U.S. Foreign Assistance to Israel.

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The Costs to American Taxpayers of the
Israeli-Palestinian Conflict: $3 Trillion.
June 2003, pages 20-23. Special Report. By Thomas R. Stauffer

Conflicts in the Middle East have been very costly to the U.S., as well as to the rest of the world. An estimate of the total cost to the U.S. alone of instability and conflict in the region - which emanates from the core, Israeli-Palestinian conflict - amounts to close to $3 trillion, measured in 2002 dollars. This is an amount almost four times greater than the cost of the Vietnam war, also reckoned in 2002 dollars.

Even this figure underestimates the costs because certain classes of expenditure remain unquantified. In particular, no reliable figure is available for the costs of "Project Independence," Washington's lavishly promoted effort to reduce U.S. dependence on oil from the Middle East. That effort, which was subverted early on by diverse local special interests, was designed primarily to insulate Israel from any new "Arab oil weapon" after 1973/74, and may easily have cost $1 trillion. Even though the outlays were rationalized in the interest of "national security," however, they contributed little or nothing to reducing U.S. strategic dependence upon imported oil from the Middle East. Similarly, aid to Israel - and thus the regional total - also is understated, since much is outside of the foreign aid appropriation process or implicit in other programs. Support for Israel comes to $1.8 trillion, including special trade advantages, preferential contracts, or aid buried in other accounts. In addition to the financial outlay, U.S. aid to Israel costs some 275,000 American jobs each year.

The major components in this minimum estimate of the costs are summarized in Table One;

Table One: Summary Overview of Cost of Mideast Conflicts to US Since WW2 (in 2002 dollars or jobs per year)
Type of Cost	Events	2002 Costs
Political or Military Crises	Conflicts in 1967, 1973, 1978-87, 1990 and construction of Strategic Petroleum Reserve	$ 1,516 Billion
Economic and Military Aid	Total Regional (budgeted) - Near East, Greece, Turkey and periphery	$ 867 Billion
Ad Hoc support for Israel	Trade preferences, loan guarantees, privileged contracts and technology access	$ 56+ Billion
Lost Trade and Domestic Jobs	Effects of sanctions and blocked contracts	275,000 Jobs
Energy Autarky	"Project Independence"	Indeterminant
Energy Autarky	Identifiable Programs within "Project Independence"	$ 285 Billion
"Defense" of Gulf Oil Supplies	Presence and preparedness in the Gulf (since mid 1980s)	$ 40+ Billion
Contingent Cost	Oil Supply Guarantee for Israel (1975 MOU)	$ 3 Billion/Month

A detailed breakdown is displayed in Table Two:

Table Two: Detailed Breakdown of Cost of Mideast Conflicts to US Since WW2 (in 2002 dollars or jobs per year)
Type of Cost	Events	Subtotals	Totals
Political or Military Crises			$ 1,220-1520 Billion
	1956 War	Minimal
	1967 War	$ 40+ Billion
	1973 War	$ 750-1050 Billion
	GDP Loss	$ 300-600 Billion
	Import Price Impact	$ 450+ Billion
	1978 Iranian Revolution and Iran-Iraq War	$ 350 Billion
	1990-91 Gulf War	$ 80 Billion
Economic and Military Aid			$ 867 Billion
	Total Regional (budgeted)	$ 808 Billion
	Israel	$ 247 Billion
	Egypt	$ 139 Billion
	Turkey	$ 159 Billion
	Greece	$ 125 Billion
	Jordan	$ 25 Billion
	Other Regional	$ 110 Billion
	West Bank and Gaza	$ 1 Billion
	Peacekeeping	$ 2 Billion
Ad Hoc support for Israel			$ 56+ Billion
	Preferential Contracting	$ 40 Billion (est)
	Discounted Arms Sales	Not traced
	Israel's SPR (1975 MOU)	$ 3 Billion
	Loan Guarantees	$ 10 Billion
	Oil Supply Guarantee	Up to $ 3 Billion/Month
	Support for Lavi and other projects	$ 3 Billion
Budgeted Aid - Periphery			$ 32 Billion
	Sudan	$ 2 Billion
	Ethiopia and Eritrea	$ 12 Billion
	Caucus and Central Asia	$ 6 Billion
	Somalia	$ 2 Billion
	Other SW Asia	$ 10 Billion
Private US Aid to Israel			$ 40-50 Billion
US Share of Multilateral Aid			$ 10 Billion
	Turkey	$ 7 Billion
	UNRWA	$ 3 Billion
Lost Trade and Domestic Jobs			275,000 Jobs/Year
	Embargoes and Sanctions	100,000 Jobs/Year
	Trade Aid Imbalance: Israel	125,000 Jobs/Year
	Blocked Trade Opportunities	650,000 man-years
	GMMR	50,000 man-years
	"Yamamah Project"	600,000 man-years
	Known Investment Losses	$ 10 Billion
Energy Autarky			$ 381 Billion (min)
	Strategic Petroleum Reserve	$ 146 Billion
	"Project Independence"	$ 235 Billion (min)
	Gasohol	$ 25 Billion
	Estimated State Subsides	$ 100 Billion
	Unconventional Gas	$ 20 Billion (est)
	Unconventional Energy	Not Traced
	Other Federal Subsidies	$ 90 Billion
"Defense" of Gulf Oil Supplies			$ 40+ Billion
	Presence and preparedness in the Gulf	$ 40+ Billion
Estimated Total (minimum)			$ 2,600-2,900 Billion

Total identifiable costs come to almost $3 trillion. About 60 percent, well over half, of those costs - about $1.7 trillion - arose from the U.S. defense of Israel, where most of that amount has been incurred since 1973 (see later section and Table Three).

Table Three: Summary Overview of Cost to US of Support for Israel Since WW2 (in 2002 dollars or jobs per year)
Direct		$ 1,854 Billion
	Official Foreign Aid	$ 247 Billion
	Rescue Costs (1973)	$ 1,050 Billion
	Collateral Costs	$ 451 Billion
	Special, ad hoc support	$ 106 Billion
Trade and Job losses		275,000 Jobs/Year
Linked		$ 324 Billion (minimum)
	Aid to Periphery (NIS etc)	$ 49+ Billion
	Energy Autarky	$ 235 Billion (minimum)
	"Defense" of Gulf	$ 40 Billion
Contingent
	Oil Supply Guarantee (not yet implemented)	$ 3 Billion/Month

Oil Crises

The largest single element in the costs has been the series of six oil-supply crises since the end of World War II. To date these have cost the U.S. $1.5 trillion (again in 2002 dollars), excluding the additional costs incurred since 2001 during the build-up toward the second war with Iraq. Until 1991, each crisis was triggered by a conflict among two or more Middle Eastern states, usually with the active involvement of at least one extra-regional power. The nature and impact of the oil crises changed over time, becoming more serious and implying greater risk to the oil-consuming world.

The several earlier Mideast oil crises, in 1956 and 1967, actually had relatively little effect on the United States. Indeed, the U.S. profited from exporting surplus oil in 1956 when Mideast supplies - especially of "sterling oil" - were interrupted. The second such crisis, in 1967, did have a longer-term impact. Initially, only the cost of shipping was raised when the Israelis interdicted the Suez Canal. The splitting of oil markets between east and west of Suez, however, was the catalyst for an overall price increase which otherwise would have been unlikely, if not impossible. Several OPEC states were successful in exploiting the closure of the Suez Canal to increase oil prices across the board after 1968. Again, the effect on the U.S. was relatively small, because U.S. oil imports were still at a low level. Nonetheless, those increases between 1970 and 1973 did cost the U.S. some $40 billion (in 2002 dollars).

The period before 1973, therefore, had little effect on U.S. oil costs, and the burden of aid to Israel was modest, so the overall cost of Middle East conflicts remained modest. The major cost prior to 1973, in fact, was support for Turkey as part of Cold War operations to contain the Soviet Union.

This changed with 1973, and costs escalated rapidly thereafter. Starting with the Arab-Israeli war of 1973, the costs to the U.S. of regional crises and aid programs began to increase beyond any original expectations. Since 1973, protection of Israel and subsidies to countries willing to sign peace treaties with Israel, such as Egypt and Jordan, has been the prime driver of U.S. outlays or the trigger for crisis costs. The 1973 war proved to be dear. At a minimum, it cost the U.S. between $750 billion and $1 trillion. This was the price tag for the rescue of Israel when President Richard Nixon agreed to resupply Israel with U.S. arms as it was losing the war against its neighbors. Washington's intervention triggered the Arab oil embargo which cost the U.S. doubly: first, due to the oil shortfall, the US lost about $300 billion to $600 billion in GDP; and, second, the U.S. was saddled with another $450 billion in higher oil import costs.

A third factor added to the oil-related cost of the 1973 war (over and above the multi-billion dollar aid package to Israel which began in that year). Deciding to act preventively, as it were, the U.S. created, after some travail, a Strategic Petroleum Reserve (SPR) designed to insulate Israel and the U.S. against the wielding of a future Arab "oil weapon." It was destined to contain one billion barrels of oil which could be released in the event of a supply crisis. To date the SPR, which still exists and is slowly being expanded, has cost $134 billion, since much of the oil was bought at high prices, and because the salvage value is relatively low. Thus, the 1973 oil crisis, all in all, cost the U.S. economy no less than $900 billion, and probably as much as $1,200 billion. Ironically, military costs themselves were negligible. The 1973 war illustrated the new dimension of Middle East conflicts, where the burdens are economic rather than military.

The next regional oil crisis was relatively less dear, although costly nonetheless. The Iranian revolution and the subsequent Iran-Iraq war cost the U.S. $335 billion in terms of higher oil import prices. There were two stages. First, 5 million barrels per day (b/d) of Iranian oil exports were suspended when the revolutionaries closed the oil terminals in 1978. The resulting shortfall in oil supply, compounded by speculators, doubled oil prices. Then, just two years later, in 1980, began the Iran-Iraq war, which interrupted oil exports from both warring countries, causing prices to more than double once again. The joint effect of the two crises cost the U.S. consumer $335 billion in terms of higher prices for imported oil. It also caused a rise in prices of domestic energy oil, gas, and coal. These "knock-on" effects are not included, however, so that the figure of $335 billion is indeed a lower bound for the actual costs of those two, back-to-back crises. The total consumer cost is likely to have been more than double that figure.

The 1990/91 Gulf war, on the other hand, proved to be almost a bargain. It did cost American consumers approximately $80 billion in higher oil prices, including both imported and domestic oil, again excluding the resulting "knock-on" effects. The military costs of conducting the war itself were all but nil, however, because virtually all the other costs were passed on to Washington's willing or reluctant allies through "burden-sharing." The Germans, Japanese, and some Gulf states contributed cash and kind to the pursuit of the war, with the result that the net military cost to the U.S. was essentially zero. Officially reported "burden-sharing" contributions amounted to $45 billion, compared to officially reported U.S. military costs of $49 billion. Given the inherent imprecision in the budgeted figures, the net effect was a wash. In fact, the U.S. government actually showed a fiscal profit from the crisis, because it collected at least an additional $10 billion in taxes and royalties from the higher prices of domestically produced oil and gas.

Economic and Military Aid

This category includes only those amounts which flow through the conventional foreign aid appropriations process. Ad hoc and special aid is discussed later. The total for the Middle East is $867 billion, which includes the official "Near East" category, plus Greece and Turkey, which are classified as part of Europe for purposes of U.S. statistics. Greece is included because the Greek lobby has ensured that Greece receives roughly 70 percent as much aid as Turkey as a condition for acquiescing in the appropriations for Turkey. Thus the outlays for Greece are necessary conditions for the outlays for Turkey, given the U.S. domestic political dynamic, and thus are causally linked to the Middle East.

The official reports are incomplete. First, it is necessary to estimate the ad hoc and special aid for Israel, which is reported differently, if at all (see below). Secondly, it is necessary to include such special, but related, transactions as U.S. support for insurgents in the Sudan, or the U.S. share in multilateral aid to Turkey, in order to flesh out the full picture. "Humanitarian aid" to the revolutionaries in the southern Sudan has aggregated to some $2 billion, while the U.S. share of recent multilateral aid to Turkey from the IMF and World Bank can be estimated at $7 billion. It can be argued that this money was made available to Ankara as a result of U.S. pressure, intended to reward Turkey further for its alliance with Israel and as an incentive for further cooperation against Iraq.

Increasingly, aid to the periphery is part of U.S. involvement in the Middle East. Ethiopia, Somalia and Eritrea are viewed as integral to geopolitical planning for the Middle East, and, more recently, aid to the Central Asian "emergent democracies" is linked in part to Middle East politics, related to efforts to encircle and isolate Iran. That increasing flow of aid is also part of the larger picture of aid to the Middle East.

Another element is ad hoc support for Israel, which is not part of the formal foreign aid programs. No comprehensive compilation of U.S. support for Israel has been publicly released. Additional known items include loan guarantees - which the U.S. most probably will be forced to cover - special contracts for Israeli firms, legal and illegal transfers of marketable U.S. military technology, de facto exemption from U.S. trade protection provisions, and discounted sales or free transfers of "surplus" U.S. military equipment. An unquantifiable element is the trade and other aid given to Romania and Russia to facilitate Jewish migration to Israel; this has accumulated to many billions of dollars. Lastly, unofficial aid, in the form of transfers from the Diaspora resident in the U.S. and net purchases by U.S. parties of Israel Bonds, adds at least $40 billion to the total. A rough estimate, again a minimum, for such additional elements is more than $100 billion since 1973.

U.S. jobs and exports also have been affected, adding to costs and losses. "Trade followed the flag" in the area - but in the reverse direction. As U.S. relations with Mideast countries deteriorated, trade was lost. Worsening political relations resulted in the loss of hundreds of thousands of U.S. jobs. Some disappeared as a consequence of trade sanctions, some because large contracts were forefeited, thanks to the Israel lobby - as in the case of foregone sales of fighters to Saudi Arabia in the 1980s - and still others due to a dangerously growing trade-aid imbalance vis-�-vis Israel.

Sanctions alone have caused U.S. jobs to disappear. The trickle of U.S. trade with Iran, Iraq, Libya and Syria - compared to what would have been expected had relations been "normal," let alone "good" - currently costs the U.S. some 80,000 to 100,000 jobs each year. The figure is probably higher, in fact, because it does not reflect the lost opportunities for U.S. farmers to export their products into the growing markets of the sanctioned countries.

"Good" relations, however, do not necessarily mean employment gains for Americans. In the case of Israel, the striking trade-aid imbalance vis-�-vis Israel costs the U.S. almost as many jobs as the sanction regimes. Israel exports to the U.S. much more than it imports, while it pays for only a fraction of what it does import from the U.S. Specifically, Israel buys little from the U.S. in relation to U.S. aid levels, and the trade-aid imbalance of $6 billion to $10 billion each year costs about 125,000 jobs. One aspect of U.S. government policy in the region, however, does create American jobs: the states of the southern Gulf incrementally buy large quantities of U.S. arms and related services. That relationship, primarily with Saudi Arabia, has translated into an extra 60,000 jobs in recent years. This gain, due to the special status of Saudi Arabia, partly offsets the jobs lost through Israeli pressures or contracting policies.

Another large element in cost has been the push for energy autarky - specifically, "Project Independence." This clutch of programs has been extraordinarily costly since it was initiated as a policy objective in the 1970s. Oil imports are higher today than before, in spite of the imposing array of subsidies or forced technologies designed to increase U.S. energy production and cut consumption. No overview of these costs has been compiled. Identifiable costs come to $285 billion, but the grand total is certainly very much higher. A reasonable estimate is at least one trillion dollars, but only part of that can be documented. While the subsidies were inevitably justified in the interests of national security, the projects and programs were in most cases captured and co-opted by domestic lobbies. Since the national objective was reducing dependence upon Mideast oil, however, the costs should be subsumed within the costs of coping with regional conflicts, even if the programs were largely ineffectual.

"Defense" of the Gulf - often cited as a major cost factor - in fact has been but a minor element of cost. Excluding the buildup for war against Iraq in late 2002, the official figure for operations and presence in the Gulf is about $30 billion to $40 billion per year. That figure is misleading, however. Most of the equipment and troops and the operations of the carrier task force at Diego Garcia would be maintained in support of other geopolitical objectives, so those outlays, which represent the largest component in the reported "cost," are not substantively tied to U.S. policies in the Gulf itself. The U.S. presence itself has entailed relatively modest incremental costs - on the order of $2 billion (net) per year, exclusive of any new costs tied to the new mobilization against Iraq.

Lastly, a large part of the costs have been inextricably tied to U.S. protection of or support for Israel. It is therefore useful to pull together the various elements linked to that policy:

Direct costs, excluding crisis costs, have amounted to about $800 billion. This figure includes budgeted U.S. aid for Egypt and Jordan, since that flow of aid is so closely correlated with their postures toward Israel - i.e., that aid is part of the cost of buying peace for Israel on two of its borders. It also includes the flow of dollars from private Jews or Jewish organizations in the U.S. to Israel, which are drains on the U.S. balance of payments, analogous to official aid transfers. The rescue of Israel in 1973 cost another $1 trillion, so total direct costs, including the costs of the results of support for Israel, are some $1.8 trillion.

There have been further costs where the causal linkage is less clear - aid to the states of the periphery (Ethiopia, Central Asia, etc.), the "defense" of the Gulf, and the costs of Energy Independence. Although some part of those costs of $300-plus billion are attributable to U.S. support for Israel at the core, any allocation is beyond the scope of this discussion.

A last element is a contingent cost: the cost to the U.S. of the Oil Supply Guarantee which Secretary of State Henry Kissinger proffered the Israelis in 1975. If Israel's oil supply is affected, Israel in effect gets a first call on any oil available to the U.S. The opportunity cost of that oil depends upon the crisis scenario's plausible scenario would entail costs to the U.S. of $3 billion per month in terms of lost GDP if the U.S. were embargoed at the same time.

Expensive Unrest

Unrest in the Middle East has proven to be very expensive for the U.S. It is known that most of American foreign aid goes to Egypt and Israel, but it is clear that the total costs to the U.S. of conflict in the region are very much higher than the aid bill itself. The total costs of supporting Israel are some six times the official aid, for example. Oil price crises have been particularly expensive - a sobering lesson from the history of the Middle East over the last 30 years. Future "burden-sharing" is unlikely - while successful in eliminating much of the cost of the 1990/91 Gulf war, it will become much more difficult. Mercenary allies, such as Turkey, moreover, are likely to demand compensation "up front," since, they argue, they never received the aid promised to them during the prior Gulf war. Ankara is especially likely to demand considerable rewards, since it protests that it received little to offset the $30 billion it claimed it lost in the last affair.

Israel, too, is demanding more aid - $4 billion in extra military support and a further $10 bn in loan guarantees, over and above the current level of appropriated aid. Conflicts in the Middle East have become expensive indeed for the American taxpayer.

It is worth noting, however, that the burden shared by the other oil-consuming states has, in fact, been much higher. Even though they do not share in policy formation, they do indeed share in the costs of the consequences. While not greatly drained by foreign aid to the region - unlike the $800 billion borne by the U.S. - they bear much more of the costs of oil crises because, collectively, they import much more oil than the U.S. Thus the total bill - the total burden shared by default - is two to four times higher than that for the U.S. alone. All states - not just the U.S. - have borne the burden of conflicts in the Middle East.

Thomas R. Stauffer is a Washington, DC-based engineer and economist who has taught the economics of energy and the Middle East at Harvard University and Georgetown University's School of Foreign Service.

http://www.wrmea.com/archives/june2003/0306020.html

The above article outlines both the direct and indirect costs of the support of Israel to the United States Taxpayer. The following report only considers direct official US Foreign Aid to Israel. Note that Stauffer states that the official US Foreign Aid to Israel amounts to $ 247 Billion. The following article claims it is $ 112 Billion (year 2002 dollars).

ISRAEL: U.S. FOREIGN ASSISTANCE.

Clyde R. Mark: Updated June 6, 2002
Issue Brief for Congress. Order Code IB85066
Foreign Affairs, Defense, and Trade Division
Congressional Research Service
The Library of Congress

A pdf-version of this document can be found here.

CONTENTS

Summary
Most Recent Developments
Background And Analysis
Current U.S.-Israel Aid Issues

Wye Agreement Supplemental Aid
Reducing U.S. Aid to Israel
Aid for Soviet and Ethiopian Jewish Refugees
Use of U.S. Aid in the Occupied Territories
Conditions on Aid

Other Aspects of U.S. Aid to Israel

Israel's Debt to the U.S. Government
Loans with Repayment Waived
"Cranston Amendment"
Allegations of Misuse of U.S. Aid
Arrow Anti-Missile Missile

Special Benefits for Israel
Congressional Action

FY2001
FY2002
FY2003
Recent Aid to Israel

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 ten year period beginning in the year 2000. The FY1999, 2000, and 2001 appropriations bills 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 anti-missile 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.

For FY2002, the Administration requested $720 million in economic, $2.04 billion in military, and $60 million in migration resettlement assistance.

[For more information, see CRS Report 96-942, Israel: U.S. Loan Guarantees for Settling Immigrants; and CRS Issue Brief IB82008, Israel-United States Relations.]

MOST RECENT DEVELOPMENTS

On April 18, 2002, the Senate rejected an amendment to the energy bill that would have extended the 1979 law permitting the United States to sell Alaskan oil to Israel in emergencies. Some critics of the bill claimed the Israeli amendment was added to compel Senators to cast a positive vote for Israel and for the bill, which included opening oil drilling in the Alaskan National Wildlife Refuge.

The supplemental appropriations bill (H.R. 4775 , S. 2551) includes $200 million in ESF grants for Israel for FY2002.

According to the President's request for foreign assistance for FY2003, Israel will receive $28 million in counter terror funds for FY2002. The President requested $600 million in Economic Support Funds, $2.1 billion in Foreign Military Financing, and $60 million in refugee settlement funds for FY2003.

BACKGROUND AND ANALYSIS

Since 1976, Israel has been the largest annual recipient of U.S. aid and is the largest recipient of cumulative U.S. assistance since World War II. From 1949 through 1965, U.S. aid to Israel averaged about $63 million per year, over 95% of which was economic development assistance and food aid. A modest military loan program began in 1959. From 1966 through 1970, average aid per year increased to about $102 million, but military loans increased to about 47% of the total. From 1971 to the present, U.S. aid to Israel has averaged over $2 billion per year, two-thirds of which has been military assistance. Congress first designated a specific amount of aid for Israel (an "earmark") in 1971. Also in 1971, economic assistance changed from specific programs, such as agricultural development, to the Commodity Import Program (CIP) for purchase of U.S. goods. CIP ended in 1979, replaced by largely unconditional direct transfers for budgetary support. The 1974 emergency aid for Israel, following the 1973 war, included the first military grant aid. Economic aid became all grant cash transfer in 1981, and military aid became all grant in 1985.

Beginning in the mid-1970s, Israel could no longer meet its balance of payments and government deficits with imported capital (gifts from overseas Jews, West German reparations, U.S. aid) and began to rely more on borrowed capital. Growing debt servicing costs, mounting government social services expenditures, perennial high defense spending levels, and a stagnant domestic economy combined with worldwide inflation and declining foreign markets for Israeli goods pushed the Israeli economy into a near crisis situation. The "unity" government of 1984, cut government subsidies, froze wages and prices, raised taxes, and took other measures to restore the economy. Inflation was cut from the high of 445% in 1984 to an annual level of 20% for 1986 and 1987. Unemployment settled down to 5.5% for the second quarter of 1987, after a high of 7.8% for the same period in 1985. But the influx of Soviet Jews beginning in 1989 pushed unemployment to 9% by 1990 and to 11% by 1992, and left inflation in the 20% per year range. Israel still runs government deficits and balance of trade and payments deficits, although the gaps have been reduced.

CURRENT U.S.-ISRAEL AID ISSUES
Wye Agreement Supplemental Aid

Israel requested $1.2 billion in additional U.S. aid to fund moving troops and military installations out of the occupied territories as called for in the October 23, 1998 Wye agreement. Israeli Finance Minister Yaacov Neeman arrived in Washington in November 1998 to discuss the new aid (Neeman resigned in December). Following the December vote to hold new elections in May 1999, Israel put the peace process and the withdrawals on hold. In February 1999, the Administration requested $600 million in military aid for Israel for FY1999, and $300 million in military aid for each fiscal year 2000 and 2001, to implement the Wye Agreement despite the fact that Israel was not completing the called for withdrawals. The President vetoed H.R. 2606, the FY2000 foreign operations appropriations bill, in part because it did not include the Wye funding. On November 29, 1999, the President signed the consolidated appropriations bill, H.R. 3194 (P.L. 106-113), which included, in Division B, passage of H.R. 3422, the foreign operations appropriations bill. Title VI of H.R. 3422, introduced in the House on November 17, included the $1.2 billion Wye funding for Israel.

According to a State Department report presented to Congress in late October 1999, the Wye funding is intended to be used as follows (in millions of dollars):

Israel Defense Force Redeployment
Relocate IDF Training Areas:	90
Relocate One Armored Division:	95
Relocate Brigade Training Area:	15
Subtotal:	200
Counter Terror
Light Surveillance Aircraft:	50
Explosive Detection and Identification:	85
Armored Personnel Carriers:	40
Subtotal:	175
Strategic
Theater Missile Defense and R & D:	100
Squadron Apache Longbow Helicopters:	360
Electronic Warfare Aircraft:	165
Enhance Readiness:	200
Subtotal:	825

Reducing U.S. Aid to Israel

On July 10, 1996, Israeli Prime Minister Binyamin Netanyahu told a joint session of Congress: "In the next four years, we will begin the long-term process of gradually reducing the level of your generous economic assistance to Israel." Israeli Finance Minister Yaacov Neeman met with some House of Representatives Appropriations Committee members in January 1998 to negotiate a reduction in Israel's $3 billion in annual aid by $600 million by decreasing the $1.2 billion economic aid to zero over a 10-year period and by increasing Israel's $1.8 billion military aid up to $2.4 billion in the same period. The United States would continue to allow Israel to spend about 25% of the military aid in Israel rather than in the United States for U.S. produced military equipment Israel is an exception to the general practice that all U.S. foreign military financing is spent in the United States.

The President requested $930 million in ESF for Israel for FY2000, an increase in the rate of annual reduction in the aid level in order to provide more funding for other Middle Eastern countries, but Congress provided $960 million in ESF for Israel for FY2000, maintaining the 10% per year reduction rate (H.R. 3422). The President requested $840 million in ESF for FY2001, which would be the expected amount if the annual reduction remained at $120 million (960 - 120 = 840). The President also requested $1.98 billion in military grants, the expected increase for FY2001 (1.92 + .06 = 1.98). Congress appropriated $840 million in ESF and $1.98 billion in FMF for FY2001. The President requested $2.04 billion in FMF and $720 million in ESF for Israel for FY2002.

Aid for Soviet and Ethiopian Jewish Refugees

U.S. aid for Soviet and other immigrants in Israel has taken two forms: first, grants through the Department of State refugee and migration account; second, through the housing loan guarantee and Soviet immigrant loan guarantee programs. The United States began providing grants to Israel under the refugee and migration account in 1973. Congress increased the funding level up to $80 million per year in 1992, when the wave of Soviet immigrants crested. H.Rept. 105-401 of November 12, 1997, on H.R. 2159, the foreign operations appropriation bill, stated that the level would decrease to $70 million in FY1999 and to $60 million in FY2000 because the declining numbers of Soviet immigrants reduced Israel's need. The President requested $60 million for immigrant assistance for FY2001.

In late 1990, the press reported that Israel would request $10 billion in loan guarantees from the United States. Under the proposal, Israel would borrow $10 billion from U.S. commercial establishments, and the United States government would guarantee the loans against default. Israel needed the funds to finance housing, jobs, and infrastructure for an anticipated 1 million Soviet Jewish immigrants expected to arrive in Israel between 1991 and 1995. During the April 1991 negotiations over Israel's request for emergency funds for Desert Storm damages, Israel agreed to postpone its guaranteed loan request until September 1991. In September, President Bush asked Congress to delay consideration of the Israeli request until January 1992, because the President feared that the loan request would jeopardize Secretary of State Baker's negotiations for a peace conference. Reluctantly, Congress agreed to delay consideration of the Israeli request.

When Congress returned in January 1992, Secretary of State Baker said the Administration would support the Israeli request only if Israel agreed to freeze all settlement activity in the occupied territories. In a series of negotiations among the Administration, Congress, and Israel, several compromises were offered; reduce the U.S. loan guarantees by an amount equal to the Israeli expenditures on settlements in the occupied territories, reduce the annual amount of the loan guarantees, allow Israel to complete housing projects underway in the territories but ban new projects, and others, but none of the proposals were acceptable to all the parties. With the stalemate, it appeared that Israel's loan guarantee request was postponed until consideration of the FY1993 foreign aid legislation.

Housing Loan Guarantees
1972	$ 50 million
1974	$ 25 million
1975	$ 25 million
1976	$ 25 million
1977	$ 25 million
1979	$ 25 million
1980	$ 25 million
1990	$ 400 million
Total	$ 600 million

Following the June 1992 Israeli elections, in which Yitzhaq Rabin and his Labor party won control over the Israeli Knesset, relations between the United States and Israel improved. President Bush announced in August that he would propose approving the loan guarantees. Congress attached the loan guarantee authorization to the foreign operations appropriation bill that passed on October 5, 1992 (Title VI, P.L. 102-391, signed into law on October 6, 1992). The United States approved the first $2 billion traunch in December 1992, and Israel issued the first $1 billion in bonds in March 1993 and the second $1 billion in September 1993. On September 30, 1993, the President notified Congress, according to Section 226(d) of the Foreign Assistance Act, that the $2 billion in loan guarantees for FY1994 would be reduced by $437 million, the amount Israel spent on Jewish settlements in the occupied territories in FY1993. On September 30, 1994, the President notified Congress that the $2 billion in loan guarantees for FY1995 would be reduced by $216.8 million, an amount equal to the amount Israel spent on Jewish settlements in the occupied territories. The President notified Congress in September 1995, that the amount for FY1996 would be reduced by $60 million, and notified Congress in September 1996, that the amount for FY1997 also would be reduced by $60 million. The $10 billion ($2 billion each year) authorized for Israel for FY1993-FY1996, has been reduced by $774 million because of settlement activity. Of the $9.226 billion available to Israel from FY1993-FY1997, Israel has drawn loans worth about $6.6 billion.

Table 1. Loan Guarantees for Israel (millions of dollars)

Year	Authorized Title VI, P.L. 102-391	Reduction for Settlement Activity	"Offset" Reinstated for Security Interests	Net Reduction	Amount Available for Israel
1993	$2,000.0	0	0	0	$2,000.0
1994	$2,000.0	437.0	0	437.0	$1,563.0
1995	$2,000.0	311.8	95.0	216.8	$1,783.2
1996	$2,000.0	303.0	243.0	60.0	$1,940.0
1997	$2,000.0	307.0	247.0	60.0	$1,940.0
Totals	$10,000.0	1,358.8	585.0	773.8	$9,226.2

These loan guarantees are in addition to $600 million in housing loan guarantees provided for Israel.

Use of U.S. Aid in the Occupied Territories

P.L. 101-302, the supplemental appropriation for FY1990, included $400 million in housing loan guarantees and $5 million in additional refugee settlement funds for Israel to help Israel settle Soviet and Ethiopian Jewish immigrants. As is true of all U.S. aid to Israel, the housing loan guarantee and the refugee resettlement grants cannot be used by Israel in the occupied territories because the United States does not want to foster the appearance of endorsing Israel's annexation of the territories without negotiations. Israeli Foreign Minister David Levy stated in an October 2, 1990, letter to Secretary of State James Baker that Israel would not use the housing loan guarantees in the occupied territories (which means that Israel would not use the funds in east Jerusalem). Some Israelis claim that Israel should use the U.S.-backed funds in east Jerusalem, which they say is part of Israel. Title VI of P.L. 102-391 (H.R. 5368), which authorizes $10 billion in loan guarantees for Israel, states that the funds may not be used in the occupied territories.

The question of using U.S. aid in the occupied territories arose again in December 1998, when Israel requested $1.2 billion to implement the Wye agreement, the funds to be used in the occupied territories for Israeli withdrawals and infrastructure for settlements.

Conditions on Aid

It has been suggested that the United States should provide aid to Israel only if Israel takes actions or meets conditions in keeping with U.S. policies. For example, as mentioned above in Aid for Soviet and Ethiopian Jewish Refugees, the United States might withhold assistance unless Israel stopped establishing settlements in the occupied territories. Other examples of conditions that might be applied to U.S. aid include Israel reversing its annexation of the Golan Heights and east Jerusalem, Israel agreeing to withdraw from the occupied territories, or Israel accepting the land-for- peace formula. Israelis and their supporters oppose any conditions attached to U.S. aid. The United States did withhold aid to Israel in 1953, during the Eisenhower Administration, until Israel stopped a water diversion project in a U.N. demilitarized zone along the Israeli-Syrian boundary, but between Presidents Eisenhower and Bush, as far as is known no Administration applied conditions to U.S. aid to Israel. Secretary of State Baker told a congressional hearing on February 24, 1992, that the Administration would not approve Israel's loan guarantee request until Israel froze settlement activity.

In addition to political conditions, others have suggested that the United States attach economic conditions to Israel's aid as a way of forcing Israel to implement needed economic reforms. Examples of economic conditions might include faster privatization of Israeli government owned business enterprises, cutting subsidies for housing in the occupied territories, or cutting the civil service. Opponents of attaching economic conditions suggest that Israeli officials are capable of making the changes needed to restore the economy, and that any such outside interference is a violation of Israeli sovereignty. Proponents of conditions suggest that Israel should demonstrate its capability to implement austerity measures before aid is given to Israel.

OTHER ASPECTS OF U.S. AID TO ISRAEL
Israel's Debt to the U.S. Government

Of the more than $84 billion in aid the United States has provided Israel through FY2000, about $69 billion has been grants and $15 billion has been loans. In 1987, Congress added the Foreign Military Sales Debt Reform section to the foreign aid appropriations bill (P.L. 100-202), which allowed countries to refinance existing military debts carrying interest rates over 10%. At the time the bill passed in 1987, Israel owed the U.S. government about $10 billion (having paid off the other $5 billion), $6 billion of which was military loans bearing interest rates over 10%. In 1988 and 1989, Israel refinanced about $5.5 billion in military loans by borrowing money from U.S. commercial institutions at interest rates below 10%, and paying off the U.S. government. As provided in P.L. 100-202, the U.S. government guaranteed up to 90% of the commercial loans. As of December 31, 1998, Israel owed the U.S. government $2.560 billion in direct economic and military loans, and the U.S. government has a contingent liability (guaranteed loans) for another $3.844 billion for the refinanced military loans and Ex-Im Bank loans, and an additional $9.703 billion in contingent liabilities for the loan guarantees for settling Soviet Jews in Israel.

Loans with Repayment Waived

The United States has not canceled any of Israel's debts to the U.S. government, but the U.S. government has waived repayment of aid to Israel that originally was categorized as loans. Following the 1973 war, President Nixon asked Congress for emergency aid for Israel, including loans for which repayment would be waived. Israel preferred that the aid be in the form of loans, rather than grants, to avoid having a U.S. military contingent in Israel to oversee a grant program. Since 1974, some or all of U.S. military aid to Israel has been in the form of loans for which repayment is waived. Technically, the assistance is called loans, but as a practical matter, the military aid is grant. From FY1974 through FY2001, Israel has received almost $40 billion in waived loans. (Egypt also receives some of its U.S. military assistance in the form of loans with repayment waived. In 1990, the United States canceled $6.7 billion in past military debts that Egypt owed to the United States.)

"Cranston Amendment"

The so-called Cranston Amendment, named after its Senate sponsor, was added to the foreign aid legislation in 1984 (Section 534, P.L. 98-473) and was repeated each year in the annual aid appropriation bill through FY1998 (Section 517 of H.R. 2159, P.L. 105-118). The Cranston amendment was not repeated in the FY1999 appropriation,H.R. 4328, P.L. 105- 277, and was not repeated in FY2000 or FY2001 appropriations bills. The amendment stated that it was "the policy and the intention" of the United States to provide Israel with economic assistance "not less than" the amount Israel owed the United States in annual debt service payments (principal and interest). For 1998, Israel received $1.2 billion in ESF and owed the U.S. government about $328 million in debt service for direct loans. The Cranston amendment was a statement of U.S. policy and intent and may not have been binding. Contingent liabilities - guaranteed loans, such as housing guarantees or the $9 billion for immigrant settlement - apparently were not included under the Cranston amendment because the debts were not owed to the U.S. government.

Allegations of Misuse of U.S. Aid

The United States stipulates that U.S. aid funds cannot be used in the occupied territories. Over the years, some have suggested that Israel may be using U.S. assistance to establish Jewish settlements in the occupied territories. Israel denies that it uses U.S. aid funds for settlements in the occupied territories. Because U.S. economic aid is given to Israel as direct government-to-government budgetary support without any specific project accounting, and money is fungible, there is no way to tell how Israel uses U.S. aid. Israel provides an annual letter to the U.S. Agency for International Development stating that the economic funds are used to service Israel's debt to the United States (approximately $1 billion per year).

Also, the United States stipulates that U.S. military equipment provided through the FMS program can be used only for internal security or defensive purposes, and that U.S. weapons and equipment cannot be transferred to a third country without U.S. approval. (See Sections 3 and 4 of the Arms Export Control Act, P.L. 90-629, as amended.) In 1978, 1979, and 1981, the executive branch notified Congress that Israel "may have violated" U.S.-Israeli agreements by using U.S. weapons for non-defensive purposes, and in 1982, the United States suspended shipments of so-called cluster bombs after allegations that Israel violated an agreement on the use of the bombs during the Israeli invasion of Lebanon. In the 1978, 1979, and 1981 instances, the Administrations took no further action. The cluster bomb ban remains in effect. Israel maintains that the weapons were used for defensive purposes. (See CRS Report RL30982, U.S. Defense Articles and Services Supplied to Foreign Recipients: Restrictions on Their Use. May 30, 2001.) There were reports in February 2001 that the U.S. government was investigating if Israel misused U.S. military equipment, including Apache helicopters, in assassinating Palestinian leaders, and later reports that Members of Congress inquired if Israel misused Apache and Cobra helicopters and F-16 fighter-bombers in attacking Palestinian facilities.

In 1982 testimony before Congress, executive branch officials said Israel transferred U.S. arms to Iran and the "South Lebanon Army" without U.S. permission, and similar charges emerged in 1992 concerning Israeli transfers of U.S. technology or equipment to China, South Africa, Chile, Ethiopia, and other countries. A U.S. Defense Department team went to Israel in late March 1992, to investigate the alleged transfer of Patriot missile technology to China, but announced on April 2 that it found no evidence of an unauthorized transfer. The State Department Inspector-General released a report on April 2, 1992, that suggested that Israel had transferred other U.S. arms technology without U.S. permission.

Arrow Anti-Missile Missile

Since 1988, the United States has provided Israel with more than $628 million in grants for research and development of the Arrow anti-missile missile. Israel deployed the first battery of Arrow missiles on March 14, 2000, and is seeking funding for a second and third battery. Some people call the Arrow funds "foreign aid" although Arrow was conceived as a joint research and development project in which the United States and Israel would share technology. U.S. funding for Arrow is authorized and appropriated through the defense budget. The U.S. Army says it will not procure the Arrow for U.S. use. In addition, the United States has provided $53 million for the Boost Phase Intercept program and $139

million for the Tactical High Energy Laser program under development in Israel to compliment the Arrow.

On April 28, 1996, President Clinton told a Washington audience that the United States would provide Israel with an additional $200 million for deployment of the Arrow in Israel, and funding (later estimated at $50 million) for development of a laser anti-missile weapon In late March 1998, Secretary of Defense Cohen was quoted as saying the United States would provide an additional $45 million for deploying a third battery of Arrow missiles.

SPECIAL BENEFITS FOR ISRAEL

As pointed out in the June 24, 1983, General Accounting Office (GAO) report, U.S. Assistance to the State of Israel (GAO/ID-83-51), Israel receives favorable treatment and special benefits that may not be available to other countries or that may establish precedents for other U.S. aid recipients. Israel's supporters justify the unusual treatment accorded to Israel because of the special relationship between the United States and Israel and because of Israel's unique economic and political status. The GAO list of benefits includes:

Cash flow financing: Israel is allowed to set aside FMS funds for current year payments only, rather than set aside the full amount needed to meet the full cost of multi-year purchases. GAO believes that cash flow financing creates a commitment to furnish aid in future years at a level sufficient to meet the future payments. Egypt and Turkey now use cash flow financing.
FMS loan repayment waiver: See Loans with Repayment Waived section above.
ESF cash transfer: The United States gives all ESF funds directly to the government of Israel rather than under a specific program. There is no accounting of how the funds are used. (Israel does send an annual letter describing Israeli payments to the United States for debt servicing.) A number of other nations receive part of their ESF as cash transfers, but not under such flexible conditions.
FMS offsets: Israel receives offsets on FMS purchases (contractors agree to offset some of the cost by buying components or materials from Israel). Although offsets are a common practice in commercial contracts (countries dealing directly with U.S. firms), GAO said offsets on FMS sales were "unusual" because FMS is intended to sell U.S. goods and services.
Early transfers: In 1982, Israel asked that the ESF funds be transferred in one lump sum early in the fiscal year rather than in four quarterly installments, as is the usual practice with other countries. The United States pays more in interest for the money it borrows to make lump sum payments. In March 1985, an A.I.D. official estimated that it cost the United States between $50 million and $60 million to borrow funds for the early, lump-sum payment. In addition, the U.S. government pays Israel interest on the ESF funds invested in U.S. Treasury notes, according to A.I.D. officials. It has been reported that Israel earned about $86 million in U.S. Treasury note interest in 1991.
FMS drawdown: Israel was permitted to draw down the grant (waived) portion of its FMS credits before the loan portion, thus delaying paying interest on the loans. Usually, loans and grants are drawn down at an equal rate.

Another GAO report, Security Assistance: Reporting of Program Contents Changes, GAO/NSIAD-90-115 of May 1990, pointed out Israel's unique FMS funding arrangements. Other countries primarily deal with DOD for purchases from U.S. companies for U.S. military items, but Israel deals directly with U.S. companies for 99% of its military purchases in the United States. Other countries have a $100,000 minimum purchase amount per contract, but Israel is allowed to purchase military items for less than $100,000. According to the GAO report, Israel processed over 15,000 orders for less than $50,000 in 1989, with no DOD review of the purchases as would have been the case with other countries' purchases. Other countries have the U.S. government disburse funds to companies directly, but the Israeli Purchasing Mission in New York pays the companies and is reimbursed by the U.S. Treasury.

Apart from the precedents cited by GAO, there are other unique features of the Israel aid program.

FMS for R&D: Israel asked for and received permission for a "one-time-only" use of $107 million in FY1977 FMS funds to be spent in Israel to develop the Merkava tank (prototype completed 1975, Merkava added to Israeli arsenal 1979). Israel asked for a similar waiver to develop the Lavi ground-attack aircraft. In November 1983, Congress added an amendment to the FY1984 Continuing Appropriation (P.L. 98-151) that allowed Israel to spend $300 million of FMS funds in the United States and $250 million of FMS in Israel to develop the Lavi. Between 1983 and 1988, Congress earmarked a total of $1.8 billion (through FY1987) for the Lavi. GAO reported in January 1987 that the United States provided $1.3 billion of $1.5 billion Lavi development costs between 1980 and 1986. On August 30, 1987, the Israeli cabinet voted to cancel the Lavi project, but asked the United States for $450 million to pay for canceled contracts. The State Department agreed to raise the FMS earmark for procurement in Israel from $300 million to $400 million to pay Lavi cancellation costs. The earmark for the $150 million for U.S. R&D continues.
FMS for in-country purchase: Israel has requested that part of the FMS funds be transferred to Israel for the Lavi aircraft, canceled on August 30, 1987, be continued for other Israeli defense purchases in Israel. Israel received $400 million of the $1.8 billion FMS for use in Israel in each fiscal year 1988 through 1990, and $475 million in each fiscal year since FY1991. According to press reports, Israel proposed that the additional $600 million in military aid that will replace the $1.2 billion in economic aid will be added to the $475 million to be spent in Israel.
The foreign assistance appropriation bill signed on November 5, 1990, provides for Israel to receive the FMS aid in a lump sum during the first month of the fiscal year, which allows Israel to invest the funds in U.S. Treasury notes and earn interest similar to the ESF investments. H.R. 3422, the foreign operations appropriations bill included in P.L. 106-113 for FY2000, includes in Title VI a clause that limits the amount Israel is to receive early for FY2000 to $1.37 billion, rather than the whole amount of $1.92 billion in military assistance. The $550 million was withheld for a later payment to meet budget requirements.
The appropriation bill of November 5, 1990, also provided Israel with grant military equipment, valued at $700 million, to be withdrawn from Western Europe.
The $400 million housing loan guarantee provided in P.L. 101-302 of May 25, 1990, waived the $25 million per country ceiling, waived the administrative fee, and waived the provision limiting the housing to poor people.

CONGRESSIONAL ACTION
FY2001

In the budget request for FY2001, the President requested $1.98 billion in military grants, $840 million in economic grants, and $60 million in refugee and migration funds for Israel for FY2001.

H.R. 4919, the Security Assistance Act of 2000, locks in the ESF $120 million reduction and the FMF $60 million increase for fiscal years 2001 and 2002 only. The House passed the H.R. 4919 conference report (H.Rept. 106-868) on September 21, 2000, and the Senate passed the conference report on September 22. H.R. 4919 was signed into law on October 6, 2000 (P.L. 106-280).

S. 2522, introduced on May 9, 2000, calls for $60 million in refugee settlement funds, $840 million in ESF, and $1.98 billion in FMF for Israel for FY2001.

During a June 20, 2000 markup, the Foreign Operations Subcommittee of the House Appropriations Committee voted nine to six to defeat an amendment that would have delayed $250 million in military aid to Israel. Members of the subcommittee wanted to delay the aid until Israel cancelled the sale of an Airborne Early Warning aircraft to China that the Administration and some Members of Congress opposed because the aircraft could have disturbed the military balance in Asia. The bill, H.R. 4811, introduced on July 10 (H.Rept. 106-720), contained $1.98 billion in FMF, $840 million in ESF, and $60 million in migration funds for Israel for FY2001. H.R. 4811 passed the House on July 13 by a vote of 239-185 and passed the Senate, with S. 2522 as a substitute amendment, on July 18. H.R. 5526, introduced on October 24, included the same provisions as H.R. 4811. The conference report for H.R. 4811 (H.Rept. 106-997) passed the House on October 25 by a vote of 307 to 101, and passed the Senate on October 25 by a vote of 65 to 27. In its final form, H.R. 4811 passed H.R. 5526 by reference.

On November 14, 2000, President Clinton requested a supplemental appropriation for FY2001 for $450 million for Israel, to be disbursed as $250 million in grant military assistance for Israel's withdrawal from Lebanon, and $200 million in FMF (one quarter of which may be disbursed in Israel). The same request also said the President's advisors recommended an additional $350 million in FMF grant assistance for FY2002. The emergency supplemental $450 million for Israel for FY2001was not included in the omnibus appropriations bill sent to the President on December 15.

FY2002

The President requested $720 million in ESF, $2.04 billion in FMF, and $60 million in refugee settlement funds for FY2002.

H.R. 1646, the foreign assistance authorization bill, included $60 million for settling Soviet and Ethiopian Jews in Israel. The bill was reported out of committee on May 4 (H.Rept. 107-57) and passed the House on May 16 by a vote of 352 to 73.

The Foreign Operations Subcommittee of the House Appropriations Committee passed a draft bill on June 27, 2001, that included $2.04 billion in FMF and$720 million in ESF for Israel for FY2002. H.R. 2506 passed the House on July 24, 2001, by a vote of 381-46. The Senate passed H.R. 2506 with amendments on October 24, 2001, by a vote of 96 to 2. The House passed the conference report (H.Rept. 107-345) on December 19, 2001, by a vote of 357 to 66, and the Senate passed it by unanimous consent on December 20. The President signed the bill (P.L. 107-115) on January 10, 2002. In addition, Israel received $28 million in counter terror funds for FY2002.

FY2003

The President requested $600 million in ESF, $60 million in refugee settlement, and $2.1 billion in FMF for Israel for FY2003.

The House Appropriations Committee added $200 million in ESF for Israel for FY2002 in the supplemental appropriations bill, H.R. 4775; the same amount appears in the Senate bill, S. 2551.

Recent Aid to Israel

Table 2 shows cumulative U.S. aid to Israel for FY1949 through FY1996, and U.S. aid to Israel for FY1997, FY1998, and FY1999. Detail for the years 1949 through 1996 is shown in Table 3.

Table 2. Recent U.S. Aid to Israel (millions of dollars)

Year	Total	Military Grant	Economic Grant	Immig Grant	ASHA	All Other
1949-1996	68,030.9	29,014.9	23,122.4	868.9	121.4	14,903.9
1997	3,132.1	1,800.0	1,200.0	80.0	2.1	50.0
1998	3,080.0	1,800.0	1,200.0	80.0	?	?
1999	3,010.0	1,860.0	1,080.0	70.0	?	?
2000	4,129.1	3,120.0	949.1	60.0	?	?
2001	2,873.8	1,975.6	838.2	60.0	2.3	?
2002est.	2,848.0	2,040.0	720.0	60.0	?	28.0
Total	87,103.9	41,614.9	29,111.5	1,278.9	123.5	14,981.9

Note: ESF was earmarked for $960 million for FY2000 but was reduced to meet the 0.38% recission. FY2000 military grants include $1.2 billion for the Wye agreement and $1.92 billion in annual military aid.

Notes for Table 3, following

* = less than $50,000
- = None
NA = Not Available
TQ = Transition Quarter, when the U.S. fiscal year changed from June to September.
FFP = Food for Peace Coop. Devel. Grant:

There are three programs in the cooperative development category: Middle East Regional Cooperation (MERC) intended for projects that foster economic growth and economic cooperation between Israel and its neighbors; Cooperative Development Program (CDP); and the Cooperative Development Research (CDR), both of which fund Israel's foreign aid program. Israel received about one half of the $94 million MERC, and all of the $53 million CDP and $39 million CDR.

"Other Loan" is a CCC loan.

"Other Grants" are $20 million in 1975 for a seawater desalting plant and $50 million in 1996 for anti-terrorism.

Definition of Aid: Under the category of foreign aid, some people include other funds transferred to Israel, such as the $180 million for research and development of the Arrow missile, or the $7.9 billion in loan guarantees for housing or settling Soviet Jews in Israel. None of these funds are included in this table.

Table 3. U.S. Assistance to Israel, FY1949 - FY1996 (millions of dollars)

Year	Total	Military Loan	Military Grant	Economic Loan	Economic Grant	FFP Loan	FFP Grant
1949	100.0
1950
1951	35.1				0.1
1952	86.4				63.7		22.7
1953	73.6				73.6		*
1954	74.7				54.0		20.7
1955	52.7			20.0	21.5	10.8	0.4
1956	50.8			10.0	14.0	25.2	1.6
1957	40.9			10.0	16.8	11.8	2.3
1958	85.4			15.0	9.0	34.9	2.3
1959	53.3	0.4		10.0	9.2	29.0	1.7
1960	56.2	0.5		15.0	8.9	26.8	4.5
1961	77.9	*		16.0	8.5	13.8	9.8
1962	93.4	13.2		45.0	0.4	18.5	6.8
1963	87.9	13.3		45.0		12.4	6.0
1964	37.0			20.0		12.2	4.8
1965	65.1	12.9		20.0		23.9	4.9
1966	126.8	90.0		10.0		25.9	0.9
1967	23.7	7.0		5.5			0.6
1968	106.5	25.0				51.3	0.5
1969	160.3	85.0				36.1	0.6
1970	93.6	30.0				40.7	0.4
1971	634.3	545.0				55.5	0.3
1972	430.9	300.0			50.0	53.8	0.4
1973	492.8	307.5			50.0	59.4	0.4
1974	2,621.3	982.7	1,500.0		50.0		1.5
1975	778.0	200.0	100.0		344.5	8.6
1976	2,337.7	750.0	750.0	225.0	475.0	14.4	*
TQ	292.5	100.0	100.0	25.0	50.0	3.6
1977	1,762.5	500.0	500.0	245.0	490.0	7.0
1978	1,822.6	500.0	500.0	260.0	525.0	6.8
1979	4,888.0	2,700.0	1,300.0	260.0	525.0	5.1
1980	2,121.0	500.0	500.0	260.0	525.0	1.0
1981	2,413.4	900.0	500.0		764.0
1982	2,250.5	850.0	550.0		806.0
1983	2,505.6	950.0	750.0		785.0
1984	2,631.6	850.0	850.0		910.0
1985	3,376.7		1,400.0		1,950.0
1986	3,663.5		1,722.6		1,898.4
1987	3,040.2		1,800.0		1,200.0
1988	3,043.4		1,800.0		1,200.0
1989	3,045.6		1,800.0		1,200.0
1990	3,034.9		1,792.3		1,194.8
1991	3,712.3		1,800.0		1,850.0
1992	3,100.0		1,800.0		1,200.0
1993	3,103.4		1,800.0		1,200.0
1994	3,097.2		1,800.0		1,200.0
1995	3,102.4		1,800.0		1,200.0
1996	3,144.0		1,800.0		1,200.0
TOTAL	68,030.9	11,212.5	29,014.9	1,516.5	23,122.4	588.5	94.1
1997	3,132.1		1,800.0		1,200.0
1998	3,080.0		1,800.0		1,200.0
1999	3,010.0		1,860.0		1,080.0
2000	4,129.1		3,120.0		949.1
2001	2,873.8		1,975.6		838.2
2002est.	2,848.0		2,040.0		720.0
TOTAL	87,103.9		41,614.9		29,111.5

Year	Ex-Im. Bank Loan	Jewish Refugee Resettle Grant	Amer. Schools & Hosp. Grant	Other Loan	Coop. Devel. Grant	Other Grant
1949	100.0
1950
1951	35.0
1952
1953
1954
1955
1956
1957
1958	24.2
1959	3.0
1960	0.5
1961	29.8
1962	9.5
1963	11.2
1964
1965	3.4
1966
1967	9.6		1.0
1968	23.7		6.0
1969	38.6
1970	10.0		12.5
1971	31.0		2.5
1972	21.1		5.6
1973	21.1	50.0	4.4
1974	47.3	36.5	3.3
1975	62.4	40.0	2.5			20.0
1976	104.7	15.0	3.6
TQ	12.6		1.3
1977	0.9	15.0	4.6
1978	5.4	20.0	5.4
1979	68.7	25.0	4.2
1980	305.9	25.0	4.1
1981	217.4	25.0	2.0		5.0
1982	6.5	12.5	3.0	17.5	5.0
1983		12.5	3.1		5.0
1984		12.5	4.1		5.0
1985		15.0	4.7		7.0
1986	15.0	12.0	5.5		10.0
1987		25.0	5.2		10.0
1988		25.0	4.9		13.5
1989		28.0	6.9		10.7
1990		29.9	3.5		14.4
1991		45.0	2.6		14.7
1992		80.0	3.5		16.5
1993		80.0	2.5		20.9
1994		80.0	2.7		14.5
1995		80.0	2.9		19.5
1996		80.0	3.3		14.0	50.0
TOTAL	1218.5	868.9	121.4	17.5	185.7	70.0

Addition to Main Article by Clyde R. Mark
U.S. Grants (gifts) to Israel, adjusted for inflation.

YEAR	US GRANTS NOMINAL DOLLARS (MILLIONS)	CPI 2002	US ASSISTANCE CONSTANT 2002 DOLLARS (MILLIONS)
1951	0.1	0.1443950	0.69
1952	86.4	0.1475501	585.56
1953	73.6	0.1486637	495.08
1954	74.7	0.1494061	499.98
1955	21.9	0.1488493	147.13
1956	15.6	0.1510765	103.26
1957	19.1	0.1564588	122.08
1958	11.3	0.1607275	70.31
1959	10.9	0.1620267	67.27
1960	13.4	0.1646251	81.40
1961	18.3	0.1662955	110.05
1962	7.2	0.1681514	42.82
1963	6.0	0.1701930	35.25
1964	4.8	0.1724202	27.84
1965	4.9	0.1753898	27.94
1966	0.9	0.1804009	4.99
1967	1.6	0.1855976	8.62
1968	6.5	0.1933927	33.61
1969	0.6	0.2037862	2.94
1970	12.9	0.2158500	59.76
1971	2.8	0.2251299	12.44
1972	56.0	0.2325538	240.80
1973	104.8	0.2470304	424.24
1974	1591.3	0.2741277	5804.96
1975	527.0	0.2991834	1761.46
1976	1243.6	0.3164439	3929.92
1977	1160.9	0.3368597	3446.24
1978	1050.4	0.3626578	2896.39
1979	1854.2	0.4034892	4595.41
1980	1054.1	0.4580549	2301.25
1981	1296.0	0.5055679	2563.45
1982	1394.0	0.5365627	2598.02
1983	1555.6	0.5538233	2808.84
1984	1781.6	0.5773942	3085.59
1985	3376.7	0.5979955	5646.70
1986	3648.5	0.6095026	5986.03
1987	3040.2	0.6317743	4812.16
1988	3043.4	0.6575724	4628.24
1989	3045.6	0.6891240	4419.52
1990	3034.9	0.7264291	4177.83
1991	3712.3	0.7572383	4902.42
1992	3100.0	0.7800668	3974.02
1993	3103.4	0.8030809	3864.37
1994	3097.2	0.8240535	3758.49
1995	3102.4	0.8472532	3661.72
1996	3147.3	0.8721232	3608.78
1997	3132.1	0.8923534	3509.93
1998	3080.0	0.9062732	3398.53
1999	3010.0	0.9261321	3250.08
2000	4129.1	0.9573125	4313.22
2001	2876.1	0.9844098	2921.65
2002	2760.0	1.0000000	2760.00
TOTAL			$ 112,589,280,000

THAT'S RIGHT $ 112,600,000,000 YEAR 2002 YANKEE DOLLARS TO ISRAEL
AND THEY STILL HAVE A BASKET CASE ECONOMY.

The figures from Clyde R. Mark's report are also quoted at www.us-israel.org. If you think these figures are wrong, remember they are accepted by www.us-israel.org so can be relied on to be very much a lower bound. The real cost is of course much, much greater.

Now toss in another $100,000,000,000, yeap that's right another $100 Billion dollars from Germany and 50-60 Billion from the Diaspora, and you can clearly understand why Israel has a basket case economy.

The CPI figures are from here (CUUR0000AA0).