Good news—and bad—for U.S. aid to Israel

WASHINGTON -- Israel will get significantly less in military aid than it had wanted from the United States -- but a larger loan guarantee than it expected.

Hours before the United States launched its war against Iraq, Bush's national security adviser, Condoleezza Rice, notified Israeli Finance Minister Benjamin Netanyahu that the administration's bill to cover the costs of war with Iraq would include $1 billion in supplemental military aid for Israel, as well as $9 billion in loan guarantees.

Israel had asked for $4 billion in military aid and $8 billion in guarantees.

According to Netanyahu's office, Rice said the Bush administration decided to up the loan guarantees because the administration was "very impressed" by the Treasury's economic reform plan. U.S. officials had demanded to see the plan to make sure that any aid would be used well.

Israel's ambassador to the United States, Daniel Ayalon, told American Jewish leaders Thursday that the supplemental aid for Israel has been "sweetened" by agreeing to give the full $1 billion right away.

Other Israeli officials publicly expressed satisfaction with the decision.

"When you ask for these sums, you don't complain if you don't get everything you want," one Foreign Ministry official told the Jerusalem Post.

However, officials in the Treasury, who recently drew up an austerity plan because of Israel's yawning budget deficit, were disappointed, the Israeli daily Ha'aretz reported.

The total package sent to Congress, estimated to be as much as $100 billion, will mostly be used to cover the costs of the military campaign, as well as providing additional aid to U.S. allies in the region, including Israel, Turkey and Jordan.

Israel's aid request, which comes in addition to nearly $2.7 billion in military and economic aid already allocated to the Jewish state, preceded the certainty of war.

Suffering a deep economic crisis, Israel says it needs the additional aid to combat the increased threat of terrorism and to offset the costs of defending against a potential missile strike from Iraq.

Congressional support for the aid is strong -- and tying it into the overall spending package for the war against Iraq might make its passage even easier, some analysts say.

Numerous Israeli officials traveled to Washington in recent months to work out details of the plan.

The loan guarantees allow Israel to borrow money at a lower interest rate, and there is no cost to the United States if Israel repays its loan. Israel maintains that it has never defaulted on a loan.

Aid to Israel has received a boost from congressional leaders on both sides of the aisle who have sent letters to the White House, urging that aid to Israel be included in the emergency supplemental package.

"Now, with the possibility of conflict with Iraq, Israel is confronted with skyrocketing defense expenditures to ensure that the Israeli people are not once again made innocent victims of attack by Saddam Hussein," said one letter, signed by Senate Majority Leader Bill Frist (R-Tenn.) and Minority Leader Tom Daschle (D-S.D.).

"We are concerned that, if not addressed soon, these issues could severely affect Israel's short- and long- term security."

Similar letters have been sent by the speaker of the House, Dennis Hastert (R-Ill.), and the House minority leader, Nancy Pelosi (D-Calif.).