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Obama to «Israel»: US Taxes Won’t Go to Your Military Contractors

Obama to «Israel»: US Taxes Won’t Go to Your Military Contractors
folder_openZionist Entity access_time7 years ago
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The US and the "Israel" entity are close to clinching a massive 10-year arms deal, but Washington is pushing to scrap a coveted provision that allowed the entity to pump hundreds of millions of dollars directly into its military industry.

Obama to «Israel»: US Taxes Won’t Go to Your Military Contractors

If successful, the administration's push to remove the clause would inflict some real pain on the "Israeli" entity's military sector, which already exports more arms overseas than almost any other country apart from the US.

On the flip side, the change would mean a potential windfall for American military contractors scrambling to sell their wares abroad to make up for declining sales at home.

The Middle East and Asia are now driving growth for major US contractors, with about a quarter of revenue coming from international sales, compared with 15 percent in 2008.

Under the change proposed by the White House, the "Israeli" entity would have to spend all the funds it receives in the arms package on US-made weapons instead of being allowed to spend a portion of it on "Israeli"-manufactured arms and fuel.

That would mean American aerospace giants such as Lockheed Martin, which builds the F-35 fighter jet, and Raytheon, which sells precision-guided missiles and sensors to US partners worldwide, would stand to benefit.

Helped by the investments Washington made in the "Israeli" military industry over the decades, the "Israeli" entity has emerged by far as the world's largest exporter of drones, biting into the US export market with over half of all sales going to Europe while also pushing to grow its presence in Asia. Japan and "Israel" are currently in talks to co-develop new armed and unarmed drones.

"We believe these arrangements, which are unique to 'Israel', no longer serve the US," a senior administration official said.

He pointed that since the provision was introduced three decades ago, "'Israel's' economy has grown dramatically, and 'Israel' is one of the top 10 arms exporters in the world, so the objective has been achieved."

The rule meant US companies had lost out on billions of dollars in potential revenue, the official added.

But the "Israeli" entity argues that it faces a dizzying range of threats amid upheaval in the Middle East and that it needs to retain the flexibility to address these threats.

The "Israelis" also maintain that their tech-savvy military firms had cooperated closely with American contractors over the years and that the US military had benefited from the entity's innovations, including in its drone programs, cyber-warfare, and parts tailored for Apache helicopters.

The current arms package, which was signed in 2007 and will expire in 2018, provided the "Israeli" entity a total of $30 billion to spend on weapons and supplies over a 10-year period.

That arrangement allowed for 26.3 percent of the funding to be spent on "Israeli"-made military products and fuel, a provision that no other US ally in the world enjoys.

The US is offering the "Israeli" entity $3.5 billion to $3.7 billion a year in military assistance over a decade, a major increase from current levels but less than the $4 billion a year initially proposed by Netanyahu's government.

Despite the strain between Obama and Netanyahu, postponing a deal until the next US president would mean renegotiating many issues with no result before the spring of next year, at the earliest.

Given the need for the "Israeli" entity to continue to upgrade its arsenal and to make long-term strategic plans, Netanyahu "can't afford not to have a deal," Alterman said.

But whatever the timeline, there will be a concrete effect felt in "Israel", according to Jonathan Schanzer, the vice president for research at the Foundation for Defense of Democracies. "I think ‘Israel' will take a hit economically," adding that the "Israeli" military industry will also be affected.

"That's a significant sum of money for a country the size of 'Israel'," Schanzer added.

Accordingly, Joel Johnson, an analyst with the Teal Group Corp., said even if the subsidies are phased out, the "Israeli" entity would seek to offset the effect by asking American companies to buy some "Israeli"-made products for the weapons systems being provided.

"'Israelis' will probably find a way to get a good deal of that back from the US firms," Johnson said.

Source: FP, Edited by website team

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