which cost Washington nothing, the U.S. gives Israel no other kind of aid—consists of credits that go directly from the Pentagon to U.S. weapons manufacturers. In return, American payouts undermine Israel’s domestic defense industry, weaken its economy, and compromise the country’s autonomy—giving Washington veto power over everything from Israeli weapons sales to diplomatic and military strategy.”
• “Controlling access to the output of Israel’s powerful high-tech sector is a strategic advantage for the U.S.”
• “[The alternative to] an unequal relationship based on dependence is a more forthrightly transactional relationship, which would allow Israel to benefit economically, diplomatically, and strategically.”
• “Israel has now become dangerously reliant on U.S. military technology.”
• “Many American foreign aid arrangements are ultimately rooted in enriching a morally profligate arms industry that is financially headquartered in the U.S. but invested in conflict on a global scale.”
• “As the price of its dependency, Israel is now being forced to downgrade its own defense industries. Whereas the previous MOU contained a special provision for Off-Shore Procurement (OSP) that allowed Israel to spend around 26% of the aid it received on domestic products, the new terms require that all aid received from Washington be spent inside the U.S.”
• “Off-Shore Procurement (OSP) is to decrease slowly until FY2024, and then phase out more dramatically over the MOU’s last five years, ending entirely in FY2028.” As a consequence, the report notes “some Israeli defense contractors are merging with U.S. companies or opening U.S. subsidiaries”—in other words, transferring their personnel and capacities from Israel to the U.S.”
• “Israel gets preferential access to the F-35, but is then locked into a fleet of aircraft both riddled with technical problems and a poor fit for Israel’s strategic air priorities.”
• “Let America pursue its interests. Let Israel, too, follow its own interests, which sometimes align with those of Washington and sometimes don’t.”

I read this piece with interest but I think it misses some key points. It assumes that the 2018 MOU which continues to provide more than $3 billion a year, is somehow bad for Israel because it began to wean Israel of being able to plow this money into its own Israeli defense industry, instead of basically being $3 billion in “aid” to Israel that has to be spent in the US. While the article understands that the spending goes back to the US, to pay for expensive platforms like F-35s and KC-46A refuelers, it doesn’t provide evidence that this weakens Israel’s economy of compromises the country’s autonomy. It’s also not clear where the US has used leverage over things like F-35 deliveries to have “veto” power over what Israel does.

The opposite appears to be true. As Israel acquires the most advanced fighter aircraft it is well positioned to participate in more joint drills with the US such as Juniper Oak of the Tri-Lightning drills. Israeli F-35s joined the Red Flag exercise in the US for the first time in March 2023. This is a new era in joint training that is unique for Israel. Israel’s integration in CENTCOM has also enabled more discussions about regional air defenses and improved Israel’s ability to have its companies, such as Elbit Systems, send new technology to US-backed initiatives like Digital Horizon in the Gulf.

The fact is that the aid over the years has helped Israel create one of the world’s leading defense industries. Israel’s three largest defense behemoths, Elbit Systems, Rafael, and IAI, are selling arms all over the world and are leading developers of some of the most advanced defense tech. These companies are also now increasing deliveries of defense tech to Europe, such as Arrow sales to Germany, David’s Sling air defense sales to new NATO-member Finland, and a number of new deals in Netherlands, Denmark and countries like Greece and Romania. As countries in Europe move older munitions and platforms to Ukraine, they need to replace them quickly. Israel’s nimble defense industry has been able to help bolster western countries at a time when the US has to focus on its own priorities.

US defense aid didn’t turn Israel into a dependent state, unlike it probably did to some other countries, rather Israel used this aid to plug some gaps (such as buying F-35s, because Israel can’t build its own F-35s) and has otherwise become a massive defense seller in its own right. The $12 billion in record sales Israel recorded in 2022 is just one example of this. Back in the early 2000s, sales were only several billion. There is no evidence that US aid has made Israel dependent or weakened the country. In the opposite, the more the US has made the MOU reduce Israeli spending of the aid locally; the more Israel developed local industry.

The article argues that “Israel has now become dangerously reliant on US military technology.” This is not accurate. Israel may be reliant on some things, like F-35s, which Israel can’t build itself. But Israel is not reliant on US “technology.” I should know, I’ve covered Israel defense tech for a decade for Defense News and Breaking Defense and I’ve covered IDF operations going back to 2009. Israel develops most of its own defense tech. For instance the new Sa’ar 6 ships that Israel acquired (built in Germany), are being filled with Israeli defense tech. Ninety percent are Israeli-made defense systems. Basically all the systems on the ships, from Barak missiles to the naval version of Iron Dome, to the radars and remote weapon stations, are all Israeli tech. In addition, as those systems become operational and combat proven, they help boost Israel’s sales of the same systems abroad. The naval version of Iron Dome is being pitched in Asia, for instance.

Israel doesn’t rely on the US for outfitting its new ships and it doesn’t rely on the US to equip its tanks or its new armored vehicle program (Carmel) or for its rifles or drones. Almost all the new leading Israeli defense technology is created either through massive investment by Israel’s Big Three defense companies (which have record sales), and investment by the Defense Ministry in research and development through special programs tailored to dual-use start-ups. Israeli companies that come out of this investment, like Smart Shooter and Xtend, are supplying the US with technology. Israeli companies make the wings and helmets for F-35s. Israel partners with Raytheon and Lockheed and all the major US defense companies, not because Israel needs them, but because they want Israeli tech.

The article turns this success on its head and portrays the US as “controlling access to the output of Israel’s powerful high-tech sector is a strategic advantage for the U.S.” It argues Israel is forced to downgrade its industries and Israeli defense contractors are transferring their personnel and capacities from Israel to the U.S. This is a misreading of the importance of Israel partnering with US companies and creating subsidiaries in the US. Israel doesn’t have the industrial might to produce Iron Dome interceptors at the scale the US has. If Israel wants to sell Iron Dome abroad, or sell David’s Sling, it needs the capacity of US industry. It can also package the sales with the US industry to pitch these weapons to the US military. The US military doesn’t want to rely on foreign companies for systems, and therefore for Israel the partnerships are the best of both worlds. Israel wants to sell David’s Sling abroad, but David’s Sling was jointly developed with the US and Israel can’t pitch the air defense system on its own and compete with Patriot (the David’s Sling interceptor is a plug-and-play with the Patriot battery, meaning it can fit in it).

The argument that Israel is losing out on these deals is not bolstered by evidence. Israeli defense technology is now prized everywhere from Australia, to the UK and Europe. The fact that it is sometimes marketed with US companies, or through partnerships with large European companies, is a benefit for Israel. This gives Israel access, it doesn’t shut the door to Israel. The evidence for this is clear daily from reports in Israel, such as Rafael showcasing its FireFly loitering munition at the US Army Expeditionary Warrior Experiment (AEWE).

If there was evidence for Israel being put at a disadvantage by the partnerships in the US we’d expect to see it manifested in barrier to Israeli sales in the Gulf or Asia. Instead Israel’s ability to enter new markets expands every month.

Where Israel has an issue is in industrial capacity. The US can’t make enough munitions to supply Ukraine, and Israel doesn’t have a huge manufacturing base. This means that Israel often needs to outsource the making of things like Iron Dome interceptors. Israel does this through JVs with companies like Raytheon and the hardware of the systems are then built in the US. This doesn’t make Israel dependent due to aid, even without aid Israel will want to do these partnerships, but it does mean that in a world with supply problems for munitions, Israel has to wait like everyone else. There is no easy solution to this. Israel can’t scale up its manufacturing locally for all the systems it needs. Its defense behemoths already employ tens of thousands of people. Elbit says it supports 40,000 jobs in the country, for instance. Partnerships in India or the Gulf are also not a quick way to increase production because the Gulf is buying defense products, not scaling up making them; and India has its own local commitments. India has its own defense policy called Make in India, but India isn’t a position to make Iron Dome interceptors. Also Israeli companies like IAI already have major investments in India and recently acquired a new company there. There is no other alternative for Israel to buy advanced systems like tanks and planes. There’s no evidence Israel feels “locked in” to platforms like the F-35 or that it would prefer French warplanes. There aren’t a plethora of countries making 5^th generation aircraft.

In addition, Israel can’t partner with US defense industry for sales to the US (which helps Israel) and then go and outsource to places like China. Considering the current role of China working with Iran and Russia, why would Israel want Beijing as an alternative, after seeing how Beijing has handled its relationships elsewhere. Building key systems in the US is the best partnership for Israel. This is now a partnership that benefits Israel, it’s not dependency. The US is more dependent on Israel these days in terms of defense tech.

Where the defense aid helps is in programs like supporting Iron Dome, and also the partnerships on Arrow and David’s Sling, which require large investments. When we look back to how exposed Israel was in the Gulf war and truly dependent on hoping the US could suppress Scud launches; or how Israel didn’t have air defenses in 2006 and civilians had to flee to safe rooms in the north; today Israel is one of the most heavily integrated defended airspaces in the world. Countries all over the world look to Israel to learn how to make multi-layered air defenses and defenses to counter drone threats. This is an outcome of the US-Israel partnership on air defense that developed in the 1990s and 2000s.

These are investments that were a benefit for Israel. Unlike the Gulf, which doesn’t make its own air defenses and has to wait on slow procurement from the US and slow approvals, Israel makes its own defense systems. Today those systems are being sold to Germany and Finland. This means that Israel and the US both benefited from the joint development. Israel is most certainly not dependent in this realm. Per capita Israel is probably the largest defense exporter in the world and has the largest partnership with the US in this regard.

The next MOU will be negotiated in the next few years and it’s true that it will likely no longer enable the aid to go into Israel’s industries. In a sense any aid after 2027 will be aid that is US funding its own industries. But this is also a good thing. We want a large US defense industry. The US has to outcompete with China and build new platforms, rather than the slow procurement that the US got used to from 1990 to 2020 as the world’s hegemon. It is in everyone’s interests that the US have a large defense industry and I don’t agree that this fuels foreign wars. The article argues that there is a “profligate arms industry that is financially headquartered in the U.S. but invested in conflict on a global scale.” The opposite is true. Countries like China are spending massively on weapons. Other countries that sought peace and trade are not having to rearm, in Asia and in Europe.

Our adversaries won’t stop building tanks and planes and ships if we decide to scale back our arms industry. Iran didn’t stop building missiles and drones when the US entered the 2015 JCPOA. Russia didn’t stop when the US decided not to invest in air defense in eastern Europe. Evidence shows that adversaries are investing in arms. They have to be met and out gunned.

Our enemies are building more. As such, it’s perfectly normal that the US should increase defense industrial production. Israel also needs to invest more in manufacturing weapons, but overall in terms of defense tech Israel is a global leader and Israel is not dependent on the US. In the opposite, Israel is self-sufficient mostly and the US is dependent on Israel in some ways. That’s a good thing. It’s good to have the industries in Israel and the US knit together.

I welcome anyone who has an interest in Israel’s defense spending, defense tech and its defense industry reaching out. I cover this for Breaking Defense and it’s worth learning more about how the industry and Israeli defense start-ups are actually developing today.

On questions about the F-35s and Israel’s preference for the plane

Regarding the F-35 Israel has decided to purchase more of them. That means it likes the aircraft. Israel had an option to buy more F-15s or F-16s. It chose more F-35s. Israel is not a country that chooses to acquire wasteful gold-plated platforms that don’t work. It doesn’t have the luxury of acquiring things that it doesn’t use.

The F-35 is being used and it is working. Israel was the first to use the plane in combat. Furthermore Israeli industries are making elements of and for the aircraft. The aircraft as a platform is a data sponge, and I think the feedback in Israel is positive. The program may have been overpriced, like most US procurement programs, but Israel was not a partner of the program. Israel agreed to buy the airplanes, rather than be a partner. As such I think Israel got the best of both worlds. It has gotten 75 of the aircraft mostly funded by the US, and it hasn’t had to go through the development or the problems with the aircraft relating to cost.

One can argue that the cost in this aid was overpriced to the US, but that didn’t harm Israel in the long run; it’s a lesson for the US. The problems with the F-35 strike me as similar to other programs, whether the competition for the F-22, or those “Littoral” combat ships, or the Pegasus, or other programs going back to things like the Aquila drone. That’s due to the US having the luxury to spend time working on these projects, especially in the 1980s to the first decade of the 2000s. Now times are changing. The end result F-35 appears to be an aircraft that does what needs to be done. America’s competitors aren’t building aircraft that compete with it. Lockheed instead is building more and more F-35s. By contrast more F-22s aren’t being built or more Global Hawks. Judging by these realities, the plane is a success. There is no alternative. There isn’t some other 5th generation aircraft out there as a competitor.