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July 19, 2016 11:45 am

Israel’s Defense Industry Will Suffer ‘Severe Blow’ if Jerusalem Accepts New Terms of US Military Aid Package, National Security Expert Says (INTERVIEW)

avatar by Lea Speyer

Dr. Oded Eran. Photo: INSS.

Dr. Oded Eran. Photo: INSS.

New stipulations attached by the Obama administration to a proposed US military aid package for Israel will result in a “severe blow” to the Jewish state’s defense industry, a former Israeli ambassador to the European Union and Jordan told The Algemeiner on Tuesday.

Dr. Oded Eran of the Institute for National Security Studies (INSS) was responding to reports that the White House is reversing a long-standing policy that allows Israel to invest a significant amount of the military aid it receives from the US in its own domestic defense industry.

As reported by The Algemeiner, President Barack Obama wants to remove the “offshore procurement” (OSP) provision that has been unique to Israel’s aid package. Through OSP, Israel spends some 26 percent of its foreign military aid on local defense research, development and programs.

According to Eran — who headed Israel’s negotiations with the Palestinians in 1999-2000 — the ramifications of this new condition could be serious.

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“It really all depends on the final arrangement between Israel and the US. If the OSP is totally cancelled, without any sort of compensation to Israel in a different manner, it will be a severe blow to the defense industry, especially in sensitive areas where these industries rely on procurement in Israel,” he told The Algemeiner. “A second option depends on whether the OSP will be phased out over time, which will allow the industry to adjust itself accordingly.”

“If OSP is cancelled completely, it will cause severe problems,” Eran reiterated.  

Israel receives $3.1 billion in military aid from the US annually, which, according to Eran, has helped the Jewish state maintain its qualitative military edge (QME) over its regional enemies.

“Historically, this aid has helped Israel’s defense industry to the extent where OSP facilitated its growth. From the beginning, however, the rationale for having this arrangement was to keep Israel’s QME over its neighbors. The OSP is part of the QME strategy and has influenced Israel’s capability to defend itself,” he said.

A standing 10-year military aid deal between both countries is set to expire in October 2017. Currently, Israel and the US are negotiating new terms, with Israel pushing the White House to increase aid to $40 billion over the next 10 years.

While Jerusalem has remained relatively mum on the OSP condition, senior Israeli officials have said that Prime Minister Benjamin Netanyahu is open to accepting a deal, but “not at any price.” According to Eran, Netanyahu “has a choice” and “must take into account Israel’s long-term security assistance.”

“Netanyahu should consider finalizing the deal now, because he will be taking some sort of gamble with the next president,” he said.

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