U.S. to make Israel 'strategic partner' in exchange for tech export controls

TEL AVIV - The United States will upgrade its strategic relationship with Israel.

Washington is expected to announce the upgrade of relations with Israel to a strategic ally of the United States. on Sept. 6 when Israeli Prime Minister Ehud Barak is scheduled to meet with U.S. President Bill Clinton at the United Nations Millennium Peace Summit in New York.

But the strategic upgrade enabling Israel to retain its deterrent capability and defend itself is contingent on an agreement between the two countries limiting Israeli arms exports controls and technology transfers.

The agreement stipulates that Israel must consult with the U.S before concluding any defense deals with either China, India, Russia or Pakistan.

Washington is also demanding that Israel participate in a joint technology committee with the U.S., intended to investigate complaints that Israel illegally transferred U.S.-manufactured military components to third countries.

In exchange, the U.S. is expected to include a special aid package for the Israel Defense Forces, Israel's daily Haaretz reported on Aug. 31. as well as U.S. funding for a multi-million dollar project to develop drones capable of attacking missile launchers and ground-to-ground missiles. The extent of the aid package or project funding has not yet been specified.

The U.S. will also pay $150 million towards allaying the cost of Israel's withdrawal from south Lebanon on May 24, estimated at at least $300 million. Lastly, the U.S. will raise gradually raise annual military aid to $2.4 billion, while phasing out the civilian aid package.

An Israeli delegation, headed by Defense Ministry Director General Amos Yaron is presently in Washington to hammer out the final details of the agreement.

Meanwhile, defense company chiefs have warned of a serious threat to the industry if Israel continues to lose contracts.

Israel Aircraft Industries has incurred a loss of $4 billion worth of contracts comprising 70 percent of the government-owned company's defense deals over the past year.

"Cuts in the Israeli defense ministry budget and the resulting fall in orders of 25 to 30 percent could deal us a fatal blow," the head of the association of Israeli arms producers, Lt.-Gen.l Herzl Bodinger said Wednesday.

Association officials said that if the trend continues the fate of the entire defense industry could be at stake.

The jobs of 13,000 defense employees would be on the line, 5,860 of them before the end of this year, association official Yaacov Toren said. He predicted that another 3,000 employees would be made redundant in the following four years and 4,000 in the next four years after. He estimated that it would cost the state $750 million dollars to retrain all those employees.

Toren also said that Israel's strategic capability would be affected because the closure of the defense plants would make Israel dependent on importing military platforms, equipment and supplies.

The association has urged the government to maintain its level of domestic contracts and only purchase from the United States equipment that isn't manufactured in Israel.

Washington provides Israel with annual military aid of $1.8 billion dollars but the bulk of the grant is linked to the purchase of U.S. equipment.