I hate it when I'm right and wrong

[bozon]

I was talking to a friend of mine just a few days ago over a cup of coffee. We somehow got to discuss the Israeli "arrow" missile interceptor and American military aid to israel.

He was wondering why Israel has not sold it to anyone yet, even though it is the only system of its kind in the world. I explained him the following:

Almost every major military related system developed in Israel is partially funded by the US. As a result, the us may veto any sales to other countries, plus get access to the new technology. If a project is successful the following usually happens:
The new system competes with american built systems in the market. The US will deny almost all Israeli deals with foreign countries unless they are very small deals with insignificant 3rd world countries. As a result, the systems are sold only to the IDF making them expensive. The IDF cannot afford it and preferes to buy the american system using the american "coupons" aid. If this is a completely new product, american access to its development ensures that US companies will emerge with a competing product fairly quick. US goverment can thus eliminate any competition with US military industry.

The aid money is given in "coupons" that can only be spent in the US. This money is therefore circulating back to US ecconomy. The US goverment is in practice subsidising its own military industry with the foreign aid money, guaranteeing a market thus reducing risk, lowering the cost of R&D and production and selling it to other countries for profit.
In order to allow the IDF to buy Israeli technology, Israeli companies manufacture their systems through an american partner company, thus R&D is done in Israel buy the long term factory jobs are created in the US. So even in this case US ecconomy benefits and Israeli ecconomy only benefits from R&D, but create very few jobs and only for highly skilled work.

Since the IDF does not spend enough cash on local Israeli industry, manufactorers are closing down their businesses. The army can be a big ecconomical force. The only thing that survives are R&D centers, but no major production.

So, back to the "arrow". I predicted that in a few years, the US will come up with a new system that competes with the "arrow" - either improve the lagging old THAAD project or a completely new one. Then the IDF would prefer to buy the american system over the expensive local arrow, which will not become any cheaper since it cannot be sold (for example the canceled deal with Indea due to US disapproval). The the "arrow" project will be canceled - just like the "Lavi" fighter, just like the "Sufa" jeep, guided munition, drones, and like a long list of other projects.

I was wrong.

It didn't take a few years, it only took 2 days.
Israel may replace arrow missile

The US goverment is not stupid. They know how to support their local industries, how to legitimatly fight competition and how to produce a diplomatical whip, since now the IDF it totaly depended on american goods and american "aid". Israel got hooked on it like crack. I'd expect my goverment to realize by this time that defense budgest spent on the local market is better than paying unemployment benefits. The Israeli goverment is too stupid to go into rehabilitation program. They will prefere to spend more money on allowances this year than slowly cutting back on the foreign aid crack and bring back Israeli industry.

[Bodhi]

Bozon,
I find it interesting that you said in the end, that the Israeli Government was "too stupid to go into rehabilitation program" to bring back their local industry.  I would think it would be next to impossible, especially considering the constraints placed on them by the current US Foreign Aid system for such a thing to actually work.  They may very well want to further develop their own industry, but it is doubtful that they could take the time off from development and fielding of equipment such a thing would require.  Especially considering they are surrounded by a sea of hostile countries, with most intent on their final destruction.  So, in a nutshell, they are so caught up in this system because like in the beginning, their very survival requires a cutting edge military.

[bozon]

Yes, Israel cannot just give up the aid as the IDF cannot maintain itself at the current level on "Shekels" budget alone. I am very thankful for the US for the aid and the will to aid, even though it is based on interests and not purely on good will. However, it doesn't mean that the Israeli goverment should take it all and it may not last forever.

It is in its own interest to slowly cut back on this aid or at least force the military to purchase certain goods in the local market even though they can get them cheaper elsewhere. They even closed down clothes factories and buy uniform from the US fer pete sake. There was a rummer that even certain canned food was bought in the US, though I need to verify that one.