Sources in Washington told "Globes" that in a rare move, the Bush administration yesterday approved Israel's request to convert to shekels $250 million of the $1 billion in special military aid received in 2002 as part of an aid package that included the loan guarantees.
The conversion adds NIS 1.1 billion to the Ministry of Defense budget, at a time when it is heatedly arguing with the Ministry of Finance about the latter's demand for addition cuts in the defense budget.
26.3% of the $1 billion was already convertible to shekels. The administration decision means that Israel can use 51% of the special military aid - $500 million - in shekels. The special aid comes on top of the regular annual military aid, 26.3% of which is also convertible to shekels.
Ministry of Defense representative in the US Dr. Yossi Draznin told "Globes" that Ministry of Defense director general Amos Yaron initiated the request to convert to shekels an additional $250 million of the special military aid. Yaron sought a solution to the ministry's shekel shortage, which is severely hurting Israel's defense contractors.
Draznin said Israel held quiet negotiations on the subject with the White House, Defense Department, State Department and Congress in the first half of the year. Israeli representatives were able to persuade the Bush administration that the additional shekels were essential to efficiently utilize the US military aid by enabling programs requiring shekels to get started.
Draznin said the shekel injection would get these programs off the ground. They will later be transferred to the US for production in cooperation with US companies, using the dollar component of the regular US military aid.
Draznin added that the additional shekels would be channeled to anti-terrorist and rearmament programs essential for the IDF. He declined to give details. Sources in Washington believe that most of the additional shekels will be used for the IDF Hunter ground forces digitalization plan.
Draznin said the US-Israeli agreement emphasized was a one-time conversion that would not set a precedent. Israel also wants this to be a one-time event. He said, "We needed an infusion, one that does not need to be repeated."
Published by Globes [online] - www.globes.co.il - on July 13, 2004