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Date posted: October 03, 2003
By Clyde R. Mark



Summary

Israel is not economically self-sufficient, and relies on foreign assistance and borrowing to maintain its economy. Since 1985, the United States has provided $3 billion in grants annually to Israel. Since 1976, Israel has been the largest annual recipient of U.S. foreign assistance, and is the largest cumulative recipient since World War II. In addition to U.S. assistance, it is estimated that Israel receives about $1 billion annually through philanthropy, an equal amount through short- and long- term commercial loans, and around $1 billion in Israel Bonds proceeds.

Israeli Prime Minister Netanyahu told a joint session of Congress on July 10, 1996, that Israel would reduce its need for U.S. aid over the next four years. In January 1998, Finance Minister Neeman proposed eliminating the $1.2 billion economic aid and increasing the $1.8 billion in military aid by $60 million per year during a 10-year period beginning in the year 2000. The FY1999, 2000, 2001, 2002, and 2003 appropriationsbills included cuts of $120 million in economic aid and an increases of $60 million in military aid for each year.

U.S. aid to Israel has some unique aspects, such as loans with repayment waived, or a pledge to provide Israel with economic assistance equal to the amount Israel owes the United States for previous loans. Israel also receives special benefits that may not be available to other countries, such as the use of U.S. military assistance for research and development in the United States, the use of U.S. military assistance for military purchases in Israel, or receiving all its assistance in the first 30 days of the fiscal year rather than in 3 or 4 installments as other countries do.

In addition to the foreign assistance, the United States has provided Israel with $625 million to develop and deploy the Arrow antimissile missile (an ongoing project), $1.3 billion to develop the Lavi aircraft (cancelled), $200 million to develop the Merkava tank (operative), $130 million to develop the high energy laser anti-missile system (ongoing), and other military projects. In FY2000 the United States provided Israel an additional $1.2 billion to fund the Wye agreement, and in FY2002 the United States provided an additional $200 million in anti-terror assistance.

For FY2004, the Administration requested $480 million in economic, $2.16 billion in military, and $50 million in migration resettlement assistance.

By the Same Author

Date: 10/10/2003

Source: Congressional Research Service
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